*Table        of Contents*

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**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 June 30, 2008**

**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*

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**NELNET,      INC.**

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

**(402)      458-2370**

| Large                accelerated filer x |   | Accelerated                filer o         |
|------------------------------------------|--------|--------------------------------------------|
| Non-accelerated                filer o   |   | Smaller                reporting company o |

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*Table        of Contents*

**NELNET,      INC.**

**FORM      10-Q**

**INDEX**

**June      30, 2008**

| **PART                I.  FINANCIAL                INFORMATION** |                    |
|-----------------------------------------------------------------------|-------------------------|
|                                                                  | Item                1.  | Financial                Statements | 2 |
|                                                                  | Item                2.  | Management’s                Discussion and Analysis of Financial Condition                and Results of Operations | 29 |
|                                                                  | Item                3.  | Quantitative                and Qualitative Disclosures about Market                Risk | 65 |
|                                                                  | Item                4.  | Controls                and Procedures | 71 |
|                                                                  |                    |
| **PART                II.  OTHER INFORMATION**                   |                    |
|                                                                  | Item                1.  | Legal                Proceedings | 71 |
|                                                                  | Item                1A. | Risk                Factors | 73 |
|                                                                  | Item                2.  | Unregistered                Sales of Equity Securities and Use of                Proceeds | 74 |
|                                                                  | Item                4.  | Submission                of Matters to a Vote of Security                Holders | 76 |
|                                                                  | Item                6.  | Exhibits | 77 |
|                                                                  |                    |
| **Signatures**                                                        | 78                      |

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*Table          of Contents*

**PART      I. FINANCIAL INFORMATION**

**ITEM      1. FINANCIAL STATEMENTS**

**NELNET,      INC. AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEETS**

**(Dollars      in thousands, except share data)**

|                                                                                                                                                                                                                            |   | **As of**              |       | **As of**                  |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|---------------------------------|--------|
|                                                                                                                                                                                                                            |   | **June 30, 2008** |       | **December 31, 2007** |   |
|                                                                                                                                                                                                                            |   | **(unaudited)**             |       |                            |   |
| **Assets:**                                                                                                                                                                                                                     |   |                        |       |                            |   |   |   |
| Student                loans receivable (net of allowance for loan losses of $47,909 and                $45,592,                respectively)                                                                                   |   | $                           | 25,993,307 |                            |   | 26,736,122 |   |
| Cash                and cash equivalents:                                                                                                                                                                                       |   |                        |       |                            |   |   |   |
| Cash                and cash equivalents - not held at a related party                                                                                                                                                          |   |                        | 15,629     |                            |   | 38,305 |   |
| Cash                and cash equivalents - held at a related party                                                                                                                                                              |   |                        | 122,825    |                            |   | 73,441 |   |
| Total                cash and cash equivalents                                                                                                                                                                                  |   |                        | 138,454    |                            |   | 111,746 |   |
|                                                                                                                                                                                                                            |   |                        |       |                            |   |   |   |
| Restricted                cash                                                                                                                                                                                                  |   |                        | 912,252    |                            |   | 842,020 |   |
| Restricted                investments                                                                                                                                                                                           |   |                        | 95,061     |                            |   | 85,227 |   |
| Restricted                cash - due to customers                                                                                                                                                                               |   |                        | 29,543     |                            |   | 81,845 |   |
| Accrued                interest receivable                                                                                                                                                                                      |   |                        | 501,544    |                            |   | 593,322 |   |
| Accounts                receivable, net                                                                                                                                                                                         |   |                        | 45,986     |                            |   | 49,084 |   |
| Goodwill                                                                                                                                                                                                                        |   |                        | 175,178    |                            |   | 164,695 |   |
| Intangible                assets, net                                                                                                                                                                                           |   |                        | 90,163     |                            |   | 112,830 |   |
| Property                and equipment, net                                                                                                                                                                                      |   |                        | 46,429     |                            |   | 55,797 |   |
| Other                assets                                                                                                                                                                                                     |   |                        | 108,662    |                            |   | 107,624 |   |
| Fair                value of derivative instruments                                                                                                                                                                             |   |                        | 295,346    |                            |   | 222,471 |   |
| Total                assets                                                                                                                                                                                                     |   | $                           | 28,431,925 |                            |   | 29,162,783 |   |
|                                                                                                                                                                                                                                 |   |                        |       |                            |   |   |   |
| **Liabilities:**                                                                                                                                                                                                                |   |                        |       |                            |   |   |   |
| Bonds                and notes payable                                                                                                                                                                                          |   | $                           | 27,530,237 |                            |   | 28,115,829 |   |
| Accrued                interest payable                                                                                                                                                                                         |   |                        | 86,496     |                            |   | 129,446 |   |
| Other                liabilities                                                                                                                                                                                                |   |                        | 162,761    |                            |   | 220,899 |   |
| Due                to customers                                                                                                                                                                                                 |   |                        | 29,543     |                            |   | 81,845 |   |
| Fair                value of derivative instruments                                                                                                                                                                             |   |                        | 38,846     |                            |   | 5,885 |   |
| Total                liabilities                                                                                                                                                                                                |   |                        | 27,847,883 |                            |   | 28,553,904 |   |
|                                                                                                                                                                                                                            |   |                        |       |                            |   |   |   |
| **Shareholders'                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                37,952,246 shares as of June 30, 2008 and 37,980,617 shares as of                December                31, 2007 |   |                        | 380        |                            |   | 380 |   |
| Class                B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued                and                outstanding 11,495,377 shares as of June 30, 2008 and December 31,                2007             |   |                        | 115        |                            |   | 115 |   |
| Additional                paid-in capital                                                                                                                                                                                       |   |                        | 99,854     |                            |   | 96,185 |   |
| Retained                earnings                                                                                                                                                                                                |   |                        | 485,739    |                            |   | 515,317 |   |
| Employee                notes receivable                                                                                                                                                                                        |   |                        | (2,046     | )                               |   | (3,118 | ) |
| Total                shareholders' equity                                                                                                                                                                                       |   |                        | 584,042    |                            |   | 608,879 |   |
| **Commitments                and contingencies**                                                                                                                                                                                |   |                        |       |                            |   |   |   |
| Total                liabilities and shareholders' equity                                                                                                                                                                       |   | $                           | 28,431,925 |                            |   | 29,162,783 |   |

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*Table          of Contents*

**NELNET,      INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

**(Dollars      in thousands, except share data)**

**(unaudited)**

|                                                                                                                                |   | **Three                months**   |    | **Six                months**     |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|-----------------------------------|--------|
|                                                                                                                                |   | **ended                June 30,** |    | **ended                June 30,** |   |
|                                                                                                                                |   | **2008**                          |    | **2007**                          |   | **2008** |   | **2007** |   |
| **Interest                income:**                                                                                                 |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Loan                interest                                                                                                        |   | $                                 | 296,686 |                              |   | 417,086 |   |   | 626,672 |   |   | 814,140 |   |
| Investment                interest                                                                                                  |   |                              | 9,116   |                              |   | 18,783 |   |   | 20,796 |   |   | 40,208 |   |
| Total                interest income                                                                                                |   |                              | 305,802 |                              |   | 435,869 |   |   | 647,468 |   |   | 854,348 |   |
| **Interest                expense:**                                                                                                |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Interest                on bonds and notes payable                                                                                  |   |                              | 232,464 |                              |   | 367,893 |   |   | 557,605 |   |   | 718,388 |   |
| Net                interest income                                                                                                  |   |                              | 73,338  |                              |   | 67,976 |   |   | 89,863 |   |   | 135,960 |   |
| Less                provision for loan losses                                                                                       |   |                              | 6,000   |                              |   | 2,535 |   |   | 11,000 |   |   | 5,288 |   |
| Net                interest income after provision for loan losses                                                                  |   |                              | 67,338  |                              |   | 65,441 |   |   | 78,863 |   |   | 130,672 |   |
|                                                                                                                                |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| **Other                income (expense):**                                                                                          |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income                                                                                   |   |                              | 24,904  |                              |   | 31,610 |   |   | 51,017 |   |   | 62,076 |   |
| Other                fee-based income                                                                                               |   |                              | 40,817  |                              |   | 38,262 |   |   | 86,730 |   |   | 78,291 |   |
| Software                services income                                                                                             |   |                              | 4,896   |                              |   | 5,848 |   |   | 11,648 |   |   | 11,596 |   |
| Other                income                                                                                                         |   |                              | 1,646   |                              |   | 1,927 |   |   | 3,056 |   |   | 7,020 |   |
| Gain                (loss) on sale of loans                                                                                         |   |                              | 48      |                              |   | 1,010 |   |   | (47,426 | ) |   | 2,796 |   |
| Derivative                market value, foreign currency, and put option adjustments and derivative                settlements, net |   |                              | 20,192  |                              |   | 10,743 |   |   | 3,594 |   |   | 2,853 |   |
| Total                other income                                                                                                   |   |                              | 92,503  |                              |   | 89,400 |   |   | 108,619 |   |   | 164,632 |   |
|                                                                                                                                |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| **Operating                expenses:**                                                                                              |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                                                                                |   |                              | 43,549  |                              |   | 59,761 |   |   | 97,392 |   |   | 121,465 |   |
| Other                operating expenses:                                                                                            |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Impairment                expense                                                                                                   |   |                              | — |                              |   | — |   |   | 18,834 |   |   | — |   |
| Advertising                and marketing                                                                                            |   |                              | 16,143  |                              |   | 15,456 |   |   | 32,346 |   |   | 29,449 |   |
| Depreciation                and amortization                                                                                        |   |                              | 10,603  |                              |   | 10,647 |   |   | 21,437 |   |   | 21,657 |   |
| Professional                and other services                                                                                      |   |                              | 8,478   |                              |   | 10,514 |   |   | 16,585 |   |   | 18,883 |   |
| Occupancy                and communications                                                                                         |   |                              | 4,914   |                              |   | 5,032 |   |   | 10,755 |   |   | 10,251 |   |
| Postage                and distribution                                                                                             |   |                              | 2,743   |                              |   | 5,624 |   |   | 6,560 |   |   | 10,143 |   |
| Trustee                and other debt related fees                                                                                  |   |                              | 2,464   |                              |   | 2,785 |   |   | 4,854 |   |   | 5,628 |   |
| Other                                                                                                                               |   |                              | 9,028   |                              |   | 10,827 |   |   | 17,996 |   |   | 24,399 |   |
| Total                other operating expenses                                                                                       |   |                              | 54,373  |                              |   | 60,885 |   |   | 129,367 |   |   | 120,410 |   |
|                                                                                                                                |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Total                operating expenses                                                                                             |   |                              | 97,922  |                              |   | 120,646 |   |   | 226,759 |   |   | 241,875 |   |
|                                                                                                                                |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                                                                                    |   |                              | 61,919  |                              |   | 34,195 |   |   | (39,277 | ) |   | 53,429 |   |
| Income                tax expense (benefit)                                                                                         |   |                              | 19,195  |                              |   | 13,306 |   |   | (12,176 | ) |   | 20,570 |   |
|                                                                                                                                |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Income                (loss) from continuing operations                                                                             |   |                              | 42,724  |                              |   | 20,889 |   |   | (27,101 | ) |   | 32,859 |   |
| Income                (loss) from discontinued operations, net of tax                                                               |   |                              | 981     |                              |   | (6,135 | ) |   | 981 |   |   | (3,325 | ) |
|                                                                                                                                |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Net                income (loss)                                                                                                    |   | $                                 | 43,705  |                              |   | 14,754 |   |   | (26,120 | ) |   | 29,534 |   |
|                                                                                                                                |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Earnings                (loss) per share, basic and diluted:                                                                        |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Income                (loss) from continuing operations                                                                             |   |                              | 0.87    |                              |   | 0.42 |   |   | (0.55 | ) |   | 0.66 |   |
| Income                (loss) from discontinued operations                                                                           |   |                              | 0.02    |                              |   | (0.12 | ) |   | 0.02 |   |   | (0.07 | ) |
|                                                                                                                                |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Net                income (loss)                                                                                                    |   | $                                 | 0.89    |                              |   | 0.30 |   |   | (0.53 | ) |   | 0.59 |   |

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*Table          of Contents*

**NELNET,      INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME      (LOSS)**

**(Dollars      in thousands, except share data)**

**(unaudited)**

|                                                                                              |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   | **Accumulated**         |    |       |   |
|---------------------------------------------------------------------------------------------------|--------|---------------|---------|-----------------------------------|--------|----------------------------|--------|------------|------------|----------------------------|--------|----------------------------|--------|----------------|---------|--------------|--------|-------------------|--------|-------------------------|---------|------------|--------|
|                                                                                              |   | **Preferred** |    |                              |   |                       |   |       |       | **Class                A** |   | **Class                B** |   | **Additional** |    |         |   | **Employee**      |   | **other**               |    | **Total**  |   |
|                                                                                              |   | **stock**     |    | **Common stock shares** |   | **Preferred**              |   | **common** |       | **common**                 |   | **paid-in**                |   | **Retained**   |    | **notes**    |   | **comprehensive** |   | **shareholders’** |    |
|                                                                                              |   | **shares**    |    | **Class                A**        |   | **Class                B** |   | **stock**  |       | **stock**                  |   | **stock**                  |   | **capital**    |    | **earnings** |   | **receivable**    |   | **income**              |    | **equity** |   |
|                                                                                              |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                as of March 31, 2007                                                       |   |          | — |                              |   | 38,097,623                 |   |       | 11,495,377 |                       | $      | —                    |   |           | 381     |         |   | 115               |   |                    | 105,345 |       |   | 507,596 |   |   | (2,701 | ) |   | 382 |   |   | 611,118 |   |
| Comprehensive                income:                                                              |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                         |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | 14,754 |   |   | — |   |   | — |   |   | 14,754 |   |
| Other                comprehensive income:                                                        |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation                                                       |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | — |   |   | — |   |   | (574 | ) |   | (574 | ) |
| Non-pension                postretirement benefit plan                                            |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | — |   |   | — |   |   | 192 |   |   | 192 |   |
| Total                comprehensive income                                                         |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | — |   |   | — |   |   | — |   |   | 14,372 |   |
| Cash                dividend on Class A and Class B common stock - $0.07 per                share |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | (3,440 | ) |   | — |   |   | — |   |   | (3,440 | ) |
| Issuance                of common stock, net of forfeitures                                       |   |          | — |                              |   | 39,182                     |   |       | —    |                       |   | —                    |   |           | 1       |         |   | —           |   |                    | 880     |       |   | — |   |   | — |   |   | — |   |   | 881 |   |
| Compensation                expense for stock based awards                                        |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | 772     |       |   | — |   |   | — |   |   | — |   |   | 772 |   |
| Repurchase                of common stock                                                         |   |          | — |                              |   | (998                       | )      |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | (22     | )          |   | — |   |   | — |   |   | — |   |   | (22 | ) |
| Acquisition                of enterprise under common control                                     |   |          | — |                              |   | (474,426                   | )      |       | —    |                       |   | —                    |   |           | (5      | )            |   | —           |   |                    | (12,502 | )          |   | — |   |   | — |   |   | — |   |   | (12,507 | ) |
| Reduction                of employee stock notes receivable                                       |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | — |   |   | 4 |   |   | — |   |   | 4 |   |
| Balance                as of June 30, 2007                                                        |   |          | — |                              |   | 37,661,381                 |   |       | 11,495,377 |                       | $      | —                    |   |           | 377     |         |   | 115               |   |                    | 94,473  |       |   | 518,910 |   |   | (2,697 | ) |   | — |   |   | 611,178 |   |
|                                                                                              |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                as of March 31, 2008                                                       |   |          | — |                              |   | 37,912,773                 |   |       | 11,495,377 |                       | $      | —                    |   |           | 379     |         |   | 115               |   |                    | 97,875  |       |   | 442,034 |   |   | (2,296 | ) |   | — |   |   | 538,107 |   |
| Comprehensive                income:                                                              |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                         |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | 43,705 |   |   | — |   |   | — |   |   | 43,705 |   |
| Total                comprehensive income                                                         |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   | 43,705 |   |
| Issuance                of common stock, net of forfeitures                                       |   |          | — |                              |   | 53,467                     |   |       | —    |                       |   | —                    |   |           | 1       |         |   | —           |   |                    | 310     |       |   | — |   |   | — |   |   | — |   |   | 311 |   |
| Compensation                expense for stock based awards                                        |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | 1,848   |       |   | — |   |   | — |   |   | — |   |   | 1,848 |   |
| Repurchase                of common stock                                                         |   |          | — |                              |   | (13,994                    | )      |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | (179    | )          |   | — |   |   | — |   |   | — |   |   | (179 | ) |
| Reduction                of employee stock notes receivable                                       |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | — |   |   | 250 |   |   | — |   |   | 250 |   |
| Balance                as of June 30, 2008                                                        |   |          | — |                              |   | 37,952,246                 |   |       | 11,495,377 |                       | $      | —                    |   |           | 380     |         |   | 115               |   |                    | 99,854  |       |   | 485,739 |   |   | (2,046 | ) |   | — |   |   | 584,042 |   |
|                                                                                              |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                as of December 31, 2006                                                    |   |          | — |                              |   | 39,035,169                 |   |       | 13,505,812 |                       | $      | —                    |   |           | 390     |         |   | 135               |   |                    | 177,678 |       |   | 496,341 |   |   | (2,825 | ) |   | 131 |   |   | 671,850 |   |
| Comprehensive                income:                                                              |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                         |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | 29,534 |   |   | — |   |   | — |   |   | 29,534 |   |
| Other                comprehensive income:                                                        |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation                                                       |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | — |   |   | — |   |   | (322 | ) |   | (322 | ) |
| Non-pension                postretirement benefit plan                                            |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | — |   |   | — |   |   | 191 |   |   | 191 |   |
| Total                comprehensive income                                                         |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   | 29,403 |   |
| Cash                dividend on Class A and Class B common stock - $0.14 per                share |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | (6,904 | ) |   | — |   |   | — |   |   | (6,904 | ) |
| Adjustment                to adopt provisions of                                                  |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| FASB                Interpretation No. 48                                                         |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | (61 | ) |   | — |   |   | — |   |   | (61 | ) |
| Issuance                of common stock, net of forfeitures                                       |   |          | — |                              |   | 152,273                    |   |       | —    |                       |   | —                    |   |           | 2       |         |   | —           |   |                    | 3,219   |       |   | — |   |   | — |   |   | — |   |   | 3,221 |   |
| Compensation                expense for stock based awards                                        |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | 1,530   |       |   | — |   |   | — |   |   | — |   |   | 1,530 |   |
| Repurchase                of common stock                                                         |   |          | — |                              |   | (3,062,070                 | )      |       | —    |                       |   | —                    |   |           | (30     | )            |   | —           |   |                    | (75,452 | )          |   | — |   |   | — |   |   | — |   |   | (75,482 | ) |
| Conversion                of common stock                                                         |   |          | — |                              |   | 2,010,435                  |   |       | (2,010,435 | )                          |   | —                    |   |           | 20      |         |   | (20               | )      |                    | — |       |   | — |   |   | — |   |   | — |   |   | — |   |
| Acquisition                of enterprise under common control                                     |   |          | — |                              |   | (474,426                   | )      |       | —    |                       |   | —                    |   |           | (5      | )            |   | —           |   |                    | (12,502 | )          |   | — |   |   | — |   |   | — |   |   | (12,507 | ) |
| Reduction                of employee stock notes receivable                                       |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | — |   |   | 128 |   |   | — |   |   | 128 |   |
| Balance                as of June 30, 2007                                                        |   |          | — |                              |   | 37,661,381                 |   |       | 11,495,377 |                       | $      | —                    |   |           | 377     |         |   | 115               |   |                    | 94,473  |       |   | 518,910 |   |   | (2,697 | ) |   | — |   |   | 611,178 |   |
|                                                                                              |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                as of December 31, 2007                                                    |   |          | — |                              |   | 37,980,617                 |   |       | 11,495,377 |                       | $      | —                    |   |           | 380     |         |   | 115               |   |                    | 96,185  |       |   | 515,317 |   |   | (3,118 | ) |   | — |   |   | 608,879 |   |
| Comprehensive                income:                                                              |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                loss                                                                           |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | (26,120 | ) |   | — |   |   | — |   |   | (26,120 | ) |
| Total                comprehensive income (loss)                                                  |   |          |    |                              |   |                       |   |       |       |                       |   |                       |   |           |    |         |   |              |   |                    |    |       |   |   |   |   |   |   |   |   |   |   | (26,120 | ) |
| Cash                dividend on Class A and Class B common stock - $0.07 per                share |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | (3,458 | ) |   | — |   |   | — |   |   | (3,458 | ) |
| Issuance                of common stock, net of forfeitures                                       |   |          | — |                              |   | 33,687                     |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | 1,073   |       |   | — |   |   | — |   |   | — |   |   | 1,073 |   |
| Compensation                expense for stock based awards                                        |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | 3,263   |       |   | — |   |   | — |   |   | — |   |   | 3,263 |   |
| Repurchase                of common stock                                                         |   |          | — |                              |   | (62,058                    | )      |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | (667    | )          |   | — |   |   | — |   |   | — |   |   | (667 | ) |
| Reduction                of employee stock notes receivable                                       |   |          | — |                              |   | —                    |   |       | —    |                       |   | —                    |   |           | — |         |   | —           |   |                    | — |       |   | — |   |   | 1,072 |   |   | — |   |   | 1,072 |   |
| Balance                as of June 30, 2008                                                        |   |          | — |                              |   | 37,952,246                 |   |       | 11,495,377 |                       | $      | —                    |   |           | 380     |         |   | 115               |   |                    | 99,854  |       |   | 485,739 |   |   | (2,046 | ) |   | — |   |   | 584,042 |   |

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*Table          of Contents*

**NELNET,      INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                                                                                                |   | **Six                months ended June 30,** |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|------------|
|                                                                                                                                                                                |   | **2008**                                     |       | **2007** |   |
|                                                                                                                                                                                |   |                                    |       |    |   |
| Net                income (loss)                                                                                                                                                    |   | $                                            | (26,120    | ) |   | 29,534 |   |
| Income                (loss) from discontinued operations                                                                                                                           |   |                                         | 981        |   |   | (3,325 | ) |
| Income                (loss) from continuing operations                                                                                                                             |   |                                         | (27,101    | ) |   | 32,859 |   |
| Adjustments                to reconcile income from continuing operations to net cash provided                by                operating activities, net of business acquisitions: |   |                                         |       |   |   |   |   |
| Depreciation                and amortization, including loan premiums and deferred origination                costs                                                                 |   |                                         | 74,312     |   |   | 150,465 |   |
| Derivative                market value adjustment                                                                                                                                   |   |                                         | (47,462    | ) |   | (20,374 | ) |
| Foreign                currency transaction adjustment                                                                                                                              |   |                                         | 88,530     |   |   | 24,974 |   |
| Change                in value of put options issued in business acquisitions                                                                                                       |   |                                         | 538        |   |   | 1,983 |   |
| Proceeds                from termination of derivative instruments                                                                                                                  |   |                                         | 7,547      |   |   | — |   |
| Payments                to terminate floor contracts                                                                                                                                |   |                                         | —    |   |   | (8,100 | ) |
| Impairment                expense                                                                                                                                                   |   |                                         | 18,834     |   |   | — |   |
| Loss                on sale of business                                                                                                                                             |   |                                         | —    |   |   | 9,041 |   |
| Loss                (gain) on sale of student loans                                                                                                                                 |   |                                         | 47,426     |   |   | (2,796 | ) |
| Non-cash                compensation expense                                                                                                                                        |   |                                         | 4,372      |   |   | 2,591 |   |
| Deferred                income tax benefit                                                                                                                                          |   |                                         | (24,237    | ) |   | (921 | ) |
| Provision                for loan losses                                                                                                                                            |   |                                         | 11,000     |   |   | 5,288 |   |
| Other                non-cash items                                                                                                                                                 |   |                                         | 344        |   |   | (2,906 | ) |
| Decrease                (increase) in accrued interest receivable                                                                                                                   |   |                                         | 91,778     |   |   | (81,421 | ) |
| Decrease                (increase) in accounts receivable                                                                                                                           |   |                                         | 3,098      |   |   | (6,698 | ) |
| Decrease                in other assets                                                                                                                                             |   |                                         | 9,419      |   |   | 6,491 |   |
| Decrease                in accrued interest payable                                                                                                                                 |   |                                         | (42,950    | ) |   | (1,545 | ) |
| (Decrease)                increase in other liabilities                                                                                                                             |   |                                         | (28,351    | ) |   | 5,667 |   |
| Net                cash flows from operating activities - continuing                operations                                                                                      |   |                                         | 187,097    |   |   | 114,598 |   |
| Net                cash flows from operating activities - discontinued                operations                                                                                    |   |                                         | —    |   |   | (4,467 | ) |
| Net                cash provided by operating activities                                                                                                                            |   |                                         | 187,097    |   |   | 110,131 |   |
|                                                                                                                                                                                |   |                                         |       |   |   |   |   |
| Cash                flows from investing activities, net of business                acquisitions:                                                                                   |   |                                         |       |   |   |   |   |
| Originations,                purchases, and consolidations of student loans, including loan premiums                and deferred origination costs                                  |   |                                         | (1,480,305 | ) |   | (3,390,016 | ) |
| Purchases                of student loans, including loan premiums, from a related                party                                                                             |   |                                         | (212,888   | ) |   | (191,003 | ) |
| Net                proceeds from student loan repayments, claims, capitalized interest,                participations, and other                                                    |   |                                         | 1,061,510  |   |   | 1,060,117 |   |
| Proceeds                from sale of student loans                                                                                                                                  |   |                                         | 1,267,826  |   |   | 89,311 |   |
| Purchases                of property and equipment, net                                                                                                                             |   |                                         | (3,721     | ) |   | (13,830 | ) |
| (Increase)                decrease in restricted cash                                                                                                                               |   |                                         | (70,232    | ) |   | 279,349 |   |
| Purchases                of restricted investments                                                                                                                                  |   |                                         | (170,512   | ) |   | (239,691 | ) |
| Proceeds                from maturities of restricted investments                                                                                                                   |   |                                         | 160,678    |   |   | 261,597 |   |
| Purchases                of equity method investments                                                                                                                               |   |                                         | (2,988     | ) |   | — |   |
| Distributions                from equity method investments                                                                                                                         |   |                                         | —    |   |   | 434 |   |
| Business                acquisitions, net of cash acquired                                                                                                                          |   |                                         | (18,000    | ) |   | 2,211 |   |
| Proceeds                from sale of business, net of cash sold                                                                                                                     |   |                                         | —    |   |   | 7,551 |   |
| Net                cash flows from investing activities - continuing                operations                                                                                      |   |                                         | 531,368    |   |   | (2,133,970 | ) |
| Net                cash flows from investing activities - discontinued                operations                                                                                    |   |                                         | —    |   |   | (294 | ) |
| Net                cash provided by (used in) investing activities                                                                                                                  |   |                                         | 531,368    |   |   | (2,134,264 | ) |
|                                                                                                                                                                                |   |                                         |       |   |   |   |   |
| Cash                flows from financing activities:                                                                                                                                |   |                                         |       |   |   |   |   |
| Payments                on bonds and notes payable                                                                                                                                  |   |                                         | (5,444,408 | ) |   | (1,435,054 | ) |
| Proceeds                from issuance of bonds and notes payable                                                                                                                    |   |                                         | 4,761,143  |   |   | 3,601,480 |   |
| Proceeds                (payments) from issuance of notes payable due to a related party,                net                                                                        |   |                                         | 9,269      |   |   | (55,715 | ) |
| Payments                of debt issuance costs                                                                                                                                      |   |                                         | (14,634    | ) |   | (5,899 | ) |
| Dividends                paid                                                                                                                                                       |   |                                         | (3,458     | ) |   | (6,904 | ) |
| Proceeds                from issuance of common stock                                                                                                                               |   |                                         | 423        |   |   | 951 |   |
| Repurchases                of common stock                                                                                                                                          |   |                                         | (667       | ) |   | (75,482 | ) |
| Payments                received on employee stock notes receivable                                                                                                                 |   |                                         | 575        |   |   | 128 |   |
| Net                cash flows from financing activities - continuing                operations                                                                                      |   |                                         | (691,757   | ) |   | 2,023,505 |   |
| Net                cash flows from financing activities - discontinued                operations                                                                                    |   |                                         | —    |   |   | — |   |
| Net                cash (used in) provided by financing activities                                                                                                                  |   |                                         | (691,757   | ) |   | 2,023,505 |   |
|                                                                                                                                                                                |   |                                         |       |   |   |   |   |
| Effect                of exchange rate fluctuations on cash                                                                                                                         |   |                                         | —    |   |   | 548 |   |
|                                                                                                                                                                                |   |                                         |       |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents                                                                                                                 |   |                                         | 26,708     |   |   | (80 | ) |
|                                                                                                                                                                                |   |                                         |       |   |   |   |   |
| Cash                and cash equivalents, beginning of period                                                                                                                       |   |                                         | 111,746    |   |   | 106,086 |   |
|                                                                                                                                                                                |   |                                         |       |   |   |   |   |
| Cash                and cash equivalents, end of period                                                                                                                             |   | $                                            | 138,454    |   |   | 106,006 |   |
|                                                                                                                                                                                |   |                                         |       |   |   |   |   |
| Supplemental                disclosures of cash flow information:                                                                                                                   |   |                                         |       |   |   |   |   |
| Interest                paid                                                                                                                                                        |   | $                                            | 589,578    |   |   | 630,175 |   |
| Income                taxes paid, net of refunds                                                                                                                                    |   | $                                            | 14,126     |   |   | 12,130 |   |

----

*Table          of Contents*

**NELNET,      INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Information      as of June 30, 2008 and for the three months and six months      ended**

**June      30, 2008 and 2007 is unaudited)**

**(Dollars      in thousands, except per share amounts, unless otherwise      noted)**

**1.          **
**Basis          of Financial Reporting**

**2.      Discontinued Operations**

|                                                                  |   | **Three                months ended June 30,** |    | **Six                months ended June 30,** |   |
|-----------------------------------------------------------------------|--------|------------------------------------------------|---------|----------------------------------------------|--------|
|                                                                  |   | **2008**                                       |    | **2007**                                     |   | **2008** |   | **2007** |   |
|                                                                  |   |                                           |    |                                         |   |   |   |   |   |   |   |   |   |
| Operating                income of discontinued operations            |   | $                                              | — |                                         |   | 4,864 |   |   | — |   |   | 9,278 |   |
| Income                tax on operations                               |   |                                           | — |                                         |   | (1,958 | ) |   | — |   |   | (3,562 | ) |
| Gain                (loss) on disposal                                |   |                                           | 1,966   |                                         |   | (8,151 | ) |   | 1,966 |   |   | (8,151 | ) |
| Income                tax on disposal                                 |   |                                           | (985    | )                                            |   | (890 | ) |   | (985 | ) |   | (890 | ) |
| Income                (loss) from discontinued operations, net of tax |   | $                                              | 981     |                                         |   | (6,135 | ) |   | 981 |   |   | (3,325 | ) |

|                                                                   |   | **Three months ended** |   | **Six months ended** |   |
|------------------------------------------------------------------------|--------|----------------------------------|--------|--------------------------------|--------|
|                                                                   |   | **June 30, 2007**      |   | **June 30, 2007**    |   |
|                                                                   |   |                             |   |                           |   |   |   |
| Net                interest income                                     |   | $                                | 53     |                           |   | 124 |   |
| Other                income                                            |   |                             | 12,480 |                           |   | 31,511 |   |
| Operating                expenses                                      |   |                             | (7,669 | )                              |   | (22,357 | ) |
| Income                before income taxes                              |   |                             | 4,864  |                           |   | 9,278 |   |
| Income                tax expense                                      |   |                             | 1,958  |                           |   | 3,562 |   |
|                                                                   |   |                             |   |                           |   |   |   |
| Operating                income of discontinued operations, net of tax |   | $                                | 2,906  |                           |   | 5,716 |   |

----

*Table          of Contents*

*Accounting      for Income Taxes*

**3.      Restructuring Charges**

***Legislative      Impact***

|                                                         |   | **Employee**    |    |             |   |      |   |
|--------------------------------------------------------------|--------|-----------------|---------|------------------|--------|-----------|--------|
|                                                         |   | **termination** |    | **Lease**        |   |      |   |
|                                                         |   | **benefits**    |    | **terminations** |   | **Total** |   |
|                                                         |   |            |    |             |   |      |   |   |   |   |
| Restructuring                accrual as of December 31, 2007 |   | $               | 1,193   |             |   | 3,682     |   |   | 4,875 |   |
|                                                         |   |            |    |             |   |      |   |   |   |   |
| Adjustment                from initial estimated charges     |   |            | (191    | )                |   | —   |   |   | (191 | ) |
|                                                         |   |            |    |             |   |      |   |   |   |   |
| Cash                payments                                 |   |            | (868    | )                |   | (358      | )      |   | (1,226 | ) |
|                                                         |   |            |    |             |   |      |   |   |   |   |
| Restructuring                accrual as of March 31, 2008    |   |            | 134     |             |   | 3,324     |   |   | 3,458 |   |
|                                                         |   |            |    |             |   |      |   |   |   |   |
| Cash                payments                                 |   |            | (134    | )                |   | (45       | )      |   | (179 | ) |
|                                                         |   |            |    |             |   |      |   |   |   |   |
| Restructuring                accrual as of June 30, 2008     |   | $               | — |             |   | 3,279     |   |   | 3,279 |   |

***Capital      Markets Impact***

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*Table          of Contents*

|                                                                                                            |   | **Employee**    |    |             |   |                         |   |      |    |
|-----------------------------------------------------------------------------------------------------------------|--------|-----------------|---------|------------------|--------|------------------------------|--------|-----------|---------|
|                                                                                                            |   | **termination** |    | **Lease**        |   | **Write-down**               |   |      |    |
|                                                                                                            |   | **benefits**    |    | **terminations** |   | **of                assets** |   | **Total** |    |
|                                                                                                            |   |            |    |             |   |                         |   |      |    |   |   |   |   |
| Restructuring                costs recognized during the three month period ended March 31,                2008 |   | $               | 6,095   | (a)              |   | 1,573                        | (b)    |      | 18,834  | (c) |   | 26,502 |   |
|                                                                                                            |   |            |    |             |   |                         |   |      |    |   |   |   |   |
| Write-down                of assets to net realizable value                                                     |   |            | — |             |   | —                      |   |      | (18,834 | ) |   | (18,834 | ) |
|                                                                                                            |   |            |    |             |   |                         |   |      |    |   |   |   |   |
| Cash                payments                                                                                    |   |            | (4,952  | )                |   | —                      |   |      | — |   |   | (4,952 | ) |
|                                                                                                            |   |            |    |             |   |                         |   |      |    |   |   |   |   |
| Restructuring                accrual as of March 31, 2008                                                       |   |            | 1,143   |             |   | 1,573                        |   |      | — |   |   | 2,716 |   |
|                                                                                                            |   |            |    |             |   |                         |   |      |    |   |   |   |   |
| Adjustment                from initial estimated charges                                                        |   |            | (190)   | (a)              |   | (175)                        | (b)    |      | — |   |   | (365 | ) |
|                                                                                                            |   |            |    |             |   |                         |   |      |    |   |   |   |   |
| Cash                payments                                                                                    |   |            | (792    | )                |   | (369                         | )      |      | — |   |   | (1,161 | ) |
|                                                                                                            |   |            |    |             |   |                         |   |      |    |   |   |   |   |
| Restructuring                accrual as of June 30, 2008                                                        |   | $               | 161     |             |   | 1,029                        |   |      | — |   |   | 1,190 |   |

|                                                          |   | **Restructuring costs**  |    |                        |   |         |   |                         |    |                  |   |         |   |                         |    |
|---------------------------------------------------------------|--------|-------------------------------|---------|-----------------------------|--------|--------------|--------|------------------------------|---------|-----------------------|--------|--------------|--------|------------------------------|---------|
|                                                          |   | **recognized during**    |    |                        |   |         |   |                         |    | **Adjustment**        |   |         |   |                         |    |
|                                                          |   | **the three month** |    | **Write-down of**      |   |         |   | **Restructuring**            |    | **from initial** |   |         |   | **Restructuring**            |    |
|                                                          |   | **period ended**         |    | **assets to net** |   | **Cash**     |   | **accrual as of**  |    | **estimated**         |   | **Cash**     |   | **accrual as of**  |    |
| **Operating segment**                                    |   | **March 31, 2008**  |    | **realizable value**   |   | **payments** |   | **March 31, 2008** |    | **charges**           |   | **payments** |   | **March 31, 2008** |    |
|                                                          |   |                          |    |                        |   |         |   |                         |    |                  |   |         |   |                         |    |   |   |   |   |   |   |   |
| Student                Loan and Guaranty Servicing            |   | $                             | 6,010   |                        |   | (5,074       | )      |                         | (430    | )                     |   | 506          |   |                         | (104    | ) |   | (352 | ) |   | 50 |   |
|                                                          |   |                          |    |                        |   |         |   |                         |    |                  |   |         |   |                         |    |   |   |   |   |   |   |   |
| Tuition                Payment Processing and Campus Commerce |   |                          | — |                        |   | —      |   |                         | — |                  |   | —      |   |                         | — |   |   | — |   |   | — |   |
|                                                          |   |                          |    |                        |   |         |   |                         |    |                  |   |         |   |                         |    |   |   |   |   |   |   |   |
| Enrollment                Services and List Management        |   |                          | 312     |                        |   | —      |   |                         | (291    | )                     |   | 21           |   |                         | (15     | ) |   | (19 | ) |   | (13 | ) |
|                                                          |   |                          |    |                        |   |         |   |                         |    |                  |   |         |   |                         |    |   |   |   |   |   |   |   |
| Software                and Technical Services                |   |                          | 518     |                        |   | —      |   |                         | (472    | )                     |   | 46           |   |                         | (8      | ) |   | — |   |   | 38 |   |
|                                                          |   |                          |    |                        |   |         |   |                         |    |                  |   |         |   |                         |    |   |   |   |   |   |   |   |
| Asset                Generation and Management                |   |                          | 11,287  |                        |   | (9,351       | )      |                         | (1,806  | )                     |   | 130          |   |                         | (52     | ) |   | (72 | ) |   | 6 |   |
|                                                          |   |                          |    |                        |   |         |   |                         |    |                  |   |         |   |                         |    |   |   |   |   |   |   |   |
| Corporate                Activity and Overhead                |   |                          | 8,375   |                        |   | (4,409       | )      |                         | (1,953  | )                     |   | 2,013        |   |                         | (186    | ) |   | (718 | ) |   | 1,109 |   |
|                                                          |   |                          |    |                        |   |         |   |                         |    |                  |   |         |   |                         |    |   |   |   |   |   |   |   |
|                                                          |   | $                             | 26,502  |                        |   | (18,834      | )      |                         | (4,952  | )                     |   | 2,716        |   |                         | (365    | ) |   | (1,161 | ) |   | 1,190 |   |

**4.      Legal, Industry, and Legislative Developments **

***Legal      Proceedings***

----

*Table          of Contents*

*Hinds      County, Mississippi v. Wachovia Bank, N.A. et al. *

***Industry      Inquiries and Investigations***

***Department      of Education Review***

----

*Table          of Contents*

***Department      of Justice***

***Internal      Revenue Service***

***Legislative      Developments***

|   | · | Increases                statutory limits on annual and aggregate borrowing for FFELP loans;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | Allows                the Department to act as a secondary market and enter into forward                purchasing agreements with lenders. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Offers                to purchase loans from lenders for the 2008-2009 academic year and                offers                lenders access to short-term liquidity;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Commits                to continue working with the FFELP community to explore programs                to                reengage the capital markets in the                long-run. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Contains                      lender and school code of conduct requirements applicable to                      FFELP and                      private education lenders; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Contains                      additional provisions and reporting requirements for lenders                      and schools                      participating in preferred lender arrangements;                      and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | Contains                    additional disclosures that FFELP lenders must make to borrowers                    as well                    as added FFELP loan servicing requirements for                    lenders. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**5.      Student Loans Receivable and Allowance for Loan Losses**

|                                                                                                                                  |   | **As of**              |       | **As of**                  |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|---------------------------------|--------|
|                                                                                                                                  |   | **June 30, 2008** |       | **December 31, 2007** |   |
|                                                                                                                                  |   |                        |       |                            |   |
| Federally                insured loans                                                                                                |   | $                           | 25,332,173 |                            |   | 26,054,398 |   |
| Non-federally                insured loans                                                                                            |   |                        | 279,953    |                            |   | 274,815 |   |
|                                                                                                                                  |   |                        | 25,612,126 |                            |   | 26,329,213 |   |
| Unamortized                loan premiums and deferred origination costs                                                               |   |                        | 429,090    |                            |   | 452,501 |   |
| Allowance                for loan losses - federally insured loans                                                                    |   |                        | (24,084    | )                               |   | (24,534 | ) |
| Allowance                for loan losses - non-federally insured loans                                                                |   |                        | (23,825    | )                               |   | (21,058 | ) |
|                                                                                                                                  |   | $                           | 25,993,307 |                            |   | 26,736,122 |   |
|                                                                                                                                  |   |                        |       |                            |   |   |   |
| Federally                insured allowance as a percentage of ending balance of federally                insured                loans |   |                        | 0.10       | %                               |   | 0.09 | % |
| Non-federally                insured allowance as a percentage of ending balance of non-federally                insured loans        |   |                        | 8.51       | %                               |   | 7.66 | % |
| Total                allowance as a percentage of ending balance of total loans                                                       |   |                        | 0.19       | %                               |   | 0.17 | % |

***Loan      Sales***

----

*Table          of Contents*

**6.**
**Intangible      Assets and Goodwill**

|                                                                                                                          |   | **Weighted **                   |                     |              |   |                        |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------------------------|-------------------|--------|-----------------------------|--------|
|                                                                                                                          |   | **average**                          |                     |              |   |                        |   |
|                                                                                                                          |   | **remaining**                        |                     |              |   |                        |   |
|                                                                                                                          |   | **useful life as of** |                     | **As of**    |   | **As of **        |   |
|                                                                                                                          |   | **June 30,**                    |                     | **June 30,** |   | **December 31, ** |   |
|                                                                                                                          |   | **2008**                             |                     | **2008**          |   | **2007**                    |   |
| Amortizable                intangible assets:                                                                                 |   |                                 |                     |              |   |                        |   |   |   |   |
| Customer                relationships (net of accumulated amortization of $25,048 and $20,299,                respectively)   |   |                                 | 112                      |              | $      | 55,312                      |   |   | 60,061 |   |
| Trade                names (net of accumulated amortization of $3,372 and $1,258,                respectively)                |   |                                 | 47                       |              |   | 13,687                      |   |   | 1,609 |   |
| Covenants                not to compete (net of accumulated amortization of $11,939 and $11,815,                respectively) |   |                                 | 25                       |              |   | 11,683                      |   |   | 15,425 |   |
| Database                and content (net of accumulated amortization of $4,320 and $3,193,                respectively)       |   |                                 | 28                       |              |   | 5,160                       |   |   | 6,287 |   |
| Computer                software (net of accumulated amortization of $6,238 and $4,898,                respectively)          |   |                                 | 15                       |              |   | 2,764                       |   |   | 4,189 |   |
| Student                lists (net of accumulated amortization of $6,831 and $5,806,                respectively)              |   |                                 | 8                        |              |   | 1,366                       |   |   | 2,391 |   |
| Other                (net of accumulated amortization of $83 and $71,                respectively)                            |   |                                 | 92                       |              |   | 191                         |   |   | 203 |   |
| Loan                origination rights (net of accumulated amortization of                $8,180)                             |   |                                 | —                  |              |   | —                     |   |   | 8,473 |   |
| Total                - amortizable intangible assets                                                                          |   |                                 | 81                months |              |   | 90,163                      |   |   | 98,638 |   |
| Unamortizable                intangible assets - trade names                                                                  |   |                                 |                          |              |   | —                     |   |   | 14,192 |   |
|                                                                                                                          |   |                                 |                          |              | $      | 90,163                      |   |   | 112,830 |   |

|                                          |   | **Operating** |                                               | **Impairment** |   |
|-----------------------------------------------|--------|---------------|----------------------------------------------------|----------------|--------|
| **Asset**                                     |   | **segment**   |                                               | **charge**     |   |
| Amortizable                intangible assets: |   |          |                                               |           |   |
| Covenants                not to compete       |   |          | Student                Loan and Guaranty Servicing |           | $      | 4,689 |   |
| Covenants                not to compete       |   |          | Asset                Generation and Management     |           |   | 336 |   |
| Loan                origination rights        |   |          | Asset                Generation and Management     |           |   | 8,336 |   |
| Computer                software              |   |          | Asset                Generation and Management     |           |   | 12 |   |
|                                          |   |          |                                               |           |   |   |   |
| Goodwill                                      |   |          | Asset                Generation and Management     |           |   | 667 |   |
|                                          |   |          |                                               |           |   |   |   |
| Property                and equipment         |   |          | Student                Loan and Guaranty Servicing |           |   | 385 |   |
| Property                and equipment         |   |          | Corporate                activities                |           |   | 4,409 |   |
|                                          |   |          |                                               |           |   |   |   |
| Total                impairment charge        |   |          |                                               |           | $      | 18,834 |   |

----

*Table          of Contents*

| 2008                               |   | $      | 13,109 |   |
|------------------------------------|--------|--------|--------|--------|
| 2009                               |   |   | 22,319 |   |
| 2010                               |   |   | 15,985 |   |
| 2011                               |   |   | 10,031 |   |
| 2012                               |   |   | 9,029  |   |
| 2013                and thereafter |   |   | 19,690 |   |
|                               |   | $      | 90,163 |   |

|                                                        |   |                  |    | **Tuition**         |   |              |   |          |    |           |   |      |   |
|-------------------------------------------------------------|--------|-----------------------|---------|---------------------|--------|-------------------|--------|---------------|---------|----------------|--------|-----------|--------|
|                                                        |   |                  |    | **Payment**         |   | **Enrollment**    |   | **Software**  |    | **Asset**      |   |      |   |
|                                                        |   | **Student Loan** |    | **Processing**      |   | **Services**      |   | **and**       |    | **Generation** |   |      |   |
|                                                        |   | **and Guaranty** |    | **and Campus** |   | **and List** |   | **Technical** |    | **and**        |   |      |   |
|                                                        |   | **Servicing**         |    | **Commerce**        |   | **Management**    |   | **Services**  |    | **Management** |   | **Total** |   |
|                                                             |   |                  |    |                |   |              |   |          |    |           |   |      |   |
| Balance                as of December 31, 2007              |   | $                     | — |                |   | 58,086            |   |          | 55,463  |           |   | 8,596     |   |   | 42,550 |   |   | 164,695 |   |
| Additional                contingent consideration paid (a) |   |                  | — |                |   | —           |   |          | 11,150  |           |   | —   |   |   | — |   |   | 11,150 |   |
| Impairment                charge                            |   |                  | — |                |   | —           |   |          | — |           |   | —   |   |   | (667 | ) |   | (667 | ) |
| Balance                as of March 31, 2008 (b)             |   | $                     | — |                |   | 58,086            |   |          | 66,613  |           |   | 8,596     |   |   | 41,883 |   |   | 175,178 |   |

|   | (a) | In                January 2008, the Company paid $18.0 million                (of which $6.8 million was                accrued as of December 31, 2007) of additional consideration related                to                its 2005 acquisitions of Student Marketing Group, Inc. and National                Honor                Roll, L.L.C. This payment satisfies all of the Company’s obligations                related to the contingencies per the terms of the purchase                agreement. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | During                the quarter ended June 30, 2008, there was no change in                goodwill. |
|--------|-----|--------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**7.      Bonds and Notes Payable**

|                                                           |   | **As of June 30, 2008** |       |
|----------------------------------------------------------------|--------|---------------------------------------------|------------|
|                                                           |   | **Carrying**                                |       | **Interest rate** |   |   |   |
|                                                           |   | **amount**                                  |       | **range** |   | **Final maturity** |   |
|                                                           |   |                                        |       |   |   |   |   |
| Variable-rate                bonds and notes (a):              |   |                                        |       |   |   |   |   |   |   |   |
| Bonds                and notes based on indices                |   | $                                           | 21,339,035 |   |   | 2.65%                - 4.97 | % |   | 09/25/13                - 06/25/41 |   |
| Bonds                and notes based on auction or remarketing |   |                                        | 2,841,245  |   |   | 0.67%                - 7.00 | % |   | 11/01/09                - 07/01/43 |   |
| Total                variable-rate bonds and notes             |   |                                        | 24,180,280 |   |   |   |   |   |   |   |
|                                                           |   |                                        |       |   |   |   |   |   |   |   |
| Commercial                paper - FFELP facility (b)           |   |                                        | 1,986,212  |   |   | 2.08%                - 2.91 | % |   | 05/09/10 |   |
| Commercial                paper - private loan facility (b)    |   |                                        | 159,800    |   |   | 3.08 | % |   | 03/14/09 |   |
| Fixed-rate                bonds and notes (a)                  |   |                                        | 207,376    |   |   | 5.30%                - 6.68 | % |   | 11/01/09                - 05/01/29 |   |
| Unsecured                fixed rate debt                       |   |                                        | 475,000    |   |   | 5.13%                and 7.40 | % |   | 06/01/10                and 09/15/61 |   |
| Unsecured                line of credit                        |   |                                        | 450,000    |   |   | 2.90 | % |   | 05/08/12 |   |
| Other                borrowings                                |   |                                        | 71,569     |   |   | 3.19%                - 5.10 | % |   | 05/22/09                - 11/01/15 |   |
|                                                           |   | $                                           | 27,530,237 |   |   |   |   |   |   |   |

|                                                           |   | **As of December 31, 2007** |       |
|----------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                           |   | **Carrying**                                    |       | **Interest rate** |   |   |   |
|                                                           |   | **amount**                                      |       | **range** |   | **Final maturity** |   |
| Variable-rate                bonds and notes (a):              |   |                                            |       |   |   |   |   |   |   |   |
| Bonds                and notes based on indices                |   | $                                               | 17,508,810 |   |   | 4.73%                - 5.78 | % |   | 09/25/12                - 06/25/41 |   |
| Bonds                and notes based on auction or remarketing |   |                                            | 2,905,295  |   |   | 2.96%                - 7.25 | % |   | 11/01/09                - 07/01/43 |   |
| Total                variable-rate bonds and notes             |   |                                            | 20,414,105 |   |   |   |   |   |   |   |
|                                                           |   |                                            |       |   |   |   |   |   |   |   |
| Commercial                paper - FFELP facility (b)           |   |                                            | 6,629,109  |   |   | 5.22%                - 5.98 | % |   | 05/09/10 |   |
| Commercial                paper - private loan facility (b)    |   |                                            | 226,250    |   |   | 5.58 | % |   | 03/14/09 |   |
| Fixed-rate                bonds and notes (a)                  |   |                                            | 214,476    |   |   | 5.20%                - 6.68 | % |   | 11/01/09                - 05/01/29 |   |
| Unsecured                fixed rate debt                       |   |                                            | 475,000    |   |   | 5.13%                and 7.40 | % |   | 06/01/10                and 09/15/61 |   |
| Unsecured                line of credit                        |   |                                            | 80,000     |   |   | 5.40%                - 5.53 | % |   | 05/08/12 |   |
| Other                borrowings                                |   |                                            | 76,889     |   |   | 4.65%                - 5.20 | % |   | 09/28/08                - 11/01/15 |   |
|                                                           |   | $                                               | 28,115,829 |   |   |   |   |   |   |   |

|  | (a) | Issued                in asset-backed securitizations |
|--|-----|-------------------------------------------------------|

|  | (b) | Loan                warehouse facilities |
|--|-----|------------------------------------------|

***Secured      Financing Transactions***

----

*Table          of Contents*

*Loan      warehouse facilities*

----

*Table          of Contents*

*Accounting      for Transfers and Servicing of Financial Assets and Extinguishments of      Liabilities *

***Asset-backed      Securitizations***

----

*Table          of Contents*

***Unsecured      Lines of Credit***

***Other      Borrowings***

**8.**
**Derivative      Financial Instruments**

***Interest      Rate Swaps***

----

*Table          of Contents*

|          |   |         |      | **Weighted**                  |   |
|---------------|--------|--------------|-----------|-------------------------------|--------|
|          |   |         |      | **average fixed**        |   |
|          |   | **Notional** |      | **rate paid by**    |   |
| **Maturity**  |   | **Amount**   |      | **the Company (a)** |   |
|          |   |         |      |                          |   |
| 2008 (b) |   | $            | 2,000,000 |                          |   | 4.18 | % |
| 2009          |   |         | 500,000   |                          |   | 4.08 |   |
| 2010          |   |         | 700,000   |                          |   | 3.44 |   |
| 2011          |   |         | 500,000   |                          |   | 3.57 |   |
| 2012          |   |         | 250,000   |                          |   | 3.86 |   |
|          |   | $            | 3,950,000 |                          |   | 3.94 | % |

|  | (a) | For                all interest rate derivatives for which the Company pays a fixed                rate, the                Company receives discrete three-month                LIBOR. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | The                maturity date on these derivatives is June 30, 2008. The Company                has                hedged a portion of its student loan portfolio in which the borrower                interest rate resets annually on July 1. These loans can generate                excess                spread income compared with the rate based on the special allowance                formula in declining interest rate environments. As discussed above,                the                Company refers to this additional income as variable-rate floor                income. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Basis      Swaps***

|         |   | **Notional                Amount (a)**                           |      |
|--------------|--------|------------------------------------------------------------------|-----------|
| **Maturity** |   | **Effective date in second****quarter 2007** |      | **Effective date in third****quarter 2007** |   | **Effective date in second****quarter 2008** |   | **Effective date in third****quarter 2008** |   | **Total** |   |
|         |   |                                                             |      |   |   |   |   |   |          |   |   |
| 2008         |   | **$**                                                            | 1,000,000 |   |   | 2,000,000 |   |   | — |   |   | — |   |   | 3,000,000 |   |
| 2009         |   |                                                             | 2,000,000 |   |   | 4,000,000 |   |   | — |   |   | 3,000,000 | (b)(f) |   | 9,000,000 |   |
| 2010         |   |                                                             | 500,000   |   |   | 2,000,000 | (c) |   | 2,000,000 |   |   | 1,000,000 |   |   | 5,500,000 |   |
| 2011         |   |                                                             | —   | (d) |   | 2,700,000 |   |   | — |   |   | — |   |   | 2,700,000 |   |
| 2012         |   |                                                             | —   | (e) |   | 1,000,000 | (f) |   | 800,000 |   |   | 1,600,000 |   |   | 3,400,000 |   |
|         |   |                                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         |   | **$**                                                            | 3,500,000 |   |   | 11,700,000 |   |   | 2,800,000 |   |   | 5,600,000 |   |   | 23,600,000 |   |

|   | (a) | All                basis swaps were executed by the Company during the second quarter                2007,                unless otherwise noted. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Executed                by the Company during the second quarter                2008. |
|--------|-----|---------------------------------------------------------------------------------------|

|   | (c) | In                March 2008, the Company terminated a basis swap with a notional amount                of                $1.0 billion, which is not included in the table                above. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | In                March 2008, the Company terminated a basis swap with a notional amount                of                $1.35 billion, which is not included in the table                above. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | In                March 2008, the Company terminated a basis swap with a notional amount                of                $0.5 billion, which is not included in the table                above. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | In                July 2008, the Company terminated these basis                swaps. |
|--------|-----|---------------------------------------------------------------------------------------|

----

*Table          of Contents*

***Cross-Currency      Interest Rate Swaps***

***Accounting      for Derivative Financial Instruments***

|                                              |   | **As of**              |    | **As of**                  |   |
|---------------------------------------------------|--------|-----------------------------|---------|---------------------------------|--------|
|                                              |   | **June 30, 2008** |    | **December 31, 2007** |   |
|                                              |   |                        |    |                            |   |
| Interest                rate swaps                |   | $                           | 1,403   |                            |   | (2,695 | ) |
| Basis                swaps                        |   |                        | (28,326 | )                               |   | 27,525 |   |
| Cross-currency                interest rate swaps |   |                        | 283,423 |                            |   | 191,756 |   |
|                                              |   |                        |    |                            |   |   |   |
| Net                fair value                     |   | $                           | 256,500 |                            |   | 216,586 |   |

|                                                |   | **Three months ended June 30,** |   | **Six months ended June 30,** |   |
|-----------------------------------------------------|--------|-----------------------------------------------------|--------|---------------------------------------------------|--------|
|                                                |   | **2008**                                            |   | **2007**                                          |   | **2008** |   | **2007** |   |
|                                                |   |                                                |   |                                              |   |   |   |   |   |
| Interest                rate swaps                  |   | $                                                   | (7,842 | )                                                 |   | 7,576 |   |   | (11,019 | ) |   | 15,074 |   |
| Basis                swaps                          |   |                                                | 5,148  |                                              |   | 58 |   |   | 45,605 |   |   | 119 |   |
| Cross-currency                interest rate swaps   |   |                                                | 7,131  |                                              |   | (2,438 | ) |   | 10,614 |   |   | (5,757 | ) |
|                                                |   |                                                |   |                                              |   |   |   |   |   |   |   |   |   |
| Derivative                settlements received, net |   | $                                                   | 4,437  |                                              |   | 5,196 |   |   | 45,200 |   |   | 9,436 |   |

----

*Table          of Contents*

**9.      **
**Fair      Value**

*Fair      Value Measurements*

|   | · | Level                1: Quoted prices for *identical*instruments                in active markets. The types of financial instruments included in                Level 1                are highly liquid instruments with quoted prices. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level                2: Quoted prices for *similar*instruments                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. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                    |   | **As                of June 30, 2008** |    |
|---------------------------------------------------------|--------|----------------------------------------|---------|
|                                                    |   | **Level                1**             |    | **Level                2** |   | **Total** |   |
| Assets:                                                 |   |                                   |    |   |   |   |   |
| Other                assets (a)                         |   | $                                      | 4,185   |   |   | 5,540 |   |   | 9,725 |   |
| Fair                value of derivative instruments (b) |   |                                   | — |   |   | 295,346 |   |   | 295,346 |   |
| Total                assets                             |   | $                                      | 4,185   |   |   | 300,886 |   |   | 305,071 |   |
|                                                         |   |                                   |    |   |   |   |   |   |   |   |
| Liabilities:                                            |   |                                   |    |   |   |   |   |   |   |   |
| Fair                value of derivative instruments (b) |   | $                                      | — |   |   | 38,846 |   |   | 38,846 |   |
| Other                liabilities (c)                    |   |                                   | — |   |   | 6,655 |   |   | 6,655 |   |
| Total                liabilities                        |   | $                                      | — |   |   | 45,501 |   |   | 45,501 |   |

|                                                    |   | **As of December 31, 2007** |    |
|---------------------------------------------------------|--------|-------------------------------------------------|---------|
|                                                    |   | **Level                1**                      |    | **Level                2** |   | **Total** |   |
| Assets:                                                 |   |                                            |    |   |   |   |   |
| Fair                value of derivative instruments (b) |   | $                                               | — |   |   | 222,471 |   |   | 222,471 |   |
| Total                assets                             |   | $                                               | — |   |   | 222,471 |   |   | 222,471 |   |
|                                                    |   |                                            |    |   |   |   |   |   |   |   |
| Liabilities:                                            |   |                                            |    |   |   |   |   |   |   |   |
| Fair                value of derivative instruments (b) |   | $                                               | — |   |   | 5,885 |   |   | 5,885 |   |
| Other                liabilities (c)                    |   |                                            | — |   |   | 6,117 |   |   | 6,117 |   |
| Total                liabilities                        |   | $                                               | — |   |   | 12,002 |   |   | 12,002 |   |

----

*Table          of Contents*

|  | (a) | 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. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | All                derivatives are accounted for at fair value in the financial statements.                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. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Other                liabilities includes put options valued using a Black-Scholes pricing                model using the stated terms of the contracts and observable inputs                including the Company’s common stock volatility and dividend yield and a                risk-free interest rate over the expected term of the option. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**10.      Earnings per Common Share**

*Earnings      Per Share*

|                                                                                                   |   | **Three months ended June 30,** |       | **Six months ended June 30,** |   |
|--------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|------------|---------------------------------------------------|--------|
|                                                                                                   |   | **2008**                                            |       | **2007**                                          |   | **2008** |   | **2007** |   |
|                                                                                                   |   |                                                |       |                                              |   |   |   |   |   |
| Weighted                average shares outstanding                                                     |   |                                                | 49,442,435 |                                              |   | 49,452,960 |   |   | 49,443,425 |   |   | 50,213,349 |   |
| Less:                Nonvested restricted stock - vesting solely upon continued                service |   |                                                | 347,282    |                                              |   | — |   |   | 369,845 |   |   | — |   |
|                                                                                                   |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Weighted                average shares outstanding used to compute basic EPS                           |   |                                                | 49,095,153 |                                              |   | 49,452,960 |   |   | 49,073,580 |   |   | 50,213,349 |   |
| Dilutive                effect of nonvested restricted stock                                           |   |                                                | 9,488      |                                              |   | — |   |   | — |   |   | — |   |
|                                                                                                   |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Weighted                average shares used to compute diluted EPS                                     |   |                                                | 49,104,641 |                                              |   | 49,452,960 |   |   | 49,073,580 |   |   | 50,213,349 |   |

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*Table          of Contents*

**11.      Segment Reporting **

*Disclosures      about Segments of an Enterprise and Related Information*

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*Table          of Contents*

***Fee-Based      Operating Segments***

*Student      Loan and Guaranty Servicing*

|   | · | Origination                and servicing of FFELP loans; |
|--------|--------|----------------------------------------------------------|

|   | · | Servicing                of non-federally insured student loans;                and |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | Servicing                and support outsourcing for guaranty                agencies. |
|--------|--------|----------------------------------------------------------------------------------------|

*Tuition      Payment Processing and Campus Commerce*

*Enrollment      Services and List Management*

*Software      and Technical Services*

***Asset      Generation and Management Operating Segment***

***Segment      Operating Results - “Base Net Income”***

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*Table          of Contents*

***Segment      Results and Reconciliations to GAAP***

|                                                                                 |   | **Three months ended June 30, 2008** |    |
|--------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|---------|
|                                                                                 |   | **Fee-Based**                                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   | **Student**                                                   |    | **Tuition** |   | **Enrollment** |   |   |   |   |   |   |   |   |   |   |   | **"Base net** |   |   |   |
|                                                                                 |   | **Loan**                                                      |    | **Payment** |   | **Services** |   | **Software** |   |   |   | **Asset** |   | **Corporate** |   |   |   | **income"** |   |   |   |
|                                                                                 |   | **and**                                                       |    | **Processing** |   | **and** |   | **and** |   | **Total** |   | **Generation** |   | **Activity** |   | **Eliminations** |   | **Adjustments** |   | **GAAP** |   |
|                                                                                 |   | **Guaranty**                                                  |    | **and Campus** |   | **List** |   | **Technical** |   | **Fee-** |   | **and** |   | **and** |   | **and** |   | **to GAAP** |   | **Results of** |   |
|                                                                                 |   | **Servicing**                                                 |    | **Commerce** |   | **Management** |   | **Services** |   | **Based** |   | **Management** |   | **Overhead** |   | **Reclassifications** |   | **Results** |   | **Operations** |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest income                                                 |   | $                                                             | 243     |   |   | 310 |   |   | 1 |   |   | — |   |   | 554 |   |   | 282,293 |   |   | 1,574 |   |   | (546 | ) |   | 21,927 |   |   | 305,802 |   |
| Interest                expense                                                      |   |                                                          | — |   |   | — |   |   | 1 |   |   | — |   |   | 1 |   |   | 222,402 |   |   | 10,607 |   |   | (546 | ) |   | — |   |   | 232,464 |   |
| Net                interest income (loss)                                            |   |                                                          | 243     |   |   | 310 |   |   | — |   |   | — |   |   | 553 |   |   | 59,891 |   |   | (9,033 | ) |   | — |   |   | 21,927 |   |   | 73,338 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                provision for loan losses                                        |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 6,000 |   |   | — |   |   | — |   |   | — |   |   | 6,000 |   |
| Net                interest income (loss) after provision for loan losses            |   |                                                          | 243     |   |   | 310 |   |   | — |   |   | — |   |   | 553 |   |   | 53,891 |   |   | (9,033 | ) |   | — |   |   | 21,927 |   |   | 67,338 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense):                                               |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income                                    |   |                                                          | 24,747  |   |   | — |   |   | — |   |   | — |   |   | 24,747 |   |   | 157 |   |   | — |   |   | — |   |   | — |   |   | 24,904 |   |
| Other                fee-based income                                                |   |                                                          | — |   |   | 10,292 |   |   | 26,067 |   |   | — |   |   | 36,359 |   |   | 4,458 |   |   | — |   |   | — |   |   | — |   |   | 40,817 |   |
| Software                services income                                              |   |                                                          | — |   |   | — |   |   | — |   |   | 4,896 |   |   | 4,896 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 4,896 |   |
| Other                income                                                          |   |                                                          | 6       |   |   | (21 | ) |   | — |   |   | — |   |   | (15 | ) |   | 393 |   |   | 1,268 |   |   | — |   |   | — |   |   | 1,646 |   |
| Gain                on sale of loans                                                 |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 48 |   |   | — |   |   | — |   |   | — |   |   | 48 |   |
| Intersegment                revenue                                                  |   |                                                          | 18,382  |   |   | (76 | ) |   | — |   |   | 1,517 |   |   | 19,823 |   |   | — |   |   | 13,960 |   |   | (33,783 | ) |   | — |   |   | — |   |
| Derivative                market value, foreign currency, and put option adjustments |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 15,755 |   |   | 15,755 |   |
| Derivative                settlements, net                                           |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 11,638 |   |   | — |   |   | — |   |   | (7,201 | ) |   | 4,437 |   |
| Total                other income (expense)                                          |   |                                                          | 43,135  |   |   | 10,195 |   |   | 26,067 |   |   | 6,413 |   |   | 85,810 |   |   | 16,694 |   |   | 15,228 |   |   | (33,783 | ) |   | 8,554 |   |   | 92,503 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                                 |   |                                                          | 12,491  |   |   | 5,784 |   |   | 6,373 |   |   | 4,702 |   |   | 29,350 |   |   | 1,954 |   |   | 12,828 |   |   | (1,333 | ) |   | 750 |   |   | 43,549 |   |
| Restructure                expense - severance and contract termination costs        |   |                                                          | (104    | ) |   | — |   |   | (15 | ) |   | (8 | ) |   | (127 | ) |   | (52 | ) |   | (186 | ) |   | 365 |   |   | — |   |   | — |   |
| Other                expenses                                                        |   |                                                          | 8,011   |   |   | 2,551 |   |   | 17,284 |   |   | 714 |   |   | 28,560 |   |   | 5,095 |   |   | 14,921 |   |   | (764 | ) |   | 6,561 |   |   | 54,373 |   |
| Intersegment                expenses                                                 |   |                                                          | 9,822   |   |   | 461 |   |   | 1,580 |   |   | 342 |   |   | 12,205 |   |   | 18,952 |   |   | 894 |   |   | (32,051 | ) |   | — |   |   | — |   |
| Total                operating expenses                                              |   |                                                          | 30,220  |   |   | 8,796 |   |   | 25,222 |   |   | 5,750 |   |   | 69,988 |   |   | 25,949 |   |   | 28,457 |   |   | (33,783 | ) |   | 7,311 |   |   | 97,922 |   |
|                                                                                      |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                                     |   |                                                          | 13,158  |   |   | 1,709 |   |   | 845 |   |   | 663 |   |   | 16,375 |   |   | 44,636 |   |   | (22,262 | ) |   | — |   |   | 23,170 |   |   | 61,919 |   |
| Income                tax expense (benefit) (a)                                      |   |                                                          | 4,079   |   |   | 530 |   |   | 262 |   |   | 206 |   |   | 5,077 |   |   | 13,837 |   |   | (6,902 | ) |   | — |   |   | 7,183 |   |   | 19,195 |   |
| Net                income (loss) from continuing operations                          |   |                                                          | 9,079   |   |   | 1,179 |   |   | 583 |   |   | 457 |   |   | 11,298 |   |   | 30,799 |   |   | (15,360 | ) |   | — |   |   | 15,987 |   |   | 42,724 |   |
| Income                from discontinued operations, net of tax                       |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 981 |   |   | 981 |   |
| Net                income (loss)                                                     |   | $                                                             | 9,079   |   |   | 1,179 |   |   | 583 |   |   | 457 |   |   | 11,298 |   |   | 30,799 |   |   | (15,360 | ) |   | — |   |   | 16,968 |   |   | 43,705 |   |

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*Table          of Contents*

|                                                                                 |   | **Three months ended June 30, 2007** |    |
|--------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|---------|
|                                                                                 |   | **Fee-Based**                                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   | **Student**                                                   |    | **Tuition** |   | **Enrollment** |   |   |   |   |   |   |   |   |   |   |   | **"Base net** |   |   |   |
|                                                                                 |   | **Loan**                                                      |    | **Payment** |   | **Services** |   | **Software** |   |   |   | **Asset** |   | **Corporate** |   |   |   | **income"** |   |   |   |
|                                                                                 |   | **and**                                                       |    | **Processing** |   | **and** |   | **and** |   | **Total** |   | **Generation** |   | **Activity** |   | **Eliminations** |   | **Adjustments** |   | **GAAP** |   |
|                                                                                 |   | **Guaranty**                                                  |    | **and Campus** |   | **List** |   | **Technical** |   | **Fee-** |   | **and** |   | **and** |   | **and** |   | **to GAAP** |   | **Results of** |   |
|                                                                                 |   | **Servicing**                                                 |    | **Commerce** |   | **Management** |   | **Services** |   | **Based** |   | **Management** |   | **Overhead** |   | **Reclassifications** |   | **Results** |   | **Operations** |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest income                                                 |   | $                                                             | 1,181   |   |   | 670 |   |   | 93 |   |   | — |   |   | 1,944 |   |   | 433,404 |   |   | 554 |   |   | (33 | ) |   | — |   |   | 435,869 |   |
| Interest                expense                                                      |   |                                                          | — |   |   | 2 |   |   | 2 |   |   | — |   |   | 4 |   |   | 358,341 |   |   | 9,581 |   |   | (33 | ) |   | — |   |   | 367,893 |   |
| Net                interest income (loss)                                            |   |                                                          | 1,181   |   |   | 668 |   |   | 91 |   |   | — |   |   | 1,940 |   |   | 75,063 |   |   | (9,027 | ) |   | — |   |   | — |   |   | 67,976 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                provision for loan losses                                        |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 2,535 |   |   | — |   |   | — |   |   | — |   |   | 2,535 |   |
| Net                interest income (loss) after provision for loan losses            |   |                                                          | 1,181   |   |   | 668 |   |   | 91 |   |   | — |   |   | 1,940 |   |   | 72,528 |   |   | (9,027 | ) |   | — |   |   | — |   |   | 65,441 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense):                                               |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income                                    |   |                                                          | 31,492  |   |   | — |   |   | — |   |   | — |   |   | 31,492 |   |   | 118 |   |   | — |   |   | — |   |   | — |   |   | 31,610 |   |
| Other                fee-based income                                                |   |                                                          | — |   |   | 9,405 |   |   | 24,923 |   |   | — |   |   | 34,328 |   |   | 3,674 |   |   | 260 |   |   | — |   |   | — |   |   | 38,262 |   |
| Software                services income                                              |   |                                                          | — |   |   | — |   |   | 157 |   |   | 5,691 |   |   | 5,848 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 5,848 |   |
| Other                income                                                          |   |                                                          | 5       |   |   | 25 |   |   | — |   |   | — |   |   | 30 |   |   | 105 |   |   | 1,792 |   |   | — |   |   | — |   |   | 1,927 |   |
| Gain                on sale of loans                                                 |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 1,010 |   |   | — |   |   | — |   |   | — |   |   | 1,010 |   |
| Intersegment                revenue                                                  |   |                                                          | 20,120  |   |   | 188 |   |   | 178 |   |   | 4,389 |   |   | 24,875 |   |   | — |   |   | 4,100 |   |   | (28,975 | ) |   | — |   |   | — |   |
| Derivative                market value, foreign currency, and put option adjustments |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 5,547 |   |   | 5,547 |   |
| Derivative                settlements, net                                           |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (461 | ) |   | 5,657 |   |   | — |   |   | — |   |   | 5,196 |   |
| Total                other income (expense)                                          |   |                                                          | 51,617  |   |   | 9,618 |   |   | 25,258 |   |   | 10,080 |   |   | 96,573 |   |   | 4,446 |   |   | 11,809 |   |   | (28,975 | ) |   | 5,547 |   |   | 89,400 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                                 |   |                                                          | 22,023  |   |   | 5,082 |   |   | 9,022 |   |   | 5,857 |   |   | 41,984 |   |   | 7,167 |   |   | 12,272 |   |   | (2,138 | ) |   | 476 |   |   | 59,761 |   |
| Other                expenses                                                        |   |                                                          | 8,404   |   |   | 2,333 |   |   | 14,589 |   |   | 751 |   |   | 26,077 |   |   | 7,246 |   |   | 21,071 |   |   | — |   |   | 6,491 |   |   | 60,885 |   |
| Intersegment                expenses                                                 |   |                                                          | 3,750   |   |   | 25 |   |   | 29 |   |   | 403 |   |   | 4,207 |   |   | 22,034 |   |   | 596 |   |   | (26,837 | ) |   | — |   |   | — |   |
| Total                operating expenses                                              |   |                                                          | 34,177  |   |   | 7,440 |   |   | 23,640 |   |   | 7,011 |   |   | 72,268 |   |   | 36,447 |   |   | 33,939 |   |   | (28,975 | ) |   | 6,967 |   |   | 120,646 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                                     |   |                                                          | 18,621  |   |   | 2,846 |   |   | 1,709 |   |   | 3,069 |   |   | 26,245 |   |   | 40,527 |   |   | (31,157 | ) |   | — |   |   | (1,420 | ) |   | 34,195 |   |
| Income                tax expense (benefit) (a)                                      |   |                                                          | 7,076   |   |   | 1,082 |   |   | 649 |   |   | 1,167 |   |   | 9,974 |   |   | 15,400 |   |   | (11,500 | ) |   | — |   |   | (568 | ) |   | 13,306 |   |
| Net                income (loss) from continuing operations                          |   |                                                          | 11,545  |   |   | 1,764 |   |   | 1,060 |   |   | 1,902 |   |   | 16,271 |   |   | 25,127 |   |   | (19,657 | ) |   | — |   |   | (852 | ) |   | 20,889 |   |
| Loss                from discontinued operations, net of tax                         |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (6,135 | ) |   | (6,135 | ) |
| Net                income (loss)                                                     |   | $                                                             | 11,545  |   |   | 1,764 |   |   | 1,060 |   |   | 1,902 |   |   | 16,271 |   |   | 25,127 |   |   | (19,657 | ) |   | — |   |   | (6,987 | ) |   | 14,754 |   |

----

*Table          of Contents*

|                                                                                 |   | **Six months ended June 30, 2008** |    |
|--------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|---------|
|                                                                                 |   | **Fee-Based**                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   | **Student**                                                 |    | **Tuition** |   | **Enrollment** |   |   |   |   |   |   |   |   |   |   |   | **"Base net** |   |   |   |
|                                                                                 |   | **Loan**                                                    |    | **Payment** |   | **Services** |   | **Software** |   |   |   | **Asset** |   | **Corporate** |   |   |   | **income"** |   |   |   |
|                                                                                 |   | **and**                                                     |    | **Processing** |   | **and** |   | **and** |   | **Total** |   | **Generation** |   | **Activity** |   | **Eliminations** |   | **Adjustments** |   | **GAAP** |   |
|                                                                                 |   | **Guaranty**                                                |    | **and Campus** |   | **List** |   | **Technical** |   | **Fee-** |   | **and** |   | **and** |   | **and** |   | **to GAAP** |   | **Results of** |   |
|                                                                                 |   | **Servicing**                                               |    | **Commerce** |   | **Management** |   | **Services** |   | **Based** |   | **Management** |   | **Overhead** |   | **Reclassifications** |   | **Results** |   | **Operations** |   |
|                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest income                                                 |   | $                                                           | 856     |   |   | 1,075 |   |   | 10 |   |   | — |   |   | 1,941 |   |   | 602,651 |   |   | 2,771 |   |   | (640 | ) |   | 40,745 |   |   | 647,468 |   |
| Interest                expense                                                      |   |                                                        | — |   |   | — |   |   | 2 |   |   | — |   |   | 2 |   |   | 538,417 |   |   | 19,826 |   |   | (640 | ) |   | — |   |   | 557,605 |   |
| Net                interest income (loss)                                            |   |                                                        | 856     |   |   | 1,075 |   |   | 8 |   |   | — |   |   | 1,939 |   |   | 64,234 |   |   | (17,055 | ) |   | — |   |   | 40,745 |   |   | 89,863 |   |
|                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                provision for loan losses                                        |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 11,000 |   |   | — |   |   | — |   |   | — |   |   | 11,000 |   |
| Net                interest income (loss) after provision for loan losses            |   |                                                        | 856     |   |   | 1,075 |   |   | 8 |   |   | — |   |   | 1,939 |   |   | 53,234 |   |   | (17,055 | ) |   | — |   |   | 40,745 |   |   | 78,863 |   |
|                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense):                                               |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income                                    |   |                                                        | 50,855  |   |   | — |   |   | — |   |   | — |   |   | 50,855 |   |   | 162 |   |   | — |   |   | — |   |   | — |   |   | 51,017 |   |
| Other                fee-based income                                                |   |                                                        | — |   |   | 24,114 |   |   | 53,289 |   |   | — |   |   | 77,403 |   |   | 9,327 |   |   | — |   |   | — |   |   | — |   |   | 86,730 |   |
| Software                services income                                              |   |                                                        | — |   |   | — |   |   | 37 |   |   | 11,611 |   |   | 11,648 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 11,648 |   |
| Other                income                                                          |   |                                                        | 38      |   |   | 4 |   |   | — |   |   | — |   |   | 42 |   |   | 381 |   |   | 2,633 |   |   | — |   |   | — |   |   | 3,056 |   |
| Loss                on sale of loans                                                 |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (47,426 | ) |   | — |   |   | — |   |   | — |   |   | (47,426 | ) |
| Intersegment                revenue                                                  |   |                                                        | 38,606  |   |   | 184 |   |   | — |   |   | 3,333 |   |   | 42,123 |   |   | — |   |   | 31,173 |   |   | (73,296 | ) |   | — |   |   | — |   |
| Derivative                market value, foreign currency, and put option adjustments |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 466 |   |   | — |   |   | — |   |   | (42,072 | ) |   | (41,606 | ) |
| Derivative                settlements, net                                           |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 55,165 |   |   | — |   |   | — |   |   | (9,965 | ) |   | 45,200 |   |
| Total                other income (expense)                                          |   |                                                        | 89,499  |   |   | 24,302 |   |   | 53,326 |   |   | 14,944 |   |   | 182,071 |   |   | 18,075 |   |   | 33,806 |   |   | (73,296 | ) |   | (52,037 | ) |   | 108,619 |   |
|                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                                   |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                                 |   |                                                        | 26,489  |   |   | 11,214 |   |   | 12,896 |   |   | 9,870 |   |   | 60,469 |   |   | 4,178 |   |   | 27,419 |   |   | 3,280 |   |   | 2,046 |   |   | 97,392 |   |
| Restructure                expense - severance and contract termination costs        |   |                                                        | 747     |   |   | — |   |   | 282 |   |   | 510 |   |   | 1,539 |   |   | 1,844 |   |   | 3,729 |   |   | (7,112 | ) |   | — |   |   | — |   |
| Impairment                expense                                                    |   |                                                        | 5,074   |   |   | — |   |   | — |   |   | — |   |   | 5,074 |   |   | 9,351 |   |   | 4,409 |   |   | — |   |   | — |   |   | 18,834 |   |
| Other                expenses                                                        |   |                                                        | 16,498  |   |   | 4,611 |   |   | 35,447 |   |   | 1,333 |   |   | 57,889 |   |   | 10,439 |   |   | 28,786 |   |   | 298 |   |   | 13,121 |   |   | 110,533 |   |
| Intersegment                expenses                                                 |   |                                                        | 23,100  |   |   | 757 |   |   | 3,427 |   |   | 736 |   |   | 28,020 |   |   | 39,554 |   |   | 2,188 |   |   | (69,762 | ) |   | — |   |   | — |   |
| Total                operating expenses                                              |   |                                                        | 71,908  |   |   | 16,582 |   |   | 52,052 |   |   | 12,449 |   |   | 152,991 |   |   | 65,366 |   |   | 66,531 |   |   | (73,296 | ) |   | 15,167 |   |   | 226,759 |   |
|                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                                     |   |                                                        | 18,447  |   |   | 8,795 |   |   | 1,282 |   |   | 2,495 |   |   | 31,019 |   |   | 5,943 |   |   | (49,780 | ) |   | — |   |   | (26,459 | ) |   | (39,277 | ) |
| Income                tax expense (benefit) (a)                                      |   |                                                        | 5,719   |   |   | 2,727 |   |   | 397 |   |   | 774 |   |   | 9,617 |   |   | 1,842 |   |   | (15,433 | ) |   | — |   |   | (8,202 | ) |   | (12,176 | ) |
| Net                income (loss) from continuing operations                          |   |                                                        | 12,728  |   |   | 6,068 |   |   | 885 |   |   | 1,721 |   |   | 21,402 |   |   | 4,101 |   |   | (34,347 | ) |   | — |   |   | (18,257 | ) |   | (27,101 | ) |
| Income                from discontinued operations, net of tax                       |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 981 |   |   | 981 |   |
| Net                income (loss)                                                     |   | $                                                           | 12,728  |   |   | 6,068 |   |   | 885 |   |   | 1,721 |   |   | 21,402 |   |   | 4,101 |   |   | (34,347 | ) |   | — |   |   | (17,276 | ) |   | (26,120 | ) |

----

*Table          of Contents*

|                                                                                 |   | **Six months ended June 30, 2007** |    |
|--------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|---------|
|                                                                                 |   | **Fee-Based**                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   | **Student**                                                 |    | **Tuition** |   | **Enrollment** |   |   |   |   |   |   |   |   |   |   |   | **"Base net** |   |   |   |
|                                                                                 |   | **Loan**                                                    |    | **Payment** |   | **Services** |   | **Software** |   |   |   | **Asset** |   | **Corporate** |   |   |   | **income"** |   |   |   |
|                                                                                 |   | **and**                                                     |    | **Processing** |   | **and** |   | **and** |   | **Total** |   | **Generation** |   | **Activity** |   | **Eliminations** |   | **Adjustments** |   | **GAAP** |   |
|                                                                                 |   | **Guaranty**                                                |    | **and Campus** |   | **List** |   | **Technical** |   | **Fee-** |   | **and** |   | **and** |   | **and** |   | **to GAAP** |   | **Results of** |   |
|                                                                                 |   | **Servicing**                                               |    | **Commerce** |   | **Management** |   | **Services** |   | **Based** |   | **Management** |   | **Overhead** |   | **Reclassifications** |   | **Results** |   | **Operations** |   |
|                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest income                                                 |   | $                                                           | 3,425   |   |   | 1,680 |   |   | 180 |   |   | 18 |   |   | 5,303 |   |   | 847,894 |   |   | 4,355 |   |   | (3,204 | ) |   | — |   |   | 854,348 |   |
| Interest                expense                                                      |   |                                                        | — |   |   | 7 |   |   | 4 |   |   | — |   |   | 11 |   |   | 699,999 |   |   | 21,582 |   |   | (3,204 | ) |   | — |   |   | 718,388 |   |
| Net                interest income (loss)                                            |   |                                                        | 3,425   |   |   | 1,673 |   |   | 176 |   |   | 18 |   |   | 5,292 |   |   | 147,895 |   |   | (17,227 | ) |   | — |   |   | — |   |   | 135,960 |   |
|                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                provision for loan losses                                        |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 5,288 |   |   | — |   |   | — |   |   | — |   |   | 5,288 |   |
| Net                interest income (loss) after provision for loan losses            |   |                                                        | 3,425   |   |   | 1,673 |   |   | 176 |   |   | 18 |   |   | 5,292 |   |   | 142,607 |   |   | (17,227 | ) |   | — |   |   | — |   |   | 130,672 |   |
|                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense):                                               |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income                                    |   |                                                        | 61,958  |   |   | — |   |   | — |   |   | — |   |   | 61,958 |   |   | 118 |   |   | — |   |   | — |   |   | — |   |   | 62,076 |   |
| Other                fee-based income                                                |   |                                                        | — |   |   | 21,176 |   |   | 49,870 |   |   | — |   |   | 71,046 |   |   | 6,985 |   |   | 260 |   |   | — |   |   | — |   |   | 78,291 |   |
| Software                services income                                              |   |                                                        | — |   |   | — |   |   | 287 |   |   | 11,309 |   |   | 11,596 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 11,596 |   |
| Other                income                                                          |   |                                                        | 11      |   |   | 28 |   |   | — |   |   | — |   |   | 39 |   |   | 3,148 |   |   | 3,833 |   |   | — |   |   | — |   |   | 7,020 |   |
| Gain                on sale of loans                                                 |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 2,796 |   |   | — |   |   | — |   |   | — |   |   | 2,796 |   |
| Intersegment                revenue                                                  |   |                                                        | 36,584  |   |   | 340 |   |   | 928 |   |   | 8,221 |   |   | 46,073 |   |   | — |   |   | 6,116 |   |   | (52,189 | ) |   | — |   |   | — |   |
| Derivative                market value, foreign currency, and put option adjustments |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (6,583 | ) |   | (6,583 | ) |
| Derivative                settlements, net                                           |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (885 | ) |   | 10,321 |   |   | — |   |   | — |   |   | 9,436 |   |
| Total                other income (expense)                                          |   |                                                        | 98,553  |   |   | 21,544 |   |   | 51,085 |   |   | 19,530 |   |   | 190,712 |   |   | 12,162 |   |   | 20,530 |   |   | (52,189 | ) |   | (6,583 | ) |   | 164,632 |   |
|                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                                   |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                                 |   |                                                        | 45,027  |   |   | 10,000 |   |   | 18,391 |   |   | 12,332 |   |   | 85,750 |   |   | 14,446 |   |   | 24,978 |   |   | (4,662 | ) |   | 953 |   |   | 121,465 |   |
| Other                expenses                                                        |   |                                                        | 17,654  |   |   | 4,493 |   |   | 29,148 |   |   | 1,535 |   |   | 52,830 |   |   | 15,511 |   |   | 38,940 |   |   | — |   |   | 13,129 |   |   | 120,410 |   |
| Intersegment                expenses                                                 |   |                                                        | 7,068   |   |   | 399 |   |   | 185 |   |   | 403 |   |   | 8,055 |   |   | 38,670 |   |   | 802 |   |   | (47,527 | ) |   | — |   |   | — |   |
| Total                operating expenses                                              |   |                                                        | 69,749  |   |   | 14,892 |   |   | 47,724 |   |   | 14,270 |   |   | 146,635 |   |   | 68,627 |   |   | 64,720 |   |   | (52,189 | ) |   | 14,082 |   |   | 241,875 |   |
|                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                                     |   |                                                        | 32,229  |   |   | 8,325 |   |   | 3,537 |   |   | 5,278 |   |   | 49,369 |   |   | 86,142 |   |   | (61,417 | ) |   | — |   |   | (20,665 | ) |   | 53,429 |   |
| Income                tax expense (benefit) (a)                                      |   |                                                        | 12,247  |   |   | 3,164 |   |   | 1,344 |   |   | 2,006 |   |   | 18,761 |   |   | 32,734 |   |   | (23,826 | ) |   | — |   |   | (7,099 | ) |   | 20,570 |   |
| Net                income (loss) from continuing operations                          |   |                                                        | 19,982  |   |   | 5,161 |   |   | 2,193 |   |   | 3,272 |   |   | 30,608 |   |   | 53,408 |   |   | (37,591 | ) |   | — |   |   | (13,566 | ) |   | 32,859 |   |
| Loss                from discontinued operations, net of tax                         |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (3,325 | ) |   | (3,325 | ) |
| Net                income (loss)                                                     |   | $                                                           | 19,982  |   |   | 5,161 |   |   | 2,193 |   |   | 3,272 |   |   | 30,608 |   |   | 53,408 |   |   | (37,591 | ) |   | — |   |   | (16,891 | ) |   | 29,534 |   |

|   | · | Income                earned on certain investment                activities; |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | Interest                expense incurred on unsecured debt                transactions; |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | Other                products and service offerings that are not considered operating                segments;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|  | · | Corporate                activities and overhead functions such as executive management, human                resources, accounting and finance, legal, marketing, and corporate                technology support. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

|                                                                                                    |   | **Student**                                         |    | **Tuition**         |   | **Enrollment** |   |          |    |           |   |          |   |      |    |
|---------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|---------------------|--------|----------------|--------|---------------|---------|----------------|--------|---------------|--------|-----------|---------|
|                                                                                                    |   | **Loan**                                            |    | **Payment**         |   | **Services**   |   | **Software**  |    | **Asset**      |   | **Corporate** |   |      |    |
|                                                                                                    |   | **and**                                             |    | **Processing**      |   | **and**        |   | **and**       |    | **Generation** |   | **Activity**  |   |      |    |
|                                                                                                    |   | **Guaranty**                                        |    | **and Campus** |   | **List**       |   | **Technical** |    | **and**        |   | **and**       |   |      |    |
|                                                                                                    |   | **Servicing**                                       |    | **Commerce**        |   | **Management** |   | **Services**  |    | **Management** |   | **Overhead**  |   | **Total** |    |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |
|                                                                                                    |   | **Three                months ended June 30, 2008** |    |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |
| Derivative                market value, foreign currency, and put option adjustments                (1) |   | $                                                   | — |                |   | —        |   |          | — |           |   | —       |   |      | (15,866 | ) |   | 111 |   |   | (15,755 | ) |
| Amortization                of intangible assets (2)                                                    |   |                                                | 1,165   |                |   | 1,997          |   |          | 3,113   |           |   | 286           |   |      | — |   |   | — |   |   | 6,561 |   |
| Compensation                related to business combinations (3)                                        |   |                                                | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | 750 |   |   | 750 |   |
| Variable-rate                floor income, net of settlements on derivatives (4)                        |   |                                                | — |                |   | —        |   |          | — |           |   | —       |   |      | (14,726 | ) |   | — |   |   | (14,726 | ) |
| Income                from discontinued operations, net of tax (5)                                      |   |                                                | (981    | )                   |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | (981 | ) |
| Net                tax effect (6)                                                                       |   |                                                | (361    | )                   |   | (619           | )      |          | (965    | )              |   | (89           | )      |      | 9,484   |   |   | (267 | ) |   | 7,183 |   |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Total                adjustments to GAAP                                                                |   | $                                                   | (177    | )                   |   | 1,378          |   |          | 2,148   |           |   | 197           |   |      | (21,108 | ) |   | 594 |   |   | (16,968 | ) |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
|                                                                                                    |   | **Three                months ended June 30, 2007** |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Derivative                market value, foreign currency, and put option adjustments                (1) |   | $                                                   | — |                |   | —        |   |          | — |           |   | —       |   |      | 6,002   |   |   | (11,549 | ) |   | (5,547 | ) |
| Amortization                of intangible assets (2)                                                    |   |                                                | 1,350   |                |   | 1,469          |   |          | 1,545   |           |   | 287           |   |      | 1,840   |   |   | — |   |   | 6,491 |   |
| Compensation                related to business combinations (3)                                        |   |                                                | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | 476 |   |   | 476 |   |
| Variable-rate                floor income, net of settlements on derivatives (4)                        |   |                                                | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | — |   |
| Loss                from discontinued operations, net of tax (5)                                        |   |                                                | 6,135   |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | 6,135 |   |
| Net                tax effect (6)                                                                       |   |                                                | (513    | )                   |   | (558           | )      |          | (587    | )              |   | (109          | )      |      | (2,980  | ) |   | 4,179 |   |   | (568 | ) |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Total                adjustments to GAAP                                                                |   | $                                                   | 6,972   |                |   | 911            |   |          | 958     |           |   | 178           |   |      | 4,862   |   |   | (6,894 | ) |   | 6,987 |   |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
|                                                                                                    |   | **Six                months ended June 30, 2008**   |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Derivative                market value, foreign currency, and put option adjustments                (1) |   | $                                                   | — |                |   | —        |   |          | — |           |   | —       |   |      | 41,534  |   |   | 538 |   |   | 42,072 |   |
| Amortization                of intangible assets (2)                                                    |   |                                                | 2,421   |                |   | 4,048          |   |          | 5,935   |           |   | 572           |   |      | 145     |   |   | — |   |   | 13,121 |   |
| Compensation                related to business combinations (3)                                        |   |                                                | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | 2,046 |   |   | 2,046 |   |
| Variable-rate                floor income, net of settlements on derivatives (4)                        |   |                                                | — |                |   | —        |   |          | — |           |   | —       |   |      | (30,780 | ) |   | — |   |   | (30,780 | ) |
| Income                from discontinued operations, net of tax (5)                                      |   |                                                | (981    | )                   |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | (981 | ) |
| Net                tax effect (6)                                                                       |   |                                                | (750    | )                   |   | (1,255         | )      |          | (1,840  | )              |   | (178          | )      |      | (3,378  | ) |   | (801 | ) |   | (8,202 | ) |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Total                adjustments to GAAP                                                                |   | $                                                   | 690     |                |   | 2,793          |   |          | 4,095   |           |   | 394           |   |      | 7,521   |   |   | 1,783 |   |   | 17,276 |   |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
|                                                                                     |   | **Six                months ended June 30, 2007**   |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Derivative                market value, foreign currency, and put option adjustments                (1) |   | $                                                   | — |                |   | —        |   |          | — |           |   | —       |   |      | 12,216  |   |   | (5,633 | ) |   | 6,583 |   |
| Amortization                of intangible assets (2)                                                    |   |                                                | 2,394   |                |   | 2,938          |   |          | 3,355   |           |   | 617           |   |      | 3,825   |   |   | — |   |   | 13,129 |   |
| Compensation                related to business combinations (3)                                        |   |                                                | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | 953 |   |   | 953 |   |
| Variable-rate                floor income, net of settlements on derivatives (4)                        |   |                                                | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | — |   |
| Loss                from discontinued operations, net of tax (5)                                        |   |                                                | 3,325   |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | 3,325 |   |
| Net                tax effect (6)                                                                       |   |                                                | (910    | )                   |   | (1,116         | )      |          | (1,275  | )              |   | (234          | )      |      | (6,096  | ) |   | 2,532 |   |   | (7,099 | ) |
|                                                                                                    |   |                                                |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Total                adjustments to GAAP                                                                |   | $                                                   | 4,809   |                |   | 1,822          |   |          | 2,080   |           |   | 383           |   |      | 9,945   |   |   | (2,148 | ) |   | 16,891 |   |

|   | (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. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

|   | (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. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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) | Beginning                in 2008, tax effect is computed using the Company’s consolidated effective                tax rate for each applicable period. In prior periods, tax effect                was                computed at 38%. The change in the value of the put options for prior                periods (included in Corporate Activities and Overhead) was not tax                effected as this is not deductible for income tax                purposes. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**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 six months ended June 30, 2008 and 2007. All dollars are in      thousands, except per share amounts, unless otherwise      noted).**

**Forward-looking      and cautionary statements**

**Overview**

----

*Table          of Contents*

|   | · | Legislative                developments; |
|--------|--------|------------------------------------------|

|  | · | Student                loan spread; |
|--|--------|-------------------------------------|

|  | · | Operating                expenses; and |
|--|--------|----------------------------------------|
|   | · | Fee-based                businesses. |
|--------|--------|--------------------------------------|

***Legislative      Developments***

|   | · | Increases                statutory limits on annual and aggregate borrowing for FFELP loans;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | Allows                the Department to act as a secondary market and enter into forward                purchasing agreements with lenders. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Offers                to purchase loans from lenders for the 2008-2009 academic year and                offers                lenders access to short-term liquidity;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Commits                to continue working with the FFELP community to explore programs                to                reengage the capital markets in the                long-run. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Student      Loan Spread***

***Operating      Expenses***

***Fee-based        businesses***

----

*Table          of Contents*

**RESULTS      OF OPERATIONS**

***Net      Interest Income***

|   | · | Reduced                special allowance payments to for-profit lenders and not-for-profit                lenders by 0.55 percentage points and 0.40 percentage points,                respectively, for both Stafford and Consolidation loans disbursed                on or                after October 1, 2007; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Reduced                special allowance payments to for-profit lenders and not-for-profit                lenders by 0.85 percentage points and 0.70 percentage points,                respectively, for PLUS loans disbursed on or after October 1, 2007; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Increased                origination fees paid by lenders on all FFELP loan types, from 0.5                percent                to 1.0 percent, for all loans first disbursed on or after October                1,                2007; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Eliminated                all provisions relating to Exceptional Performer status, and the                monetary                benefit associated with it, effective October 1, 2007;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Reduces                default insurance to 95 percent of the unpaid principal of such loans,                for                loans first disbursed on or after October 1,                2012. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

***Provision      for Loan Losses***

***Other      Income***

*Loan      and Guaranty Servicing Income *

*Other      Fee-Based Income *

*Software      Services*

----

*Table          of Contents*

***Operating      Expenses***

***Three      and six months ended June 30, 2008 compared to the three and six months ended      June 30, 2007***

***Net      Interest Income***

|                                                               |   | **Three months ended June 30,** |    | **Six months ended June 30,** |   |
|--------------------------------------------------------------------|--------|-----------------------------------------------------|---------|---------------------------------------------------|--------|
|                                                               |   | **2008**                                            |    | **2007**                                          |   | **$ Change** |   | **2008** |   | **2007** |   | **$ Change** |   |
| Interest                income:                                    |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |
| Loan                interest                                       |   | $                                                   | 296,686 |                                              |   | 417,086 |   |   | (120,400 | ) |   | 626,672 |   |   | 814,140 |   |   | (187,468 | ) |
| Investment                interest                                 |   |                                                | 9,116   |                                              |   | 18,783 |   |   | (9,667 | ) |   | 20,796 |   |   | 40,208 |   |   | (19,412 | ) |
|  Total                interest income                         |   |                                                | 305,802 |                                              |   | 435,869 |   |   | (130,067 | ) |   | 647,468 |   |   | 854,348 |   |   | (206,880 | ) |
| Interest                expense:                                   |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                on bonds and notes payable                 |   |                                                | 232,464 |                                              |   | 367,893 |   |   | (135,429 | ) |   | 557,605 |   |   | 718,388 |   |   | (160,783 | ) |
|  Net                interest income                           |   |                                                | 73,338  |                                              |   | 67,976 |   |   | 5,362 |   |   | 89,863 |   |   | 135,960 |   |   | (46,097 | ) |
| Provision                for loan losses                           |   |                                                | 6,000   |                                              |   | 2,535 |   |   | 3,465 |   |   | 11,000 |   |   | 5,288 |   |   | 5,712 |   |
|                                                               |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income after provision for loan losses |   | $                                                   | 67,338  |                                              |   | 65,441 |   |   | 1,897 |   |   | 78,863 |   |   | 130,672 |   |   | (51,809 | ) |

|   | · | Net                  interest income decreased for the six months ended June 30, 2008                  compared                  to 2007 as a result of the compression in the core student loan                  spread as                  discussed in this Item 2 under “Asset Generation and Management Operating                  Segment - Results of Operations.” The decrease in net interest income was                  offset by $40.7 million of variable-rate floor income earned by                  the                  Company in 2008 and an increase in average student loans compared                  to 2007.                  Net interest income increased for the three months ended June 30,                  2008                  compared to the same period in 2007 as a result of an increase                  in student                  loan spread (including approximately $21.9 million of variable-rate                  floor                  income in 2008) and an increase in average student                  loans. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                provision for loan losses increased for the three and six months                ended                June 30, 2008 compared to 2007 due to an increase in risk share as                a                result of the elimination of the Exceptional Performer                program. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Other      Income***

|                                                                                 |   | **Three months ended June 30,** |   | **Six months ended June 30,** |   |
|--------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|---------------------------------------------------|--------|
|                                                                                 |   | **2008**                                            |   | **2007**                                          |   | **$ Change** |   | **2008** |   | **2007** |   | **$ Change** |   |
| Loan and guaranty servicing                income                     |   | $                                                   | 24,904 |                                              |   | 31,610 |   |   | (6,706 | ) |   | 51,017 |   |   | 62,076 |   |   | (11,059 | ) |
| Other                fee-based income                                                |   |                                                | 40,817 |                                              |   | 38,262 |   |   | 2,555 |   |   | 86,730 |   |   | 78,291 |   |   | 8,439 |   |
| Software                services income                                              |   |                                                | 4,896  |                                              |   | 5,848 |   |   | (952 | ) |   | 11,648 |   |   | 11,596 |   |   | 52 |   |
| Other                income                                                          |   |                                                | 1,646  |                                              |   | 1,927 |   |   | (281 | ) |   | 3,056 |   |   | 7,020 |   |   | (3,964 | ) |
| Gain                (loss) on sale of loans                                          |   |                                                | 48     |                                              |   | 1,010 |   |   | (962 | ) |   | (47,426 | ) |   | 2,796 |   |   | (50,222 | ) |
|                                                                                 |   |                                                |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Derivative                market value, foreign currency, and put option adjustments |   |                                                | 15,755 |                                              |   | 5,547 |   |   | 10,208 |   |   | (41,606 | ) |   | (6,583 | ) |   | (35,023 | ) |
| Derivative                settlements, net                                           |   |                                                | 4,437  |                                              |   | 5,196 |   |   | (759 | ) |   | 45,200 |   |   | 9,436 |   |   | 35,764 |   |
| Total                other income                                                    |   | $                                                   | 92,503 |                                              |   | 89,400 |   |   | 3,103 |   |   | 108,619 |   |   | 164,632 |   |   | (56,013 | ) |

|   | · | “Loan                and guaranty servicing income” decreased due to decreases in both FFELP                loan servicing income and guaranty servicing income as further discussed                in this Item 2 under “Student Loan and Guaranty Servicing Operating                Segment - Results of Operations.” |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | “Other                fee-based income” increased due to an increase in the number of managed                tuition payment plans and an increase in campus commerce and related                clients in the Tuition Payment Processing and Campus Commerce Operating                Segment, as well as an increase in lead generation sales volume in                the                Enrollment Services and List Management Operating                Segment. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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.” |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                change in “derivative market value, foreign currency, and put option                adjustments” was caused by a 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.” |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                change in derivative settlements is discussed in Item 3, “Quantitative and                Qualitative Disclosures about Market Risk.” |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

***Operating      Expense***
***s***

|                                    |   |                             |    |                                  |   | **Net change**           |   |                             |    |
|-----------------------------------------|--------|----------------------------------|---------|---------------------------------------|--------|-------------------------------|--------|----------------------------------|---------|
|                                    |   |                             |    |                                  |   | **after impact of** |   |                             |    |
|                                    |   | **Three months ended** |    | **Impact of restructuring** |   | **restructuring and**    |   | **Three months ended** |    |
|                                    |   | **June 30, 2007**      |    | **and impairment charges**  |   | **impairment charges**   |   | **June 30, 2008**      |    |
|                                    |   |                             |    |                                  |   |                          |   |                             |    |
| Salaries                and benefits    |   | $                                | 59,761  |                                  |   | (190                          | )      |                             | (16,022 | ) |   | 43,549 |   |
| Other                expenses           |   |                             | 60,885  |                                  |   | (175                          | )      |                             | (6,337  | ) |   | 54,373 |   |
|                                    |   |                             |    |                                  |   |                          |   |                             |    |   |   |   |   |
| Total                operating expenses |   | $                                | 120,646 |                                  |   | (365                          | )      |                             | (22,359 | ) |   | 97,922 |   |

|                                          |   |                           |    |                                  |   | **Net change**           |   |                           |    |
|-----------------------------------------------|--------|--------------------------------|---------|---------------------------------------|--------|-------------------------------|--------|--------------------------------|---------|
|                                          |   |                           |    |                                  |   | **after impact of** |   |                           |    |
|                                          |   | **Six months ended** |    | **Impact of restructuring** |   | **restructuring and**    |   | **Six months ended** |    |
|                                          |   | **June 30, 2007**    |    | **and impairment charges**  |   | **impairment charges**   |   | **June 30, 2008**    |    |
|                                          |   |                           |    |                                  |   |                          |   |                           |    |
| Salaries                and benefits          |   | $                              | 121,465 |                                  |   | 5,714                         |   |                           | (29,787 | ) |   | 97,392 |   |
| Other                expenses                 |   |                           | 120,410 |                                  |   | 20,232                        |   |                           | (11,275 | ) |   | 129,367 |   |
|                                          |   |                           |    |                                  |   |                          |   |                           |    |   |   |   |   |
|  Total                operating expenses |   | $                              | 241,875 |                                  |   | 25,946                        |   |                           | (41,062 | ) |   | 226,759 |   |

***Income      Taxes***

----

*Table          of Contents*

***Financial      Condition as of June 30, 2008 compared to December 31,      2007***

|                                                      |   | **As of**    |       | **As of**        |   |        |   |        |     |
|-----------------------------------------------------------|--------|-------------------|------------|-----------------------|--------|-------------|--------|-------------|----------|
|                                                      |   | **June 30,** |       | **December 31,** |   | **Change**  |   |
|                                                      |   | **2008**          |       | **2007**              |   | **Dollars** |   | **Percent** |     |
| **Assets:**                                               |   |              |       |                  |   |        |   |        |     |
| Student                loans receivable, net              |   | $                 | 25,993,307 |                  |   | 26,736,122  |   |        | (742,815 | ) |   | (2.8 | )% |
| Cash,                cash equivalents, and investments    |   |              | 1,175,310  |                  |   | 1,120,838   |   |        | 54,472   |   |   | 4.9 |   |
| Goodwill                                                  |   |              | 175,178    |                  |   | 164,695     |   |        | 10,483   |   |   | 6.4 |   |
| Intangible                assets, net                     |   |              | 90,163     |                  |   | 112,830     |   |        | (22,667  | ) |   | (20.1 | ) |
| Fair                value of derivative instruments       |   |              | 295,346    |                  |   | 222,471     |   |        | 72,875   |   |   | 32.8 |   |
| Other                assets                               |   |              | 702,621    |                  |   | 805,827     |   |        | (103,206 | ) |   | (12.8 | ) |
| Total                assets                               |   | $                 | 28,431,925 |                  |   | 29,162,783  |   |        | (730,858 | ) |   | (2.5 | )% |
|                                                      |   |              |       |                  |   |        |   |        |     |   |   |   |   |
| **Liabilities:**                                          |   |              |       |                  |   |        |   |        |     |   |   |   |   |
| Bonds                and notes payable                    |   | $                 | 27,530,237 |                  |   | 28,115,829  |   |        | (585,592 | ) |   | (2.1 | )% |
| Fair                value of derivative instruments       |   |              | 38,846     |                  |   | 5,885       |   |        | 32,961   |   |   | 560.1 |   |
| Other                liabilities                          |   |              | 278,800    |                  |   | 432,190     |   |        | (153,390 | ) |   | (35.5 | ) |
| Total                liabilities                          |   |              | 27,847,883 |                  |   | 28,553,904  |   |        | (706,021 | ) |   | (2.5 | ) |
|                                                      |   |              |       |                  |   |        |   |        |     |   |   |   |   |
| **Shareholders'                equity**                   |   |              | 584,042    |                  |   | 608,879     |   |        | (24,837  | ) |   | (4.1 | ) |
| Total                liabilities and shareholders' equity |   | $                 | 28,431,925 |                  |   | 29,162,783  |   |        | (730,858 | ) |   | (2.5 | )% |

----

*Table          of Contents*

**OPERATING      SEGMENTS **

----

*Table          of Contents*

***Segment      Results and Reconciliations to GAAP***

|                                                                                                                                                   |   | **Three months ended June 30, 2008** |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|---------|
|                                                                                                                                                   |   | **Fee-Based**                                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                   |   | **Student**                                                   |    | **Tuition** |   | **Enrollment** |   |   |   |   |   |   |   |   |   |   |   | **"Base net** |   |   |   |
|                                                                                                                                                   |   | **Loan**                                                      |    | **Payment** |   | **Services** |   | **Software** |   |   |   | **Asset** |   | **Corporate** |   |   |   | **income"** |   |   |   |
|                                                                                                                                                   |   | **and**                                                       |    | **Processing** |   | **and** |   | **and** |   | **Total** |   | **Generation** |   | **Activity** |   | **Eliminations** |   | **Adjustments** |   | **GAAP** |   |
|                                                                                                                                                   |   | **Guaranty**                                                  |    | **and Campus** |   | **List** |   | **Technical** |   | **Fee-** |   | **and** |   | **and** |   | **and** |   | **to GAAP** |   | **Results of** |   |
|                                                                                                                                                   |   | **Servicing**                                                 |    | **Commerce** |   | **Management** |   | **Services** |   | **Based** |   | **Management** |   | **Overhead** |   | **Reclassifications** |   | **Results** |   | **Operations** |   |
|                                                                                                                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest income                                                                                                                   |   | $                                                             | 243     |   |   | 310 |   |   | 1 |   |   | — |   |   | 554 |   |   | 282,293 |   |   | 1,574 |   |   | (546 | ) |   | 21,927 |   |   | 305,802 |   |
| Interest                expense                                                                                                                        |   |                                                          | — |   |   | — |   |   | 1 |   |   | — |   |   | 1 |   |   | 222,402 |   |   | 10,607 |   |   | (546 | ) |   | — |   |   | 232,464 |   |
| Net                interest income (loss)                                                                                                              |   |                                                          | 243     |   |   | 310 |   |   | — |   |   | — |   |   | 553 |   |   | 59,891 |   |   | (9,033 | ) |   | — |   |   | 21,927 |   |   | 73,338 |   |
|                                                                                                                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                provision for loan losses                                                                                                          |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 6,000 |   |   | — |   |   | — |   |   | — |   |   | 6,000 |   |
| Net                interest income (loss) after provision for loan losses                                                                              |   |                                                          | 243     |   |   | 310 |   |   | — |   |   | — |   |   | 553 |   |   | 53,891 |   |   | (9,033 | ) |   | — |   |   | 21,927 |   |   | 67,338 |   |
|                                                                                                                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense):                                                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income                                                                                                      |   |                                                          | 24,747  |   |   | — |   |   | — |   |   | — |   |   | 24,747 |   |   | 157 |   |   | — |   |   | — |   |   | — |   |   | 24,904 |   |
| Other                fee-based income                                                                                                                  |   |                                                          | — |   |   | 10,292 |   |   | 26,067 |   |   | — |   |   | 36,359 |   |   | 4,458 |   |   | — |   |   | — |   |   | — |   |   | 40,817 |   |
| Software                services income                                                                                                                |   |                                                          | — |   |   | — |   |   | — |   |   | 4,896 |   |   | 4,896 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 4,896 |   |
| Other                income                                                                                                                            |   |                                                          | 6       |   |   | (21 | ) |   | — |   |   | — |   |   | (15 | ) |   | 393 |   |   | 1,268 |   |   | — |   |   | — |   |   | 1,646 |   |
| Gain                on sale of loans                                                                                                                   |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 48 |   |   | — |   |   | — |   |   | — |   |   | 48 |   |
| Intersegment                revenue                                                                                                                    |   |                                                          | 18,382  |   |   | (76 | ) |   | — |   |   | 1,517 |   |   | 19,823 |   |   | — |   |   | 13,960 |   |   | (33,783 | ) |   | — |   |   | — |   |
| Derivative                market value, foreign currency, and put option adjustments                                                                   |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 15,755 |   |   | 15,755 |   |
| Derivative                settlements, net                                                                                                             |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 11,638 |   |   | — |   |   | — |   |   | (7,201 | ) |   | 4,437 |   |
| Total                other income (expense)                                                                                                            |   |                                                          | 43,135  |   |   | 10,195 |   |   | 26,067 |   |   | 6,413 |   |   | 85,810 |   |   | 16,694 |   |   | 15,228 |   |   | (33,783 | ) |   | 8,554 |   |   | 92,503 |   |
|                                                                                                                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                                                                                                     |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                                                                                                   |   |                                                          | 12,491  |   |   | 5,784 |   |   | 6,373 |   |   | 4,702 |   |   | 29,350 |   |   | 1,954 |   |   | 12,828 |   |   | (1,333 | ) |   | 750 |   |   | 43,549 |   |
| Restructure                expense - severance and contract termination costs                                                                          |   |                                                          | (104    | ) |   | — |   |   | (15 | ) |   | (8 | ) |   | (127 | ) |   | (52 | ) |   | (186 | ) |   | 365 |   |   | — |   |   | — |   |
| Other                expenses                                                                                                                          |   |                                                          | 8,011   |   |   | 2,551 |   |   | 17,284 |   |   | 714 |   |   | 28,560 |   |   | 5,095 |   |   | 14,921 |   |   | (764 | ) |   | 6,561 |   |   | 54,373 |   |
| Intersegment                expenses                                                                                                                   |   |                                                          | 9,822   |   |   | 461 |   |   | 1,580 |   |   | 342 |   |   | 12,205 |   |   | 18,952 |   |   | 894 |   |   | (32,051 | ) |   | — |   |   | — |   |
| Total                operating expenses                                                                                                                |   |                                                          | 30,220  |   |   | 8,796 |   |   | 25,222 |   |   | 5,750 |   |   | 69,988 |   |   | 25,949 |   |   | 28,457 |   |   | (33,783 | ) |   | 7,311 |   |   | 97,922 |   |
|                                                                                                                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                                                                                                       |   |                                                          | 13,158  |   |   | 1,709 |   |   | 845 |   |   | 663 |   |   | 16,375 |   |   | 44,636 |   |   | (22,262 | ) |   | — |   |   | 23,170 |   |   | 61,919 |   |
| Income                tax expense (benefit) (a)                                                                                                        |   |                                                          | 4,079   |   |   | 530 |   |   | 262 |   |   | 206 |   |   | 5,077 |   |   | 13,837 |   |   | (6,902 | ) |   | — |   |   | 7,183 |   |   | 19,195 |   |
| Net                income (loss) from continuing operations                                                                                            |   |                                                          | 9,079   |   |   | 1,179 |   |   | 583 |   |   | 457 |   |   | 11,298 |   |   | 30,799 |   |   | (15,360 | ) |   | — |   |   | 15,987 |   |   | 42,724 |   |
| Income                from discontinued operations, net of tax                                                                                         |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 981 |   |   | 981 |   |
| Net                income (loss)                                                                                                                       |   | $                                                             | 9,079   |   |   | 1,179 |   |   | 583 |   |   | 457 |   |   | 11,298 |   |   | 30,799 |   |   | (15,360 | ) |   | — |   |   | 16,968 |   |   | 43,705 |   |
|                                                                                                                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (a)                Beginning in 2008, the consolidated effective tax rate is used to                calculate income taxes for each operating segment. |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Three                months ended June 30, 2008:                                                                                                       |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin -excluding restructure expense                                                                              |   |                                                          | 30.1    | % |   | 16.3 | % |   | 3.2 | % |   | 10.2 | % |   | 18.8 | % |   | 63.2 | % |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Three                months ended June 30, 2007:                                                                                                       |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin                                                                                                             |   |                                                          | 35.3    | % |   | 27.7 | % |   | 6.7 | % |   | 30.4 | % |   | 26.6 | % |   | 52.7 | % |   |   |   |   |   |   |   |   |   |   |   |   |

----

*Table          of Contents*

|                                                                                 |   | **Three months ended June 30, 2007** |    |
|--------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|---------|
|                                                                                 |   | **Fee-Based**                                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   | **Student**                                                   |    | **Tuition** |   | **Enrollment** |   |   |   |   |   |   |   |   |   |   |   | **"Base net** |   |   |   |
|                                                                                 |   | **Loan**                                                      |    | **Payment** |   | **Services** |   | **Software** |   |   |   | **Asset** |   | **Corporate** |   |   |   | **income"** |   |   |   |
|                                                                                 |   | **and**                                                       |    | **Processing** |   | **and** |   | **and** |   | **Total** |   | **Generation** |   | **Activity** |   | **Eliminations** |   | **Adjustments** |   | **GAAP** |   |
|                                                                                 |   | **Guaranty**                                                  |    | **and Campus** |   | **List** |   | **Technical** |   | **Fee-** |   | **and** |   | **and** |   | **and** |   | **to GAAP** |   | **Results of** |   |
|                                                                                 |   | **Servicing**                                                 |    | **Commerce** |   | **Management** |   | **Services** |   | **Based** |   | **Management** |   | **Overhead** |   | **Reclassifications** |   | **Results** |   | **Operations** |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest income                                                 |   | $                                                             | 1,181   |   |   | 670 |   |   | 93 |   |   | — |   |   | 1,944 |   |   | 433,404 |   |   | 554 |   |   | (33 | ) |   | — |   |   | 435,869 |   |
| Interest                expense                                                      |   |                                                          | — |   |   | 2 |   |   | 2 |   |   | — |   |   | 4 |   |   | 358,341 |   |   | 9,581 |   |   | (33 | ) |   | — |   |   | 367,893 |   |
| Net                interest income (loss)                                            |   |                                                          | 1,181   |   |   | 668 |   |   | 91 |   |   | — |   |   | 1,940 |   |   | 75,063 |   |   | (9,027 | ) |   | — |   |   | — |   |   | 67,976 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                provision for loan losses                                        |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 2,535 |   |   | — |   |   | — |   |   | — |   |   | 2,535 |   |
| Net                interest income (loss) after provision for loan losses            |   |                                                          | 1,181   |   |   | 668 |   |   | 91 |   |   | — |   |   | 1,940 |   |   | 72,528 |   |   | (9,027 | ) |   | — |   |   | — |   |   | 65,441 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense):                                               |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income                                    |   |                                                          | 31,492  |   |   | — |   |   | — |   |   | — |   |   | 31,492 |   |   | 118 |   |   | — |   |   | — |   |   | — |   |   | 31,610 |   |
| Other                fee-based income                                                |   |                                                          | — |   |   | 9,405 |   |   | 24,923 |   |   | — |   |   | 34,328 |   |   | 3,674 |   |   | 260 |   |   | — |   |   | — |   |   | 38,262 |   |
| Software                services income                                              |   |                                                          | — |   |   | — |   |   | 157 |   |   | 5,691 |   |   | 5,848 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 5,848 |   |
| Other                income                                                          |   |                                                          | 5       |   |   | 25 |   |   | — |   |   | — |   |   | 30 |   |   | 105 |   |   | 1,792 |   |   | — |   |   | — |   |   | 1,927 |   |
| Gain                on the sale of loans                                             |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 1,010 |   |   | — |   |   | — |   |   | — |   |   | 1,010 |   |
| Intersegment                revenue                                                  |   |                                                          | 20,120  |   |   | 188 |   |   | 178 |   |   | 4,389 |   |   | 24,875 |   |   | — |   |   | 4,100 |   |   | (28,975 | ) |   | — |   |   | — |   |
| Derivative                market value, foreign currency, and put option adjustments |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 5,547 |   |   | 5,547 |   |
| Derivative                settlements, net                                           |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (461 | ) |   | 5,657 |   |   | — |   |   | — |   |   | 5,196 |   |
| Total                other income (expense)                                          |   |                                                          | 51,617  |   |   | 9,618 |   |   | 25,258 |   |   | 10,080 |   |   | 96,573 |   |   | 4,446 |   |   | 11,809 |   |   | (28,975 | ) |   | 5,547 |   |   | 89,400 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                                   |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                                 |   |                                                          | 22,023  |   |   | 5,082 |   |   | 9,022 |   |   | 5,857 |   |   | 41,984 |   |   | 7,167 |   |   | 12,272 |   |   | (2,138 | ) |   | 476 |   |   | 59,761 |   |
| Other                expenses                                                        |   |                                                          | 8,404   |   |   | 2,333 |   |   | 14,589 |   |   | 751 |   |   | 26,077 |   |   | 7,246 |   |   | 21,071 |   |   | — |   |   | 6,491 |   |   | 60,885 |   |
| Intersegment                expenses                                                 |   |                                                          | 3,750   |   |   | 25 |   |   | 29 |   |   | 403 |   |   | 4,207 |   |   | 22,034 |   |   | 596 |   |   | (26,837 | ) |   | — |   |   | — |   |
| Total                operating expenses                                              |   |                                                          | 34,177  |   |   | 7,440 |   |   | 23,640 |   |   | 7,011 |   |   | 72,268 |   |   | 36,447 |   |   | 33,939 |   |   | (28,975 | ) |   | 6,967 |   |   | 120,646 |   |
|                                                                                 |   |                                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                                     |   |                                                          | 18,621  |   |   | 2,846 |   |   | 1,709 |   |   | 3,069 |   |   | 26,245 |   |   | 40,527 |   |   | (31,157 | ) |   | — |   |   | (1,420 | ) |   | 34,195 |   |
| Income                tax expense (benefit) (a)                                      |   |                                                          | 7,076   |   |   | 1,082 |   |   | 649 |   |   | 1,167 |   |   | 9,974 |   |   | 15,400 |   |   | (11,500 | ) |   | — |   |   | (568 | ) |   | 13,306 |   |
| Net                income (loss) from continuing operations                          |   |                                                          | 11,545  |   |   | 1,764 |   |   | 1,060 |   |   | 1,902 |   |   | 16,271 |   |   | 25,127 |   |   | (19,657 | ) |   | — |   |   | (852 | ) |   | 20,889 |   |
| Loss                from discontinued operations, net of tax                         |   |                                                          | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (6,135 | ) |   | (6,135 | ) |
| Net                income (loss)                                                     |   | $                                                             | 11,545  |   |   | 1,764 |   |   | 1,060 |   |   | 1,902 |   |   | 16,271 |   |   | 25,127 |   |   | (19,657 | ) |   | — |   |   | (6,987 | ) |   | 14,754 |   |

----

*Table          of Contents*

|                                                                                                                                                                                                        |   | **Six months ended June 30, 2008** |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|---------|
|                                                                                                                                                                                                        |   | **Fee-Based**                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                        |   | **Student**                                                 |    | **Tuition** |   | **Enrollment** |   |   |   |   |   |   |   |   |   |   |   | **"Base net** |   |   |   |
|                                                                                                                                                                                                        |   | **Loan**                                                    |    | **Payment** |   | **Services** |   | **Software** |   |   |   | **Asset** |   | **Corporate** |   |   |   | **income"** |   |   |   |
|                                                                                                                                                                                                        |   | **and**                                                     |    | **Processing** |   | **and** |   | **and** |   | **Total** |   | **Generation** |   | **Activity** |   | **Eliminations** |   | **Adjustments** |   | **GAAP** |   |
|                                                                                                                                                                                                        |   | **Guaranty**                                                |    | **and Campus** |   | **List** |   | **Technical** |   | **Fee-** |   | **and** |   | **and** |   | **and** |   | **to GAAP** |   | **Results of** |   |
|                                                                                                                                                                                                        |   | **Servicing**                                               |    | **Commerce** |   | **Management** |   | **Services** |   | **Based** |   | **Management** |   | **Overhead** |   | **Reclassifications** |   | **Results** |   | **Operations** |   |
|                                                                                                                                                                                                        |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest income                                                                                                                                                                        |   | $                                                           | 856     |   |   | 1,075 |   |   | 10 |   |   | — |   |   | 1,941 |   |   | 602,651 |   |   | 2,771 |   |   | (640 | ) |   | 40,745 |   |   | 647,468 |   |
| Interest                expense                                                                                                                                                                             |   |                                                        | — |   |   | — |   |   | 2 |   |   | — |   |   | 2 |   |   | 538,417 |   |   | 19,826 |   |   | (640 | ) |   | — |   |   | 557,605 |   |
| Net                interest income (loss)                                                                                                                                                                   |   |                                                        | 856     |   |   | 1,075 |   |   | 8 |   |   | — |   |   | 1,939 |   |   | 64,234 |   |   | (17,055 | ) |   | — |   |   | 40,745 |   |   | 89,863 |   |
|                                                                                                                                                                                                        |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                provision for loan losses                                                                                                                                                               |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 11,000 |   |   | — |   |   | — |   |   | — |   |   | 11,000 |   |
| Net                interest income (loss) after provision for loan losses                                                                                                                                   |   |                                                        | 856     |   |   | 1,075 |   |   | 8 |   |   | — |   |   | 1,939 |   |   | 53,234 |   |   | (17,055 | ) |   | — |   |   | 40,745 |   |   | 78,863 |   |
|                                                                                                                                                                                                        |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense):                                                                                                                                                                      |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income                                                                                                                                                           |   |                                                        | 50,855  |   |   | — |   |   | — |   |   | — |   |   | 50,855 |   |   | 162 |   |   | — |   |   | — |   |   | — |   |   | 51,017 |   |
| Other                fee-based income                                                                                                                                                                       |   |                                                        | — |   |   | 24,114 |   |   | 53,289 |   |   | — |   |   | 77,403 |   |   | 9,327 |   |   | — |   |   | — |   |   | — |   |   | 86,730 |   |
| Software                services income                                                                                                                                                                     |   |                                                        | — |   |   | — |   |   | 37 |   |   | 11,611 |   |   | 11,648 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 11,648 |   |
| Other                income                                                                                                                                                                                 |   |                                                        | 38      |   |   | 4 |   |   | — |   |   | — |   |   | 42 |   |   | 381 |   |   | 2,633 |   |   | — |   |   | — |   |   | 3,056 |   |
| Loss                on sale of loans                                                                                                                                                                        |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (47,426 | ) |   | — |   |   | — |   |   | — |   |   | (47,426 | ) |
| Intersegment                revenue                                                                                                                                                                         |   |                                                        | 38,606  |   |   | 184 |   |   | — |   |   | 3,333 |   |   | 42,123 |   |   | — |   |   | 31,173 |   |   | (73,296 | ) |   | — |   |   | — |   |
| Derivative                market value, foreign currency, and put option adjustments                                                                                                                        |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 466 |   |   | — |   |   | — |   |   | (42,072 | ) |   | (41,606 | ) |
| Derivative                settlements, net                                                                                                                                                                  |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 55,165 |   |   | — |   |   | — |   |   | (9,965 | ) |   | 45,200 |   |
| Total                other income (expense)                                                                                                                                                                 |   |                                                        | 89,499  |   |   | 24,302 |   |   | 53,326 |   |   | 14,944 |   |   | 182,071 |   |   | 18,075 |   |   | 33,806 |   |   | (73,296 | ) |   | (52,037 | ) |   | 108,619 |   |
|                                                                                                                                                                                                        |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                                                                                                                                                          |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                                                                                                                                                        |   |                                                        | 26,489  |   |   | 11,214 |   |   | 12,896 |   |   | 9,870 |   |   | 60,469 |   |   | 4,178 |   |   | 27,419 |   |   | 3,280 |   |   | 2,046 |   |   | 97,392 |   |
| Restructure                expense - severance and contract termination costs                                                                                                                               |   |                                                        | 747     |   |   | — |   |   | 282 |   |   | 510 |   |   | 1,539 |   |   | 1,844 |   |   | 3,729 |   |   | (7,112 | ) |   | — |   |   | — |   |
| Impairment                expense                                                                                                                                                                           |   |                                                        | 5,074   |   |   | — |   |   | — |   |   | — |   |   | 5,074 |   |   | 9,351 |   |   | 4,409 |   |   | — |   |   | — |   |   | 18,834 |   |
| Other                expenses                                                                                                                                                                               |   |                                                        | 16,498  |   |   | 4,611 |   |   | 35,447 |   |   | 1,333 |   |   | 57,889 |   |   | 10,439 |   |   | 28,786 |   |   | 298 |   |   | 13,121 |   |   | 110,533 |   |
| Intersegment                expenses                                                                                                                                                                        |   |                                                        | 23,100  |   |   | 757 |   |   | 3,427 |   |   | 736 |   |   | 28,020 |   |   | 39,554 |   |   | 2,188 |   |   | (69,762 | ) |   | — |   |   | — |   |
| Total                operating expenses                                                                                                                                                                     |   |                                                        | 71,908  |   |   | 16,582 |   |   | 52,052 |   |   | 12,449 |   |   | 152,991 |   |   | 65,366 |   |   | 66,531 |   |   | (73,296 | ) |   | 15,167 |   |   | 226,759 |   |
|                                                                                                                                                                                                        |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                                                                                                                                                            |   |                                                        | 18,447  |   |   | 8,795 |   |   | 1,282 |   |   | 2,495 |   |   | 31,019 |   |   | 5,943 |   |   | (49,780 | ) |   | — |   |   | (26,459 | ) |   | (39,277 | ) |
| Income                tax expense (benefit) (a)                                                                                                                                                             |   |                                                        | 5,719   |   |   | 2,727 |   |   | 397 |   |   | 774 |   |   | 9,617 |   |   | 1,842 |   |   | (15,433 | ) |   | — |   |   | (8,202 | ) |   | (12,176 | ) |
| Net                income (loss) from continuing operations                                                                                                                                                 |   |                                                        | 12,728  |   |   | 6,068 |   |   | 885 |   |   | 1,721 |   |   | 21,402 |   |   | 4,101 |   |   | (34,347 | ) |   | — |   |   | (18,257 | ) |   | (27,101 | ) |
| Income                from discontinued operations, net of tax                                                                                                                                              |   |                                                        | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 981 |   |   | 981 |   |
| Net                income (loss)                                                                                                                                                                            |   | $                                                           | 12,728  |   |   | 6,068 |   |   | 885 |   |   | 1,721 |   |   | 21,402 |   |   | 4,101 |   |   | (34,347 | ) |   | — |   |   | (17,276 | ) |   | (26,120 | ) |
|                                                                                                                                                                                                        |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (a)                Beginning in 2008, the consolidated effective tax rate is used to                calculate income taxes for each operating segment.                                                      |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                        |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Six                months ended June 30, 2008:                                                                                                                                                              |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin - excluding restructure expense, impairment                expense,                and the loss on sale of loans during the first quarter of                2008 |   |                                                        | 26.9    | % |   | 34.7 | % |   | 2.9 | % |   | 20.1 | % |   | 20.5 | % |   | 54.4 | % |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                        |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Six                months ended June, 2007:                                                                                                                                                                 |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin                                                                                                                                                                  |   |                                                        | 31.6    | % |   | 35.9 | % |   | 6.9 | % |   | 27.0 | % |   | 25.2 | % |   | 55.7 | % |   |   |   |   |   |   |   |   |   |   |   |   |

----

*Table          of Contents*

|                                                                                 |   | **Six                months ended June 30, 2007** |    |
|--------------------------------------------------------------------------------------|--------|---------------------------------------------------|---------|
|                                                                                 |   | **Fee-Based**                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   | **Student**                                       |    | **Tuition** |   | **Enrollment** |   |   |   |   |   |   |   |   |   |   |   | **"Base                net** |   |   |   |
|                                                                                 |   | **Loan**                                          |    | **Payment** |   | **Services** |   | **Software** |   |   |   | **Asset** |   | **Corporate** |   |   |   | **income"** |   |   |   |
|                                                                                 |   | **and**                                           |    | **Processing** |   | **and** |   | **and** |   | **Total** |   | **Generation** |   | **Activity** |   | **Eliminations** |   | **Adjustments** |   | **GAAP** |   |
|                                                                                 |   | **Guaranty**                                      |    | **and                Campus** |   | **List** |   | **Technical** |   | **Fee-** |   | **and** |   | **and** |   | **and** |   | **to                GAAP** |   | **Results                of** |   |
|                                                                                 |   | **Servicing**                                     |    | **Commerce** |   | **Management** |   | **Services** |   | **Based** |   | **Management** |   | **Overhead** |   | **Reclassifications** |   | **Results** |   | **Operations** |   |
|                                                                                 |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest income                                                 |   | $                                                 | 3,425   |   |   | 1,680 |   |   | 180 |   |   | 18 |   |   | 5,303 |   |   | 847,894 |   |   | 4,355 |   |   | (3,204 | ) |   | — |   |   | 854,348 |   |
| Interest                expense                                                      |   |                                              | — |   |   | 7 |   |   | 4 |   |   | — |   |   | 11 |   |   | 699,999 |   |   | 21,582 |   |   | (3,204 | ) |   | — |   |   | 718,388 |   |
| Net                interest income (loss)                                            |   |                                              | 3,425   |   |   | 1,673 |   |   | 176 |   |   | 18 |   |   | 5,292 |   |   | 147,895 |   |   | (17,227 | ) |   | — |   |   | — |   |   | 135,960 |   |
|                                                                                 |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                provision for loan losses                                        |   |                                              | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 5,288 |   |   | — |   |   | — |   |   | — |   |   | 5,288 |   |
| Net                interest income (loss) after provision for loan losses            |   |                                              | 3,425   |   |   | 1,673 |   |   | 176 |   |   | 18 |   |   | 5,292 |   |   | 142,607 |   |   | (17,227 | ) |   | — |   |   | — |   |   | 130,672 |   |
|                                                                                 |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense):                                               |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income                                    |   |                                              | 61,958  |   |   | — |   |   | — |   |   | — |   |   | 61,958 |   |   | 118 |   |   | — |   |   | — |   |   | — |   |   | 62,076 |   |
| Other                fee-based income                                                |   |                                              | — |   |   | 21,176 |   |   | 49,870 |   |   | — |   |   | 71,046 |   |   | 6,985 |   |   | 260 |   |   | — |   |   | — |   |   | 78,291 |   |
| Software                services income                                              |   |                                              | — |   |   | — |   |   | 287 |   |   | 11,309 |   |   | 11,596 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 11,596 |   |
| Other                income                                                          |   |                                              | 11      |   |   | 28 |   |   | — |   |   | — |   |   | 39 |   |   | 3,148 |   |   | 3,833 |   |   | — |   |   | — |   |   | 7,020 |   |
| Gain                on the sale of loans                                             |   |                                              | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 2,796 |   |   | — |   |   | — |   |   | — |   |   | 2,796 |   |
| Intersegment                revenue                                                  |   |                                              | 36,584  |   |   | 340 |   |   | 928 |   |   | 8,221 |   |   | 46,073 |   |   | — |   |   | 6,116 |   |   | (52,189 | ) |   | — |   |   | — |   |
| Derivative                market value, foreign currency, and put option adjustments |   |                                              | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (6,583 | ) |   | (6,583 | ) |
| Derivative                settlements, net                                           |   |                                              | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (885 | ) |   | 10,321 |   |   | — |   |   | — |   |   | 9,436 |   |
| Total                other income (expense)                                          |   |                                              | 98,553  |   |   | 21,544 |   |   | 51,085 |   |   | 19,530 |   |   | 190,712 |   |   | 12,162 |   |   | 20,530 |   |   | (52,189 | ) |   | (6,583 | ) |   | 164,632 |   |
|                                                                                 |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                                   |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                                 |   |                                              | 45,027  |   |   | 10,000 |   |   | 18,391 |   |   | 12,332 |   |   | 85,750 |   |   | 14,446 |   |   | 24,978 |   |   | (4,662 | ) |   | 953 |   |   | 121,465 |   |
| Other                expenses                                                        |   |                                              | 17,654  |   |   | 4,493 |   |   | 29,148 |   |   | 1,535 |   |   | 52,830 |   |   | 15,511 |   |   | 38,940 |   |   | — |   |   | 13,129 |   |   | 120,410 |   |
| Intersegment                expenses                                                 |   |                                              | 7,068   |   |   | 399 |   |   | 185 |   |   | 403 |   |   | 8,055 |   |   | 38,670 |   |   | 802 |   |   | (47,527 | ) |   | — |   |   | — |   |
| Total                operating expenses                                              |   |                                              | 69,749  |   |   | 14,892 |   |   | 47,724 |   |   | 14,270 |   |   | 146,635 |   |   | 68,627 |   |   | 64,720 |   |   | (52,189 | ) |   | 14,082 |   |   | 241,875 |   |
|                                                                                 |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                                     |   |                                              | 32,229  |   |   | 8,325 |   |   | 3,537 |   |   | 5,278 |   |   | 49,369 |   |   | 86,142 |   |   | (61,417 | ) |   | — |   |   | (20,665 | ) |   | 53,429 |   |
| Income                tax expense (benefit) (a)                                      |   |                                              | 12,247  |   |   | 3,164 |   |   | 1,344 |   |   | 2,006 |   |   | 18,761 |   |   | 32,734 |   |   | (23,826 | ) |   | — |   |   | (7,099 | ) |   | 20,570 |   |
| Net                income (loss) from continuing operations                          |   |                                              | 19,982  |   |   | 5,161 |   |   | 2,193 |   |   | 3,272 |   |   | 30,608 |   |   | 53,408 |   |   | (37,591 | ) |   | — |   |   | (13,566 | ) |   | 32,859 |   |
| Loss                from discontinued operations, net of tax                         |   |                                              | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (3,325 | ) |   | (3,325 | ) |
| Net                income (loss)                                                     |   | $                                                 | 19,982  |   |   | 5,161 |   |   | 2,193 |   |   | 3,272 |   |   | 30,608 |   |   | 53,408 |   |   | (37,591 | ) |   | — |   |   | (16,891 | ) |   | 29,534 |   |

**Non-GAAP      Performance Measures**

----

*Table          of Contents*

***Limitations      of “Base Net Income”***

----

*Table          of Contents*

|                                                                                 |   | **Student**                                                   |    | **Tuition**         |   | **Enrollment** |   |          |    |           |   |          |   |      |    |
|--------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|---------|---------------------|--------|----------------|--------|---------------|---------|----------------|--------|---------------|--------|-----------|---------|
|                                                                                 |   | **Loan**                                                      |    | **Payment**         |   | **Services**   |   | **Software**  |    | **Asset**      |   | **Corporate** |   |      |    |
|                                                                                 |   | **and**                                                       |    | **Processing**      |   | **and**        |   | **and**       |    | **Generation** |   | **Activity**  |   |      |    |
|                                                                                 |   | **Guaranty**                                                  |    | **and Campus** |   | **List**       |   | **Technical** |    | **and**        |   | **and**       |   |      |    |
|                                                                                 |   | **Servicing**                                                 |    | **Commerce**        |   | **Management** |   | **Services**  |    | **Management** |   | **Overhead**  |   | **Total** |    |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |
|                                                                                 |   | **Three months ended June 30, 2008** |    |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |
| Derivative                market value, foreign currency, and put option adjustments |   | $                                                             | — |                |   | —        |   |          | — |           |   | —       |   |      | (15,866 | ) |   | 111 |   |   | (15,755 | ) |
| Amortization                of intangible assets                                     |   |                                                          | 1,165   |                |   | 1,997          |   |          | 3,113   |           |   | 286           |   |      | — |   |   | — |   |   | 6,561 |   |
| Compensation                related to business combinations                         |   |                                                          | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | 750 |   |   | 750 |   |
| Variable-rate                floor income, net of settlements on derivatives         |   |                                                          | — |                |   | —        |   |          | — |           |   | —       |   |      | (14,726 | ) |   | — |   |   | (14,726 | ) |
| Income                from discontinued operations, net of tax                       |   |                                                          | (981    | )                   |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | (981 | ) |
| Net                tax effect (a)                                                    |   |                                                          | (361    | )                   |   | (619           | )      |          | (965    | )              |   | (89           | )      |      | 9,484   |   |   | (267 | ) |   | 7,183 |   |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Total                adjustments to GAAP                                             |   | $                                                             | (177    | )                   |   | 1,378          |   |          | 2,148   |           |   | 197           |   |      | (21,108 | ) |   | 594 |   |   | (16,968 | ) |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
|                                                                                 |   | **Three                months ended June 30, 2007**           |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Derivative                market value, foreign currency, and put option adjustments |   | $                                                             | — |                |   | —        |   |          | — |           |   | —       |   |      | 6,002   |   |   | (11,549 | ) |   | (5,547 | ) |
| Amortization                of intangible assets                                     |   |                                                          | 1,350   |                |   | 1,469          |   |          | 1,545   |           |   | 287           |   |      | 1,840   |   |   | — |   |   | 6,491 |   |
| Compensation                related to business combinations                         |   |                                                          | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | 476 |   |   | 476 |   |
| Variable-rate                floor income, net of settlements on derivatives         |   |                                                          | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | — |   |
| Loss                from discontinued operations, net of tax                         |   |                                                          | 6,135   |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | 6,135 |   |
| Net                tax effect (a)                                                    |   |                                                          | (513    | )                   |   | (558           | )      |          | (587    | )              |   | (109          | )      |      | (2,980  | ) |   | 4,179 |   |   | (568 | ) |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Total                adjustments to GAAP                                             |   | $                                                             | 6,972   |                |   | 911            |   |          | 958     |           |   | 178           |   |      | 4,862   |   |   | (6,894 | ) |   | 6,987 |   |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
|                                                                                 |   | **Six                months ended June 30, 2008**             |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Derivative                market value, foreign currency, and put option adjustments |   | $                                                             | — |                |   | —        |   |          | — |           |   | —       |   |      | 41,534  |   |   | 538 |   |   | 42,072 |   |
| Amortization                of intangible assets                                     |   |                                                          | 2,421   |                |   | 4,048          |   |          | 5,935   |           |   | 572           |   |      | 145     |   |   | — |   |   | 13,121 |   |
| Compensation                related to business combinations                         |   |                                                          | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | 2,046 |   |   | 2,046 |   |
| Variable-rate                floor income, net of settlements on derivatives         |   |                                                          | — |                |   | —        |   |          | — |           |   | —       |   |      | (30,780 | ) |   | — |   |   | (30,780 | ) |
| Income                from discontinued operations, net of tax                       |   |                                                          | (981    | )                   |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | (981 | ) |
| Net                tax effect (a)                                                    |   |                                                          | (750    | )                   |   | (1,255         | )      |          | (1,840  | )              |   | (178          | )      |      | (3,378  | ) |   | (801 | ) |   | (8,202 | ) |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Total                adjustments to GAAP                                             |   | $                                                             | 690     |                |   | 2,793          |   |          | 4,095   |           |   | 394           |   |      | 7,521   |   |   | 1,783 |   |   | 17,276 |   |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
|                                                                                 |   | **Six                months ended June 30, 2007**             |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Derivative                market value, foreign currency, and put option adjustments |   | $                                                             | — |                |   | —        |   |          | — |           |   | —       |   |      | 12,216  |   |   | (5,633 | ) |   | 6,583 |   |
| Amortization                of intangible assets                                     |   |                                                          | 2,394   |                |   | 2,938          |   |          | 3,355   |           |   | 617           |   |      | 3,825   |   |   | — |   |   | 13,129 |   |
| Compensation                related to business combinations                         |   |                                                          | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | 953 |   |   | 953 |   |
| Variable-rate                floor income, net of settlements on derivatives         |   |                                                          | — |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | — |   |
| Loss                from discontinued operations, net of tax                         |   |                                                          | 3,325   |                |   | —        |   |          | — |           |   | —       |   |      | — |   |   | — |   |   | 3,325 |   |
| Net                tax effect (a)                                                    |   |                                                          | (910    | )                   |   | (1,116         | )      |          | (1,275  | )              |   | (234          | )      |      | (6,096  | ) |   | 2,532 |   |   | (7,099 | ) |
|                                                                                 |   |                                                          |    |                |   |           |   |          |    |           |   |          |   |      |    |   |   |   |   |   |   |   |
| Total                adjustments to GAAP                                             |   | $                                                             | 4,809   |                |   | 1,822          |   |          | 2,080   |           |   | 383           |   |      | 9,945   |   |   | (2,148 | ) |   | 16,891 |   |

|   | (a) | Beginning                in 2008, tax effect is computed using the Company’s consolidated effective                tax rate for each applicable period. In prior periods, tax effect                was                computed at 38%. The change in the value of the put options for prior                periods (included in Corporate Activity and Overhead) was not tax                effected                as this is not deductible for income tax                purposes. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Differences      between GAAP and “Base Net Income”***

***Derivative      market value, foreign currency, and put option adjustments:“***
*Accounting      for Derivative Instruments and Hedging Activities *

----

*Table          of Contents*

***Amortization      of intangible assets:***
** **

***Compensation      related to business combinations:***

***Variable-rate      floor income, net of settlements on derivatives***
**:      **

----

*Table          of Contents*

***Discontinued      operations:***

**STUDENT      LOAN AND GUARANTY SERVICING OPERATING SEGMENT - RESULTS OF      OPERATIONS**

***Student      Loan Servicing Volumes***

|                       |   | **As of**                  |   | **As of**    |   |
|----------------------------|--------|---------------------------------|--------|-------------------|--------|
|                       |   | **June 30,**               |   | **June 30,** |   |
|                       |   | **2008**                        |   | **2007**          |   |
|                       |   | **Dollar**                      |   | **Percent**       |   | **Dollar** |   | **Percent** |   |
|                       |   | (dollars in millions) |   |
|                       |   |                            |   |              |   |   |   |   |   |
| Company                    |   | $                               | 24,873 | (a)               |   | 70.0 | % | $ | 24,429 |   |   | 75.6 | % |
|                       |   |                            |   |              |   |   |   |   |   |   |   |   |   |
| Third                Party |   |                            | 10,680 | (b)               |   | 30.0 |   |   | 7,884 |   |   | 24.4 |   |
|                       |   |                            |   |              |   |   |   |   |   |   |   |   |   |
|                       |   | $                               | 35,553 |              |   | 100.0 | % | $ | 32,313 |   |   | 100.0 | % |

|   | (a) | Approximately                $26 million                of these loans were disbursed on or after May 1, 2008 and are eligible                to                be sold to the Department of Education pursuant to its Purchase Commitment                Program. The Department obtains all rights to service loans which                it                purchases as part of this program. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Approximately                $145 million                of these loans were disbursed on or after May 1, 2008 and may be                eligible                to be sold to the Department of Education pursuant to its Purchase                Commitment Program. The Department obtains all rights to service                loans                which it purchases as part of this                program. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Three      and six months ended June 30, 2008 compared to the three and six months ended      June 30, 2007***

|                                                                                                             |   | **Three months                ended June 30,** |    | **Six                months ended June 30,** |   |
|------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|----------------------------------------------|--------|
|                                                                                                             |   | **2008**                                            |    | **2007**                                     |   | **$                Change** |   | **2008** |   | **2007** |   | **$                Change** |   |
| Net                interest income after the provision for loan losses                                           |   | $                                                   | 243     |                                         |   | 1,181 |   |   | (938 | ) |   | 856 |   |   | 3,425 |   |   | (2,569 | ) |
| Loan                and guaranty servicing income                                                                |   |                                                | 24,747  |                                         |   | 31,492 |   |   | (6,745 | ) |   | 50,855 |   |   | 61,958 |   |   | (11,103 | ) |
| Other                income                                                                                      |   |                                                | 6       |                                         |   | 5 |   |   | 1 |   |   | 38 |   |   | 11 |   |   | 27 |   |
| Intersegment                revenue                                                                              |   |                                                | 18,382  |                                         |   | 20,120 |   |   | (1,738 | ) |   | 38,606 |   |   | 36,584 |   |   | 2,022 |   |
| Total                other income                                                                                |   |                                                | 43,135  |                                         |   | 51,617 |   |   | (8,482 | ) |   | 89,499 |   |   | 98,553 |   |   | (9,054 | ) |
| Salaries                and benefits                                                                             |   |                                                | 12,491  |                                         |   | 22,023 |   |   | (9,532 | ) |   | 26,489 |   |   | 45,027 |   |   | (18,538 | ) |
| Restructure                expense - severance and contract termination costs                                    |   |                                                | (104    | )                                            |   | — |   |   | (104 | ) |   | 747 |   |   | — |   |   | 747 |   |
| Impairment                expense                                                                                |   |                                                | — |                                         |   | — |   |   | — |   |   | 5,074 |   |   | — |   |   | 5,074 |   |
| Other                expenses                                                                                    |   |                                                | 8,011   |                                         |   | 8,404 |   |   | (393 | ) |   | 16,498 |   |   | 17,654 |   |   | (1,156 | ) |
| Intersegment                expenses                                                                             |   |                                                | 9,822   |                                         |   | 3,750 |   |   | 6,072 |   |   | 23,100 |   |   | 7,068 |   |   | 16,032 |   |
| Total                operating expenses                                                                          |   |                                                | 30,220  |                                         |   | 34,177 |   |   | (3,957 | ) |   | 71,908 |   |   | 69,749 |   |   | 2,159 |   |
| "Base                net income" before income taxes                                                             |   |                                                | 13,158  |                                         |   | 18,621 |   |   | (5,463 | ) |   | 18,447 |   |   | 32,229 |   |   | (13,782 | ) |
| Income                tax expense                                                                                |   |                                                | 4,079   |                                         |   | 7,076 |   |   | (2,997 | ) |   | 5,719 |   |   | 12,247 |   |   | (6,528 | ) |
| "Base                net income"                                                                                 |   | $                                                   | 9,079   |                                         |   | 11,545 |   |   | (2,466 | ) |   | 12,728 |   |   | 19,982 |   |   | (7,254 | ) |
|                                                                                                             |   |                                                |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin                                                                       |   |                                                | 30.3    | %                                            |   | 35.3 | % |   |   |   |   | 20.4 | % |   | 31.6 | % |   |   |   |
|                                                                                                             |   |                                                |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin - excluding restructure expense and impairment                expense |   |                                                | 30.1    | %                                            |   | 35.3 | % |   |   |   |   | 26.9 | % |   | 31.6 | % |   |   |   |

----

*Table          of Contents*

*Net      interest income after the provision for loan losses*
*.      *

*Loan      and guaranty servicing income*

|                                                                            |   | **Three                months ended June 30,** |   | **Six                months ended June 30,** |   |
|---------------------------------------------------------------------------------|--------|------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                            |   | **2008**                                       |   | **2007**                                     |   | **$                Change** |   | **%                Change** |   | **2008** |   | **2007** |   | **$                Change** |   | **%                Change** |   |
|                                                                            |   |                                           |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Origination                and servicing of FFEL Program loans                  |   | $                                              | 12,533 |                                         |   | 13,774 |   |   | (1,241 | ) |   | (9.0 | )% | $ | 24,812 |   |   | 27,904 |   |   | (3,092 | ) |   | (11.1 | )% |
|                                                                            |   |                                           |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Origination                and servicing of non-federally insured student loans |   |                                           | 1,872  |                                         |   | 2,335 |   |   | (463 | ) |   | (19.8 | ) |   | 4,143 |   |   | 4,656 |   |   | (513 | ) |   | (11.0 | ) |
|                                                                            |   |                                           |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Servicing                and support outsourcing for guaranty agencies          |   |                                           | 10,342 |                                         |   | 15,383 |   |   | (5,041 | ) |   | (32.8 | ) |   | 21,900 |   |   | 29,398 |   |   | (7,498 | ) |   | (25.5 | ) |
|                                                                            |   |                                           |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income to external parties           |   | $                                              | 24,747 |                                         |   | 31,492 |   |   | (6,745 | ) |   | (21.4) | %  | $ | 50,855 |   |   | 61,958 |   |   | (11,103 | ) |   | (17.9) | % |

|   | · | FFELP                loan servicing income decreased due to new servicing contracts being                priced at lower rates following the legislative developments in September                2007. This decrease was partially offset by an increase in loan servicing                volume due to entering into new servicing contracts. ** ** |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Servicing                and support outsourcing for guaranty agencies decreased due to the                termination of the Voluntary Flexible Agreement between the Department                of                Education and College Assist and the timing of certain activities                offset                by an increase in the volume of guaranteed loans serviced as well                as an                increase in collections due to utilizing an outside collection agency. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Intersegment        revenue*

*Operating      expenses*
*.*

----

*Table          of Contents*

**TUITION      PAYMENT PROCESSING AND CAMPUS COMMERCE OPERATING SEGMENT - RESULTS OF      OPERATIONS**

***Three      and six months ended June 30, 2008 compared to the three and six months ended      June 30, 2007***

|                                                                   |   | **Three                months ended June 30,** |   | **Six                months ended June 30,** |   |
|------------------------------------------------------------------------|--------|------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                   |   | **2008**                                       |   | **2007**                                     |   | **$                Change** |   | **2008** |   | **2007** |   | **$                Change** |   |
| Net                interest income after the provision for loan losses |   | $                                              | 310    |                                         |   | 668 |   |   | (358 | ) |   | 1,075 |   |   | 1,673 |   |   | (598 | ) |
| Other                fee-based income                                  |   |                                           | 10,292 |                                         |   | 9,405 |   |   | 887 |   |   | 24,114 |   |   | 21,176 |   |   | 2,938 |   |
| Other                income                                            |   |                                           | (21    | )                                            |   | 25 |   |   | (46 | ) |   | 4 |   |   | 28 |   |   | (24 | ) |
| Intersegment                revenue                                    |   |                                           | (76    | )                                            |   | 188 |   |   | (264 | ) |   | 184 |   |   | 340 |   |   | (156 | ) |
| Total                other income                                      |   |                                           | 10,195 |                                         |   | 9,618 |   |   | 577 |   |   | 24,302 |   |   | 21,544 |   |   | 2,758 |   |
| Salaries                and benefits                                   |   |                                           | 5,784  |                                         |   | 5,082 |   |   | 702 |   |   | 11,214 |   |   | 10,000 |   |   | 1,214 |   |
| Other                expenses                                          |   |                                           | 2,551  |                                         |   | 2,333 |   |   | 218 |   |   | 4,611 |   |   | 4,493 |   |   | 118 |   |
| Intersegment                expenses                                   |   |                                           | 461    |                                         |   | 25 |   |   | 436 |   |   | 757 |   |   | 399 |   |   | 358 |   |
| Total                operating expenses                                |   |                                           | 8,796  |                                         |   | 7,440 |   |   | 1,356 |   |   | 16,582 |   |   | 14,892 |   |   | 1,690 |   |
| "Base                net income" before income taxes                   |   |                                           | 1,709  |                                         |   | 2,846 |   |   | (1,137 | ) |   | 8,795 |   |   | 8,325 |   |   | 470 |   |
| Income                tax expense                                      |   |                                           | 530    |                                         |   | 1,082 |   |   | (552 | ) |   | 2,727 |   |   | 3,164 |   |   | (437 | ) |
| "Base                net income"                                       |   | $                                              | 1,179  |                                         |   | 1,764 |   |   | (585 | ) |   | 6,068 |   |   | 5,161 |   |   | 907 |   |
|                                                                   |   |                                           |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin                             |   |                                           | 16.3   | %                                            |   | 27.7 | % |   |   |   |   | 34.7 | % |   | 35.9 | % |   |   |   |

*Other      fee-based income*

*Operating      expenses*
*.      *

----

*Table          of Contents*

**ENROLLMENT      SERVICES AND LIST MANAGEMENT OPERATING SEGMENT - RESULTS OF      OPERATIONS**

***Three      and six months ended June 30, 2008 compared to the three and six months ended      June 30, 2007***

|                                                                                       |   | **Three months ended June 30,** |    | **Six months ended June 30,** |   |
|--------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|---------------------------------------------------|--------|
|                                                                                       |   | **2008**                                            |    | **2007**                                          |   | **$ Change** |   | **2008** |   | **2007** |   | **$ Change** |   |
| Net interest income after the                provision for loan losses |   | $                                                   | — |                                              |   | 91 |   |   | (91 | ) |   | 8 |   |   | 176 |   |   | (168 | ) |
| Other                fee-based income                                                      |   |                                                | 26,067  |                                              |   | 24,923 |   |   | 1,144 |   |   | 53,289 |   |   | 49,870 |   |   | 3,419 |   |
| Software                services income                                                    |   |                                                | — |                                              |   | 157 |   |   | (157 | ) |   | 37 |   |   | 287 |   |   | (250 | ) |
| Intersegment                revenue                                                        |   |                                                | — |                                              |   | 178 |   |   | (178 | ) |   | — |   |   | 928 |   |   | (928 | ) |
| Total                other income                                                          |   |                                                | 26,067  |                                              |   | 25,258 |   |   | 809 |   |   | 53,326 |   |   | 51,085 |   |   | 2,241 |   |
| Salaries                and benefits                                                       |   |                                                | 6,373   |                                              |   | 9,022 |   |   | (2,649 | ) |   | 12,896 |   |   | 18,391 |   |   | (5,495 | ) |
| Restructure                expense - severance and contract termination costs              |   |                                                | (15     | )                                                 |   | — |   |   | (15 | ) |   | 282 |   |   | — |   |   | 282 |   |
| Other                expenses                                                              |   |                                                | 17,284  |                                              |   | 14,589 |   |   | 2,695 |   |   | 35,447 |   |   | 29,148 |   |   | 6,299 |   |
| Intersegment                expenses                                                       |   |                                                | 1,580   |                                              |   | 29 |   |   | 1,551 |   |   | 3,427 |   |   | 185 |   |   | 3,242 |   |
| Total                operating expenses                                                    |   |                                                | 25,222  |                                              |   | 23,640 |   |   | 1,582 |   |   | 52,052 |   |   | 47,724 |   |   | 4,328 |   |
| "Base                net income" before income taxes                                       |   |                                                | 845     |                                              |   | 1,709 |   |   | (864 | ) |   | 1,282 |   |   | 3,537 |   |   | (2,255 | ) |
| Income                tax expense                                                          |   |                                                | 262     |                                              |   | 649 |   |   | (387 | ) |   | 397 |   |   | 1,344 |   |   | (947 | ) |
| "Base                net income"                                                           |   | $                                                   | 583     |                                              |   | 1,060 |   |   | (477 | ) |   | 885 |   |   | 2,193 |   |   | (1,308 | ) |
|                                                                                       |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin                                                 |   |                                                | 3.2     | %                                                 |   | 6.7 | % |   |   |   |   | 2.4 | % |   | 6.9 | % |   |   |   |
|                                                                                       |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin - excluding restructure expense                 |   |                                                | 3.2     | %                                                 |   | 6.7 | % |   |   |   |   | 2.9 | % |   | 6.9 | % |   |   |   |

*Other      fee-based income.*

*Operating      expenses*

----

*Table          of Contents*

**SOFTWARE      AND TECHNICAL SERVICES OPERATING SEGMENT - RESULTS OF      OPERATIONS**

***Three      and six months ended June 30, 2008 compared to the three and six months ended      June 30, 2007***

|                                                                                            |   | **Three months ended June 30,** |    | **Six months ended June 30,** |   |
|-------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|---------------------------------------------------|--------|
|                                                                                            |   | **2008**                                            |    | **2007**                                          |   | **$ Change** |   | **2008** |   | **2007** |   | **$ Change** |   |
| Net interest income after the provision for loan losses |   | $                                                   | — |                                              |   | — |   |   | — |   |   | — |   |   | 18 |   |   | (18 | ) |
| Software                services income                                                         |   |                                                | 4,896   |                                              |   | 5,691 |   |   | (795 | ) |   | 11,611 |   |   | 11,309 |   |   | 302 |   |
| Intersegment                revenue                                                             |   |                                                | 1,517   |                                              |   | 4,389 |   |   | (2,872 | ) |   | 3,333 |   |   | 8,221 |   |   | (4,888 | ) |
| Total                other income                                                               |   |                                                | 6,413   |                                              |   | 10,080 |   |   | (3,667 | ) |   | 14,944 |   |   | 19,530 |   |   | (4,586 | ) |
| Salaries                and benefits                                                            |   |                                                | 4,702   |                                              |   | 5,857 |   |   | (1,155 | ) |   | 9,870 |   |   | 12,332 |   |   | (2,462 | ) |
| Restructure                expense - severance and contract                                     |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| termination                costs                                                                |   |                                                | (8      | )                                                 |   | — |   |   | (8 | ) |   | 510 |   |   | — |   |   | 510 |   |
| Other                expenses                                                                   |   |                                                | 714     |                                              |   | 751 |   |   | (37 | ) |   | 1,333 |   |   | 1,535 |   |   | (202 | ) |
| Intersegment                expenses                                                            |   |                                                | 342     |                                              |   | 403 |   |   | (61 | ) |   | 736 |   |   | 403 |   |   | 333 |   |
| Total                operating expenses                                                         |   |                                                | 5,750   |                                              |   | 7,011 |   |   | (1,261 | ) |   | 12,449 |   |   | 14,270 |   |   | (1,821 | ) |
| "Base                net income" before income taxes                                            |   |                                                | 663     |                                              |   | 3,069 |   |   | (2,406 | ) |   | 2,495 |   |   | 5,278 |   |   | (2,783 | ) |
| Income                tax expense                                                               |   |                                                | 206     |                                              |   | 1,167 |   |   | (961 | ) |   | 774 |   |   | 2,006 |   |   | (1,232 | ) |
| "Base                net income"                                                                |   | $                                                   | 457     |                                              |   | 1,902 |   |   | (1,445 | ) |   | 1,721 |   |   | 3,272 |   |   | (1,551 | ) |
|                                                                                            |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin                                                      |   |                                                | 10.3    | %                                            |   | 30.4 | %  |   |   |   |   | 16.7 | %  |   | 27.0 | %  |   |   |   |
|                                                                                            |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin - excluding restructure expense                      |   |                                                | 10.2    | %                                                 |   | 30.4 | % |   |   |   |   | 20.1 | % |   | 27.0 | % |   |   |   |

*Software      services income*
*.*

*Intersegment      revenue*
*.      *

*Operating      expenses*
*.*

----

*Table          of Contents*

**ASSET      GENERATION AND MANAGEMENT OPERATING SEGMENT - RESULTS OF      OPERATIONS**

***Student      Loan Portfolio***

|                                                               |   | **As of June 30, 2008** |       | **As of December 31, 2007** |   |
|--------------------------------------------------------------------|--------|---------------------------------------------|------------|-------------------------------------------------|--------|
|                                                               |   | **Dollars**                                 |       | **Percent**                                     |   | **Dollars** |   | **Percent** |   |
| Federally insured: (a) (b)                          |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Stafford                                                           |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Originated                prior to 10/1/07                         |   | $                                           | 6,668,100  |                                            |   | 25.6 | %  | $ | 6,624,009 |   |   | 24.8 | % |
| Originated                on or after 10/1/07                      |   |                                        | 386,669    |                                            |   | 1.5 |   |   | 101,901 |   |   | 0.4 |   |
| PLUS/SLS                                                           |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Originated                prior to 10/1/07                         |   |                                        | 424,609    |                                            |   | 1.6 |   |   | 414,708 |   |   | 1.5 |   |
| Originated                on or after 10/1/07                      |   |                                        | 47,133     |                                            |   | 0.2 |   |   | 15,233 |   |   | 0.1 |   |
| Consolidation                                                      |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Originated                prior to 10/1/07                         |   |                                        | 17,683,114 |                                            |   | 68.0 |   |   | 18,646,993 |   |   | 69.8 |   |
| Originated                on or after 10/1/07                      |   |                                        | 122,548    |                                            |   | 0.5 |   |   | 251,554 |   |   | 0.9 |   |
|                                                               |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Non-federally                insured                               |   |                                        | 279,953    |                                            |   | 1.1 |   |   | 274,815 |   |   | 1.0 |   |
|                                                               |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Total                                                              |   |                                        | 25,612,126 |                                            |   | 98.5 |   |   | 26,329,213 |   |   | 98.5 |   |
|                                                               |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Unamortized                premiums and deferred origination costs |   |                                        | 429,090    |                                            |   | 1.7 |   |   | 452,501 |   |   | 1.7 |   |
| Allowance                for loan losses:                          |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Allowance                - federally insured                       |   |                                        | (24,084    | )                                               |   | (0.1 | ) |   | (24,534 | ) |   | (0.1 | ) |
| Allowance                - non-federally insured                   |   |                                        | (23,825    | )                                               |   | (0.1 | ) |   | (21,058 | ) |   | (0.1 | ) |
|                                                               |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
|                                                               |   | $                                           | 25,993,307 |                                            |   | 100.0 | % | $ | 26,736,122 |   |   | 100.0 | % |

|   | (a) | The                College Cost Reduction Act reduced the yield on federally insured                loans                originated on or after October 1, 2007. As of June 30, 2008 and December                31, 2007, $228.7 million and $278.9 million, respectively, of federally                insured student loans are excluded from the above table as these                loans are                accounted for as participation interests sold under an agreement                with                Union Bank which is further discussed in note 7 of the Company’s                consolidated financial statements included in this Quarterly Report.                As of                June 30, 2008, $197.5 million of the loans accounted for as participation                interests sold under this agreement were originated on or after October                1,                2007. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | As                of June 30, 2008, approximately $27 million                of federally insured student loans were eligible to be sold or                participated to the Department under the Department’s Loan Purchase                Commitment and Participation                Programs. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Origination      and Acquisition***

----

*Table          of Contents*

|                                                                               |   | **Three months ended June 30,** |       | **Six months ended June 30,** |   |
|------------------------------------------------------------------------------------|--------|-----------------------------------------------------|------------|---------------------------------------------------|--------|
|                                                                               |   | **2008**                                            |       | **2007**                                          |   | **2008** |   | **2007** |   |
|                                                                               |   |                                                |       |                                              |   |   |   |   |   |
| Beginning                balance                                                   |   | $                                                   | 26,347,354 |                                              |   | 24,617,030 |   |   | 26,329,213 |   |   | 23,414,468 |   |
| Direct                channel:                                                     |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Consolidation                loan originations                                     |   |                                                | 3,284      |                                              |   | 836,711 |   |   | 69,029 |   |   | 1,900,949 |   |
| Less                consolidation of existing portfolio                            |   |                                                | (988       | )                                                 |   | (438,993 | ) |   | (28,447 | ) |   | (912,788 | ) |
| Net                consolidation loan originations                                 |   |                                                | 2,296      |                                              |   | 397,718 |   |   | 40,582 |   |   | 988,161 |   |
| Stafford/PLUS                loan originations                                     |   |                                                | 114,228    |                                              |   | 141,882 |   |   | 535,329 |   |   | 496,709 |   |
| Branding                partner channel                                            |   |                                                | 127,929    |                                              |   | 255,703 |   |   | 601,307 |   |   | 457,993 |   |
| Forward                flow channel                                                |   |                                                | 84,216     |                                              |   | 392,174 |   |   | 403,060 |   |   | 768,115 |   |
| Other                channels                                                      |   |                                                | —    |                                              |   | 560,796 |   |   | 55,922 |   |   | 766,714 |   |
|                                                                               |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Total                channel acquisitions                                          |   |                                                | 328,669    |                                              |   | 1,748,273 |   |   | 1,636,200 |   |   | 3,477,692 |   |
|                                                                               |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Repayments,                claims, capitalized interest, participations, and other |   |                                                | (585,443   | )                                                 |   | (397,556 | ) |   | (885,243 | ) |   | (633,363 | ) |
| Consolidation                loans lost to external parties                        |   |                                                | (46,849    | )                                                 |   | (187,350 | ) |   | (176,267 | ) |   | (426,754 | ) |
| Loans                sold                                                          |   |                                                | (431,605   | )                                                 |   | (34,397 | ) |   | (1,291,777 | ) |   | (86,043 | ) |
| Ending                balance                                                      |   | $                                                   | 25,612,126 |                                              |   | 25,746,000 |   |   | 25,612,126 |   |   | 25,746,000 |   |

|   | · | Increases                statutory limits on annual and aggregate borrowing for FFELP loans;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | Allows                the Department to act as a secondary market and enter into forward                purchasing agreements with lenders. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Offers                to purchase loans from lenders for the 2008-2009 academic year and                offers                lenders access to short-term liquidity;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Commits                to continue working with the FFELP community to explore programs                to                reengage the capital markets in the                long-run. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

*Activity        in the Allowance for Loan Losses*

|                                                                                                                               |   | **Three months ended June 30,** |       | **Six months ended June 30,** |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|------------|---------------------------------------------------|--------|
|                                                                                                                               |   | **2008**                                            |       | **2007**                                          |   | **2008** |   | **2007** |   |
|                                                                                                                               |   |                                                |       |                                              |   |   |   |   |   |
| Balance                at beginning of period                                                                                      |   | $                                                   | 46,137     |                                              |   | 26,224 |   |   | 45,592 |   |   | 26,003 |   |
| Provision                for loan losses:                                                                                          |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Federally                insured loans                                                                                             |   |                                                | 4,000      |                                              |   | 1,665 |   |   | 7,500 |   |   | 3,118 |   |
| Non-federally                insured loans                                                                                         |   |                                                | 2,000      |                                              |   | 870 |   |   | 3,500 |   |   | 2,170 |   |
| Total                provision for loan losses                                                                                     |   |                                                | 6,000      |                                              |   | 2,535 |   |   | 11,000 |   |   | 5,288 |   |
| Charge-offs,                net of recoveries:                                                                                     |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Federally                insured loans                                                                                             |   |                                                | (3,878     | )                                                 |   | (1,330 | ) |   | (7,200 | ) |   | (2,525 | ) |
| Non-federally                insured loans                                                                                         |   |                                                | (350       | )                                                 |   | (289 | ) |   | (733 | ) |   | (455 | ) |
| Net                charge-offs                                                                                                     |   |                                                | (4,228     | )                                                 |   | (1,619 | ) |   | (7,933 | ) |   | (2,980 | ) |
| Sale                of federally insured loans                                                                                     |   |                                                | —    |                                              |   | — |   |   | (750 | ) |   | — |   |
| Sale                of non-federally insured loans                                                                                 |   |                                                | —    |                                              |   | — |   |   | — |   |   | (1,171 | ) |
| Balance                at end of period                                                                                            |   | $                                                   | 47,909     |                                              |   | 27,140 |   |   | 47,909 |   |   | 27,140 |   |
| Allocation                of the allowance for loan losses:                                                                        |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Federally                insured loans                                                                                             |   | $                                                   | 24,084     |                                              |   | 8,194 |   |   | 24,084 |   |   | 8,194 |   |
| Non-federally                insured loans                                                                                         |   |                                                | 23,825     |                                              |   | 18,946 |   |   | 23,825 |   |   | 18,946 |   |
| Total                allowance for loan losses                                                                                     |   | $                                                   | 47,909     |                                              |   | 27,140 |   |   | 47,909 |   |   | 27,140 |   |
|                                                                                                                               |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Net                loan charge-offs as a percentage of average student loans                                                       |   |                                                | 0.066      | %                                                 |   | 0.026 | % |   | 0.060 | % |   | 0.025 | % |
| Total                allowance as a percentage of average student loans                                                            |   |                                                | 0.186      | %                                                 |   | 0.110 | % |   | 0.182 | % |   | 0.112 | % |
| Total                allowance as a percentage of ending balance of student                loans                                   |   |                                                | 0.187      | %                                                 |   | 0.105 | % |   | 0.187 | % |   | 0.105 | % |
| Non-federally                insured allowance as a percentage of the ending balance of non-federally                insured loans |   |                                                | 8.510      | %                                                 |   | 8.061 | % |   | 8.510 | % |   | 8.061 | % |
| Average                student loans                                                                                               |   | $                                                   | 25,767,123 |                                              |   | 24,687,280 |   |   | 26,313,226 |   |   | 24,266,048 |   |
| Ending                balance of student loans                                                                                     |   |                                                | 25,612,126 |                                              |   | 25,746,000 |   |   | 25,612,126 |   |   | 25,746,000 |   |
| Ending                balance of non-federally insured loans                                                                       |   |                                                | 279,953    |                                              |   | 235,023 |   |   | 279,953 |   |   | 235,023 |   |

|                                                  |   | **As of June 30, 2008** |       | **As of December 31, 2007** |   |
|-------------------------------------------------------|--------|---------------------------------------------|------------|-------------------------------------------------|--------|
|                                                  |   | **Dollars**                                 |       | **Percent**                                     |   | **Dollars** |   | **Percent** |   |
| **Federally                Insured Loans:**           |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Loans                in-school/grace/deferment(1)     |   | $                                           | 7,352,864  |                                            |   |   |   | $ | 7,115,505 |   |   |   |   |
| Loans                in forebearance(2)               |   |                                        | 2,562,434  |                                            |   |   |   |   | 3,015,456 |   |   |   |   |
| Loans                in repayment status:             |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Loans                current                          |   |                                        | 13,596,739 |                                            |   | 88.2 | % |   | 13,937,702 |   |   | 87.5 | % |
| Loans                delinquent 31-60 days(3)         |   |                                        | 550,423    |                                            |   | 3.6 |   |   | 682,956 |   |   | 4.3 |   |
| Loans                delinquent 61-90 days(3)         |   |                                        | 327,090    |                                            |   | 2.1 |   |   | 353,303 |   |   | 2.2 |   |
| Loans                delinquent 91 days or greater(4) |   |                                        | 942,623    |                                            |   | 6.1 |   |   | 949,476 |   |   | 6.0 |   |
| Total                loans in repayment               |   |                                        | 15,416,875 |                                            |   | 100.0 | % |   | 15,923,437 |   |   | 100.0 | % |
| Total                federally insured loans          |   | $                                           | 25,332,173 |                                            |   |   |   | $ | 26,054,398 |   |   |   |   |
| **Non-Federally                Insured Loans:**       |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Loans                in-school/grace/deferment(1)     |   | $                                           | 103,785    |                                            |   |   |   | $ | 111,946 |   |   |   |   |
| Loans                in forebearance(2)               |   |                                        | 11,659     |                                            |   |   |   |   | 12,895 |   |   |   |   |
| Loans                in repayment status:             |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Loans                current                          |   |                                        | 156,341    |                                            |   | 95.0 | % |   | 142,851 |   |   | 95.3 | % |
| Loans                delinquent 31-60 days(3)         |   |                                        | 3,163      |                                            |   | 1.9 |   |   | 3,450 |   |   | 2.3 |   |
| Loans                delinquent 61-90 days(3)         |   |                                        | 1,950      |                                            |   | 1.2 |   |   | 1,247 |   |   | 0.8 |   |
| Loans                delinquent 91 days or greater(4) |   |                                        | 3,055      |                                            |   | 1.9 |   |   | 2,426 |   |   | 1.6 |   |
| Total                loans in repayment               |   |                                        | 164,509    |                                            |   | 100.0 | % |   | 149,974 |   |   | 100.0 | % |
| Total                non-federally insured loans      |   | $                                           | 279,953    |                                            |   |   |   | $ | 274,815 |   |   |   |   |

| (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. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (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. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

| (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***
** **

|                                                                             |   | **Three months ended June 30,** |       | **Six months ended June 30,** |   |
|----------------------------------------------------------------------------------|--------|-----------------------------------------------------|------------|---------------------------------------------------|--------|
|                                                                             |   | **2008**                                            |       | **2007**                                          |   | **2008** |   | **2007** |   |
| Student                loan yield                                                |   |                                                | 5.65       | %                                                 |   | 7.93 | % |   | 5.85 | % |   | 7.90 | % |
| Consolidation                rebate fees                                         |   |                                                | (0.74      | )                                                 |   | (0.78 | ) |   | (0.74 | ) |   | (0.78 | ) |
| Premium                and deferred origination costs amortization               |   |                                                | (0.36      | )                                                 |   | (0.37 | ) |   | (0.37 | ) |   | (0.36 | ) |
| Student                loan net yield                                            |   |                                                | 4.55       |                                              |   | 6.78 |   |   | 4.74 |   |   | 6.76 |   |
| Student                loan cost of funds (a)                                    |   |                                                | (3.25      | )                                                 |   | (5.50 | ) |   | (3.61 | ) |   | (5.48 | ) |
| Student                loan spread                                               |   |                                                | 1.30       |                                              |   | 1.28 |   |   | 1.13 |   |   | 1.28 |   |
| Variable-rate                floor income, net of settlements on derivatives (b) |   |                                                | (0.23      | )                                                 |   | — |   |   | (0.24 | ) |   | — |   |
|                                                                             |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Core                student loan spread                                          |   |                                                | 1.07       | %                                                 |   | 1.28 | % |   | 0.89 | % |   | 1.28 | % |
|                                                                             |   |                                                |       |                                              |   |   |   |   |   |   |   |   |   |
| Average                balance of student loans                                  |   | $                                                   | 25,767,123 |                                              |   | 24,687,280 |   |   | 26,313,226 |   |   | 24,266,048 |   |
| Average                balance of debt outstanding                               |   |                                                | 26,767,459 |                                              |   | 26,158,525 |   |   | 27,297,445 |   |   | 25,770,551 |   |

|   | (a) | The                student loan cost of funds includes the effects of net settlement                costs on                the Company's derivative instruments (excluding the net settlements                of                $5.7                million and $10.3                million, for the three and six months ended June 30, 2007, respectively,                on those derivatives no longer hedging student loan                assets). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Variable-rate                floor income is calculated by the Company on a statutory basis. As                a                result of the disruptions in the debt and secondary capital markets                which                began in August 2007, the full benefit of variable-rate floor income                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.                The Company entered into interest rate swaps with effective dates                beginning in January 2008 to hedge a portion of the variable-rate                floor                income. Settlements on these derivatives are presented as part of                the                Company’s statutory calculation of variable-rate floor                income. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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. As shown in Item 3, “Quantitative and Qualitative                Disclosures about Market Risk,” 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. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

|   | · | The                  spread to LIBOR on asset-backed securities transactions has increased                  significantly since August 2007. Since August 2007, the Company                  has issued                  $6.0                  billion of notes in asset-backed securities transactions ($1.5                  billion in                  August 2007, $1.2 billion in March 2008, $1.9 billion in April                  2008, and                  $1.3 billion in May 2008). The                  increase in costs on these transactions from historical levels                  have had                  and will continue to have a negative impact on the Company’s student loan                  net interest income. The increased spread to LIBOR on                  asset-backed securities transactions is shown in the below table: |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | As                a result of the passage of the College Cost Reduction Act, the yield                on                FFELP loans originated after October 1, 2007 was reduced. As of June                30,                2008, the Company had $556.4 million                of FFELP loans originated after October 1, 2007. The core student                loan                spread on FFELP loans originated after October 1, 2007 for the second                quarter of 2008 was approximately 40 to 50                basis points. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

***Three      and six months ended June 30, 2008 compared to the three and six months ended      June 30, 2007***

|                                                                                                                                                                                                     |   | **Three months ended June 30,** |    | **Six months ended June 30,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|---------------------------------------------------|--------|
|                                                                                                                                                                                                     |   | **2008**                                            |    | **2007**                                          |   | **$                Change** |   | **2008** |   | **2007** |   | **$                Change** |   |
| Net                interest income after the provision for loan losses                                                                                                                                   |   | $                                                   | 53,891  |                                              |   | 72,528 |   |   | (18,637 | ) |   | 53,234 |   |   | 142,607 |   |   | (89,373 | ) |
|                                                                                                                                                                                                     |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                and guaranty servicing income                                                                                                                                                        |   |                                                | 157     |                                              |   | 118 |   |   | 39 |   |   | 162 |   |   | 118 |   |   | 44 |   |
| Other                fee-based income                                                                                                                                                                    |   |                                                | 4,458   |                                              |   | 3,674 |   |   | 784 |   |   | 9,327 |   |   | 6,985 |   |   | 2,342 |   |
| Other                income                                                                                                                                                                              |   |                                                | 393     |                                              |   | 105 |   |   | 288 |   |   | 381 |   |   | 3,148 |   |   | (2,767 | ) |
| Gain                (loss) on sale of loans                                                                                                                                                              |   |                                                | 48      |                                              |   | 1,010 |   |   | (962 | ) |   | (47,426 | ) |   | 2,796 |   |   | (50,222 | ) |
| Derivative                market value, foreign currency, and put option adjustments                                                                                                                     |   |                                                | — |                                              |   | — |   |   | — |   |   | 466 |   |   | — |   |   | 466 |   |
| Derivative                settlements, net                                                                                                                                                               |   |                                                | 11,638  |                                              |   | (461 | ) |   | 12,099 |   |   | 55,165 |   |   | (885 | ) |   | 56,050 |   |
| Total                other income                                                                                                                                                                        |   |                                                | 16,694  |                                              |   | 4,446 |   |   | 12,248 |   |   | 18,075 |   |   | 12,162 |   |   | 5,913 |   |
|                                                                                                                                                                                                     |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                                                                                                                                                     |   |                                                | 1,954   |                                              |   | 7,167 |   |   | (5,213 | ) |   | 4,178 |   |   | 14,446 |   |   | (10,268 | ) |
| Restructure                expense - severance and contract termination costs                                                                                                                            |   |                                                | (52     | )                                                 |   | — |   |   | (52 | ) |   | 1,844 |   |   | — |   |   | 1,844 |   |
| Impairment                expense                                                                                                                                                                        |   |                                                | — |                                              |   | — |   |   | — |   |   | 9,351 |   |   | — |   |   | 9,351 |   |
| Other                expenses                                                                                                                                                                            |   |                                                | 5,095   |                                              |   | 7,246 |   |   | (2,151 | ) |   | 10,439 |   |   | 15,511 |   |   | (5,072 | ) |
| Intersegment                expenses                                                                                                                                                                     |   |                                                | 18,952  |                                              |   | 22,034 |   |   | (3,082 | ) |   | 39,554 |   |   | 38,670 |   |   | 884 |   |
| Total                operating expenses                                                                                                                                                                  |   |                                                | 25,949  |                                              |   | 36,447 |   |   | (10,498 | ) |   | 65,366 |   |   | 68,627 |   |   | (3,261 | ) |
|                                                                                                                                                                                                     |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| "Base                net income (loss)" before income taxes                                                                                                                                              |   |                                                | 44,636  |                                              |   | 40,527 |   |   | 4,109 |   |   | 5,943 |   |   | 86,142 |   |   | (80,199 | ) |
| Income                tax expense (benefit)                                                                                                                                                              |   |                                                | 13,837  |                                              |   | 15,400 |   |   | (1,563 | ) |   | 1,842 |   |   | 32,734 |   |   | (30,892 | ) |
|                                                                                                                                                                                                     |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| "Base                net income (loss)"                                                                                                                                                                  |   | $                                                   | 30,799  |                                              |   | 25,127 |   |   | 5,672 |   |   | 4,101 |   |   | 53,408 |   |   | (49,307 | ) |
|                                                                                                                                                                                                     |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin                                                                                                                                                               |   |                                                | 63.2    | %                                                 |   | 52.7 | % |   |   |   |   | 8.3 | % |   | 55.7 | % |   |   |   |
|                                                                                                                                                                                                     |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Before                Tax Operating Margin - excluding restructure expense, impairment                expense,                and the loss on sale of loans during the first quarter                2008 |   |                                                | 63.2    | %                                                 |   | 52.7 | % |   |   |   |   | 54.4 | % |   | 55.7 | % |   |   |   |

*Net      interest income after the provision for loan losses*

|                                                                        |   | **Three months ended June 30,** |    | **Change** |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|------------|--------|
|                                                                        |   | **2008**                                            |    | **2007**   |   | **Dollars** |   | **Percent** |   |
|                                                                        |   |                                                |    |       |   |   |   |   |   |
| Loan                interest                                                |   | $                                                   | 345,321 |       |   | 487,465 |   |   | (142,144 | ) |   | (29.2) | % |
| Consolidation                rebate fees                                    |   |                                                | (47,721 | )          |   | (47,745 | ) |   | 24 |   |   | 0.1 |   |
| Amortization                of loan premiums and deferred origination costs |   |                                                | (22,841 | )          |   | (22,634 | ) |   | (207 | ) |   | (0.9 | ) |
| Total                loan interest                                          |   |                                                | 274,759 |       |   | 417,086 |   |   | (142,327 | ) |   | (34.1 | ) |
| Investment                interest                                          |   |                                                | 7,534   |       |   | 16,318 |   |   | (8,784 | ) |   | (53.8 | ) |
| Total                interest income                                        |   |                                                | 282,293 |       |   | 433,404 |   |   | (151,111 | ) |   | (34.9 | ) |
| Interest                on bonds and notes payable                          |   |                                                | 221,856 |       |   | 358,308 |   |   | (136,452 | ) |   | (38.1 | ) |
| Intercompany                interest                                        |   |                                                | 546     |       |   | 33 |   |   | 513 |   |   | 1,554.5 |   |
| Provision                for loan losses                                    |   |                                                | 6,000   |       |   | 2,535 |   |   | 3,465 |   |   | 136.7 |   |
| Net                  interest income after provision for loan losses        |   | $                                                   | 53,891  |       |   | 72,528 |   |   | (18,637 | ) |   | (25.7) | % |

|   | · | The                average student loan portfolio increased $1.1 billion, or 4.4%, for                the                three months ended June 30, 2008 compared to the same period in 2007.                The                increase in average loans was offset by a decrease in the yield earned                on                student loans. Loan interest income decreased $142.1 million as a                result                of these factors. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Investment                income decreased as a result of an overall decrease in average cash                held                in 2008 as compared to 2007, as well as lower interest                rates. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

|   | · | 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 3.33% for the three months                ended                June 30, 2008 compared to 5.49% for the same period a year ago. This                was                offset by a $0.6 billion, or 2.3%, increase in average debt for the                three                months ended June 30, 2008 compared to the same period in 2007. Interest                expense was impacted in 2008 by credit market disruptions as further                discussed in this Report. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                provision for loan loss increased due to an increase in risk share                as a                result of the elimination of the Exceptional Performer program in                the                third quarter of 2007. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                        |   | **Six months ended June 30,** |    | **Change** |   |
|-----------------------------------------------------------------------------|--------|---------------------------------------------------|---------|------------|--------|
|                                                                        |   | **2008**                                          |    | **2007**   |   | **Dollars** |   | **Percent** |   |
|                                                                        |   |                                              |    |       |   |   |   |   |   |
| Loan                interest                                                |   | $                                                 | 731,747 |       |   | 951,998 |   |   | (220,251 | ) |   | (23.1) | % |
| Consolidation                rebate fees                                    |   |                                              | (97,575 | )          |   | (94,165 | ) |   | (3,410 | ) |   | (3.6 | ) |
| Amortization                of loan premiums and deferred origination costs |   |                                              | (48,245 | )          |   | (43,693 | ) |   | (4,552 | ) |   | (10.4 | ) |
| Total                loan interest                                          |   |                                              | 585,927 |       |   | 814,140 |   |   | (228,213 | ) |   | (28.0 | ) |
| Investment                interest                                          |   |                                              | 16,724  |       |   | 33,754 |   |   | (17,030 | ) |   | (50.5 | ) |
| Total                interest income                                        |   |                                              | 602,651 |       |   | 847,894 |   |   | (245,243 | ) |   | (28.9 | ) |
| Interest                on bonds and notes payable                          |   |                                              | 537,777 |       |   | 696,795 |   |   | (159,018 | ) |   | (22.8 | ) |
| Intercompany                interest                                        |   |                                              | 640     |       |   | 3,204 |   |   | (2,564 | ) |   | (80.0 | ) |
| Provision                for loan losses                                    |   |                                              | 11,000  |       |   | 5,288 |   |   | 5,712 |   |   | 108.0 |   |
| Net                interest income after provision for loan losses          |   | $                                                 | 53,234  |       |   | 142,607 |   |   | (89,373 | ) |   | (62.7) | % |

|   | · | The                average student loan portfolio increased $2.0 billion,                or 8.4%, for the six months ended June 30, 2008 compared to the same                period in 2007. The increase in average loans was offset by a decrease                in                the yield earned on student loans. Loan interest income decreased                $220.3                million                as a result of these factors. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Consolidation                rebate fees increased due to the $0.8 billion,                or 4.6%, increase in the average consolidation loan                portfolio. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                amortization of loan premiums and deferred origination costs increased                $4.6 million                as a result of an increase in the average student loan                portfolio. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Investment                income decreased as a result of an overall decrease in average cash                held                in 2008 as compared to 2007, as well as lower interest                rates. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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 3.96% for the six months                ended                June 30, 2008 compared to 5.48% for the same period a year ago. This                was                offset by a $1.5 billion, or 5.9%, increase in average debt for the                six                months ended June 30, 2008 compared to the same period in 2007. Interest                expense was impacted in 2008 by credit market disruptions as further                discussed in this Report. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                provision for loan loss increased due to an increase in risk share                as a                result of the elimination of the Exceptional Performer program in                the                third quarter of 2007. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Other      fee-based income*

*Gain      (loss) on sale of loans*

*Operating      expenses*
*.      *

----

*Table          of Contents*

**LIQUIDITY      AND CAPITAL RESOURCES **

|                                                           |   | **As of June 30, 2008** |       |
|----------------------------------------------------------------|--------|---------------------------------------------|------------|
|                                                           |   | **Carrying**                                |       | **Interest rate** |   |   |   |
|                                                           |   | **amount**                                  |       | **range** |   | **Final maturity** |   |
|                                                           |   |                                        |       |   |   |   |   |
| Variable-rate                bonds and notes (a):              |   |                                        |       |   |   |   |   |   |   |   |
| Bonds                and notes based on indices                |   | $                                           | 21,339,035 |   |   | 2.65%                - 4.97% |   |   | 09/25/13                - 06/25/41 |   |
| Bonds                and notes based on auction or remarketing |   |                                        | 2,841,245  |   |   | 0.67%                - 7.00% |   |   | 11/01/09                - 07/01/43 |   |
| Total                variable-rate bonds and notes             |   |                                        | 24,180,280 |   |   |   |   |   |   |   |
|                                                           |   |                                        |       |   |   |   |   |   |   |   |
| Commercial                paper - FFELP facility (b)           |   |                                        | 1,986,212  |   |   | 2.08%                - 2.91% |   |   | 05/09/10 |   |
| Commercial                paper - private loan facility (b)    |   |                                        | 159,800    |   |   | 3.08% |   |   | 03/14/09 |   |
| Fixed-rate                bonds and notes (a)                  |   |                                        | 207,376    |   |   | 5.30%                - 6.68% |   |   | 11/01/09                - 05/01/29 |   |
| Unsecured                fixed rate debt                       |   |                                        | 475,000    |   |   | 5.13%                and 7.40% |   |   | 06/01/10                and 09/15/61 |   |
| Unsecured                line of credit                        |   |                                        | 450,000    |   |   | 2.90% |   |   | 05/08/12 |   |
| Other                borrowings                                |   |                                        | 71,569     |   |   | 3.19%                - 5.10% |   |   | 05/22/09                - 11/01/15 |   |
|                                                           |   | $                                           | 27,530,237 |   |   |   |   |   |   |   |

***Secured      Financing Transactions***

*Loan      warehouse facilities*

----

*Table          of Contents*

*Accounting      for Transfers and Servicing of Financial Assets and Extinguishments of      Liabilities *

*Asset-backed      securitizations*

----

*Table          of Contents*

***Operating      Lines of Credit***

----

*Table          of Contents*

|   | (i) | A                minimum consolidated net worth; |
|--------|-----|--------------------------------------------------|

|   | (ii) | A                minimum adjusted EBITDA to corporate debt interest (over the last                four                rolling quarters); |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | A                limitation on subsidiary indebtedness;                and |
|--------|-------|----------------------------------------------------------------------------|

|   | (iv) | A                limitation on the percentage of non-guaranteed loans in the Company’s                portfolio. |
|--------|------|------------------------------------------------------------------------------------------------------------------------|

***Universal      Shelf Offerings***

----

*Table          of Contents*

***Sources      of Liquidity***

| Sources                of primary liquidity: (a)   |   |   |    |   |
|----------------------------------------------------|--------|--------|---------|--------|
| Cash                and cash equivalents (b)       |   | $      | 138,454 |   |
| Unencumbered                student loan assets    |   |   | 6,858   |   |
| Unused                unsecured line of credit (c) |   |   | 300,000 |   |
|                                               |   |   |    |   |
| Total                sources of primary liquidity  |   | $      | 445,312 |   |

|   | (a) | The                sources of primary liquidity table above does not include the following                items: |
|--------|-----|------------------------------------------------------------------------------------------------------------------|

|   | · | FFELP                warehouse facility                -                On July 31, 2008, the Company did not renew the liquidity provisions                of                this facility. Accordingly, on July 31, 2008, the facility became                a term                facility with a final maturity date of May 9, 2010. No new student                loan                originations can be funded under this                program. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Private                loan warehouse facility                -                As of June 30, 2008, the Company has $90.2 million                of capacity on this facility. However, in January 2008, the Company                suspended originating private loans. As such, the capacity on this                facility is not included in the above table. The Company’s private loan                warehouse facility expires on March 14, 2009. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Extendible                commercial paper warehouse program                -                The Company has $5.0 billion                authorized for future issuance under this facility. As a result of                the                disruption of the credit markets, there is no market for the issuance                of                notes under this facility. Management believes it is unlikely a market                will exist in the future. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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 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  June 30, 2008 and August 8, 2008, approximately                $228.7 million and $56.4 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.                The Company does not include this participation agreement in the                table                above because the Company is limited to the amount they can participate                under this facility by the amount of investments in the grantor                trusts. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Department                of Education’s Loan Participation Program                -                On July 1, 2008, pursuant to HR 5715, the Department of Education                announced terms under which it will offer to purchase FFELP student                loans                and loan participations from FFELP lenders. Under the Participation                Program, the Department will provide interim short-term liquidity                to FFELP                lenders by purchasing participation interest in pools of FFELP loans.                FFELP lenders will be charged a rate of commercial paper plus 50                basis                points on the principal amount of participation interests outstanding.                Loans funded under the Participation Program must be either refinanced                by                the lender or sold to the Department prior to its expiration on September                30, 2009. To be eligible for purchase or participation under the                Department’s program, loans must be 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. The Company is in the process                of                completing and filing all relevant documents to participate in the                Department’s program and expects to utilize the Participation Program to                fund a significant portion of its loan originations for the 2008-2009                academic year. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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) | As                of August 8, 2008, the unused unsecured line of credit was                $300.0                million. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

***Contractual      Obligations***

|                                       |   | **Total** |       | **Less than****1 year** |   | **1 to 3 years** |   | **3 to 5 years** |    | **More than****5 years** |   |
|--------------------------------------------|--------|-----------|------------|-----------------------------------|--------|---------------------------------|--------|---------------------------------|---------|------------------------------------|--------|
|                                       |   |      |       |                              |   |                            |   |                            |    |                               |   |
| Bonds                and notes payable     |   | $         | 27,530,237 |                              |   | 2,227,217                       |   |                            | 390,173 |                               |   | 513,847 |   |   | 24,399,000 |   |
| Operating                lease obligations |   |      | 41,571     |                              |   | 9,032                           |   |                            | 16,201  |                               |   | 11,449 |   |   | 4,889 |   |
| Other                                      |   |      | 7,675      |                              |   | 7,355                           |   |                            | 320     |                               |   | — |   |   | — |   |
| Total                                      |   | $         | 27,579,483 |                              |   | 2,243,604                       |   |                            | 406,694 |                               |   | 525,296 |   |   | 24,403,889 |   |

** **

|   | · | 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 subsequent 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 June 30, 2008 of                $11.23                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. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 5280                Solutions, Inc. – 258,760 shares of Class A Common Stock issued as                part of the original purchase price is subject to a put option arrangement                whereby during the 30-day period ending November 30, 2008, the holders may                require the Company to repurchase all or part of the shares at a                price of                $37.10 per share. The value of this put option as of June 30, 2008                was                $6.7 million                and is included in “other” in the above                table. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Dividends**

----

*Table          of Contents*

**CRITICAL      ACCOUNTING POLICIES**

***Allowance      for Loan Losses***

***Revenue      Recognition***

*Student      Loan Income *
*Accounting      for Non-Refundable Fees and Costs Associated with Originating or Acquiring      Loans      and Initial Direct Costs of Leases*

*Other      Fee-Based Income *

----

*Table          of Contents*

***Purchase      Price Accounting Related to Business and Certain Asset      Acquisitions***

***Goodwill      and Intangible Assets - Impairment Assessments***

*Goodwill      and Other Intangible Assets*

*Accounting      for the Impairment or Disposal of Long-Lived Assets*

***Income      Taxes***

----

*Table          of Contents*

**RECENT      ACCOUNTING PRONOUNCEMENTS**

*Business      Combinations*

*Fair      Value Measurements*

*The      Fair Value Option for Financial Assets and Financial Liabilities *
*      Including an amendment of FASB Statement No. 115 *

*Noncontrolling      Interests in Consolidated Financial Statements, an amendment of ARB No. 51*

*Disclosures      about Derivative Instruments and Hedging Activities*

*The      Hierarchy of Generally Accepted Accounting Principles*
*The      Meaning of Present Fairly in Conformity with Generally Accepted Accounting      Principles*

----

*Table          of Contents*

*Accounting      for Collaborative Arrangements*
*Reporting      Revenue Gross as a Principal Versus Net as an Agent*

*Determination      of the Useful Life of Intangible Assets*
*Goodwill      and Other Intangible Assets *

**ITEM      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

**Interest      Rate Risk**

|                                          |   | **As of June 30, 2008** |       | **As of December 31, 2007** |   |
|-----------------------------------------------|--------|---------------------------------------------|------------|-------------------------------------------------|--------|
|                                          |   | **Dollars**                                 |       | **Percent**                                     |   | **Dollars** |   | **Percent** |   |
| Fixed-rate                loan assets         |   | $                                           | 2,391,089  |                                            |   | 9.3 | % | $ | 1,136,544 |   |   | 4.3 | % |
| Variable-rate                loan assets      |   |                                        | 23,221,037 |                                            |   | 90.7 |   |   | 25,192,669 |   |   | 95.7 |   |
| Total                                         |   | $                                           | 25,612,126 |                                            |   | 100.0 | % | $ | 26,329,213 |   |   | 100.0 | % |
|                                          |   |                                        |       |                                            |   |   |   |   |   |   |   |   |   |
| Fixed-rate                debt instruments    |   |                                        | 682,376    |                                            |   | 2.5 | % |   | 689,476 |   |   | 2.5 | % |
| Variable-rate                debt instruments |   |                                        | 26,847,861 |                                            |   | 97.5 |   |   | 27,426,353 |   |   | 97.5 |   |
| Total                                         |   | $                                           | 27,530,237 |                                            |   | 100.0 | % | $ | 28,115,829 |   |   | 100.0 | % |

----

*Table          of Contents*

|                       |   | **Borrower/**          |   | **Estimated**     |   | **Balance of**                     |   |
|----------------------------|--------|------------------------|--------|-------------------|--------|-----------------------------------------|--------|
| **Fixed**                  |   | **lender**             |   | **variable**      |   | **assets earning fixed-rate** |   |
| **interest **         |   | **weighted**           |   | **conversion**    |   | **floor income as of**   |   |
| **rate range**        |   | **average yield** |   | **rate (a)** |   | **June 30, 2008 (b)**    |   |
|                       |   |                   |   |              |   |                                    |   |
| 4.5                - 4.99% |   |                   | 4.88   | %                 |   | 2.24                                    | %      | $ | 942 |   |
| 5.0                - 5.49% |   |                   | 5.09   | %                 |   | 2.45                                    | %      |   | 1,046 |   |
| 5.5                - 5.99% |   |                   | 5.67   | %                 |   | 3.03                                    | %      |   | 355,270 |   |
| 6.0                - 6.49% |   |                   | 6.19   | %                 |   | 3.55                                    | %      |   | 425,480 |   |
| 6.5                - 6.99% |   |                   | 6.70   | %                 |   | 4.06                                    | %      |   | 381,260 |   |
| 7.0                - 7.49% |   |                   | 7.17   | %                 |   | 4.53                                    | %      |   | 132,967 |   |
| 7.5                - 7.99% |   |                   | 7.71   | %                 |   | 5.07                                    | %      |   | 229,591 |   |
| 8.0                - 8.99% |   |                   | 8.16   | %                 |   | 5.52                                    | %      |   | 532,306 |   |
| >                9.0%   |   |                   | 9.04   | %                 |   | 6.40                                    | %      |   | 332,227 |   |
|                       |   |                   |   |              |   |                                    |   | $ | 2,391,089 |   |

|  | (a) | The                estimated variable conversion rate is the estimated short-term interest                rate at which loans would convert to variable rate. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (b) | As                of June 30, 2008, the Company had $206.7 million                of                fixed rate debt that was used by the Company to hedge fixed-rate                student                loan assets. The weighted average interest rate paid by the Company                on                this debt as of June 30, 2008 was 6.17%. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

|         |   |         |      | **Weighted**                  |   |
|--------------|--------|--------------|-----------|-------------------------------|--------|
|         |   |         |      | **average fixed**        |   |
|         |   | **Notional** |      | **rate paid by**    |   |
| **Maturity** |   | **Amount**   |      | **the Company (a)** |   |
|         |   |         |      |                          |   |
| 2009         |   | $            | 500,000   |                          |   | 4.08 | % |
| 2010         |   |         | 700,000   |                          |   | 3.44 |   |
| 2011         |   |         | 500,000   | (b)                      |   | 3.57 |   |
| 2012         |   |         | 250,000   | (c)                           |   | 3.86 |   |
|         |   | $            | 1,950,000 |                          |   | 3.69 | % |

|  | (a) | For                all interest rate derivatives for which the Company pays a fixed                rate, the                Company receives discrete three-month                LIBOR. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (b) | $250.0                million notional amount of derivatives have an effective start date                in the                first quarter of 2010. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (c) | Derivatives                have an effective start date in the first quarter                2009. |
|--|-----|---------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

| **Index (e)**                                        |   | **Frequency of****Variable Resets** |      | **Assets** |   | **Debt****outstanding****that funded****student loan****assets (a)** |   |
|-----------------------------------------------------------|--------|-----------------------------------------------|-----------|------------|--------|-------------------------------------------------------------------------------------|--------|
|                                                      |   |                                          |      |       |   |                                                                                |   |
| 3                month H15 financial commercial paper (b) |   |                                          | Daily     |       | $      | 23,962,096                                                                          |   |   | — |   |
| 3                month Treasury bill                      |   |                                          | Varies    |       |   | 1,370,077                                                                           |   |   | — |   |
| Private                student loans                      |   |                                          |      |       |   | 279,953                                                                             |   |   | — |   |
| 3                month LIBOR (c)                          |   |                                          | Quarterly |       |   | —                                                                             |   |   | 21,339,035 |   |
| Auction-rate                or remarketing                |   |                                          | Varies    |       |   | —                                                                             |   |   | 2,841,245 |   |
| Asset-backed                commercial paper              |   |                                          | Varies    |       |   | —                                                                             |   |   | 2,146,012 |   |
| Fixed                rate                                 |   |                                          |      |       |   | —                                                                             |   |   | 207,376 |   |
| Other                (d)                                  |   |                                          |      |       |   | 921,542                                                                             |   |   | — |   |
|                                                      |   |                                          |      |       | $      | 26,533,668                                                                          |   |   | 26,533,668 |   |

|   | (a) | During                2007, the Company 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 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 June 30, 2008: |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|         |   | **Notional Amount**                                         |      |
|--------------|--------|------------------------------------------------------------------|-----------|
| **Maturity** |   | **Effective date in second****quarter 2007** |      | **Effective date in third****quarter 2007** |   | **Effective date in second****quarter 2008** |   | **Effective date in third****quarter 2008** |   | **Total** |   |
|         |   |                                                             |      |   |   |   |   |   |   |   |   |
| 2008         |   | **$**                                                            | 1,000,000 |   |   | 2,000,000 |   |   | — |   |   | — |   |   | 3,000,000 |   |
| 2009         |   |                                                             | 2,000,000 |   |   | 4,000,000 |   |   | — |   |   | 3,000,000 |   |   | 9,000,000 |   |
| 2010         |   |                                                             | 500,000   |   |   | 2,000,000 |   |   | 2,000,000 |   |   | 1,000,000 |   |   | 5,500,000 |   |
| 2011         |   |                                                             | —   |   |   | 2,700,000 |   |   | — |   |   | — |   |   | 2,700,000 |   |
| 2012         |   |                                                             | —   |   |   | 1,000,000 |   |   | 800,000 |   |   | 1,600,000 |   |   | 3,400,000 |   |
|         |   |                                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         |   | **$**                                                            | 3,500,000 |   |   | 11,700,000 |   |   | 2,800,000 |   |   | 5,600,000 |   |   | 23,600,000 |   |

|   | (b) | The                Company’s FFELP student loans earn interest based on the daily average H15                financial commercial paper calculated on a 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) | Assets                include restricted cash and investments, pre-funding on certain debt                transactions, and other assets. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | 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. As shown below, 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. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

***Financial      Statement Impact of Derivative Instruments***

|                                                |   | **Three months ended June 30,** |    | **Six months ended June 30,** |   |
|-----------------------------------------------------|--------|-----------------------------------------------------|---------|---------------------------------------------------|--------|
|                                                |   | **2008**                                            |    | **2007**                                          |   | **2008** |   | **2007** |   |
|                                                |   |                                                |    |                                              |   |   |   |   |   |
| Interest                rate swaps - loan portfolio |   | $                                                   | (7,842  | )                                                 |   | 1,977 |   |   | (11,019 | ) |   | 4,872 |   |
| Basis                swaps - loan portfolio         |   |                                                | 5,148   |                                              |   | — |   |   | 45,605 |   |   | — |   |
| Interest                rate swaps - other (a)      |   |                                                | — |                                              |   | 5,657 |   |   | — |   |   | 10,321 |   |
| Cross-currency                interest rate swaps   |   |                                                | 7,131   |                                              |   | (2,438 | ) |   | 10,614 |   |   | (5,757 | ) |
|                                                |   |                                                |    |                                              |   |   |   |   |   |   |   |   |   |
| Derivative                settlements received, net |   | $                                                   | 4,437   |                                              |   | 5,196 |   |   | 45,200 |   |   | 9,436 |   |

|   | (a) | During                the fourth quarter 2006, in consideration of not receiving 9.5% special                allowance payments on a prospective basis, the Company entered into                a                series of off-setting interest rate swaps that mirrored the $2.45                billion                in pre-existing interest rate swaps that the Company had utilized                to hedge                its loan portfolio receiving 9.5% special allowance payments against                increases in interest rates. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

***Sensitivity      Analysis***

|                                                                                                                |   | **Three months ended June 30, 2008**            |   |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                                                                                |   | **Change from decrease of 100****basis points** |   | **Change from increase of 100****basis points** |   | **Change from increase of 200****basis points** |   |
|                                                                                                                |   |                                                                     |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                |   | **Dollar**                                                               |   | **Percent** |   | **Dollar** |   | **Percent** |   | **Dollar** |   | **Percent** |   |
|                                                                                                                |   | (dollars in thousands)                                         |   |
| Effect                  on earnings:                                                                                |   |                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase                  (decrease) in pre-tax net income before impact of derivative                  settlements |   | $                                                                        | 10,566 |   |   | 17.1 | % |   | (10,566 | ) |   | (17.1) | % |   | (21,132 | ) |   | (34.1) | % |
| Impact                  of derivative settlements                                                                   |   |                                                                     | (8,492 | ) |   | (13.7 | ) |   | 8,492 |   |   | 13.7 |   |   | 16,984 |   |   | 27.4 |   |
| Increase                  (decrease) in net income before taxes                                                     |   | $                                                                        | 2,074  |   |   | 3.4 | % |   | (2,074 | ) |   | (3.4) | % |   | (4,148 | ) |   | (6.7) | % |
| Increase                  (decrease) in basic and diluted earning per share                                         |   | $                                                                        | 0.03   |   |   |   |   |   | (0.03 | ) |   |   |   |   | (0.06 | ) |   |   |   |

|                                                                                                     |   | **Three months ended June 30, 2007**            |   |
|----------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                                                                     |   | **Change from decrease of 100****basis points** |   | **Change from increase of 100****basis points** |   | **Change from increase of 200****basis points** |   |
|                                                                                                     |   |                                                                     |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                     |   | **Dollar**                                                               |   | **Percent** |   | **Dollar** |   | **Percent** |   | **Dollar** |   | **Percent** |   |
|                                                                                                     |   | (dollars in thousands)                                         |   |
| Effect on earnings:                                                                            |   |                                                                     |
| Increase                  in pre-tax net income before impact of derivative                  settlements |   | $                                                                        | 6,519  |   |   | 21.1 | % |   | 535 |   |   | 1.7 | % |   | 2,192 |   |   | 7.1 | % |
| Impact                  of derivative settlements                                                        |   |                                                                     | (1,932 | ) |   | (6.3 | ) |   | 1,932 |   |   | 6.3 |   |   | 3,864 |   |   | 12.5 |   |
| Increase                  in net income before taxes                                                     |   | $                                                                        | 4,587  |   |   | 14.8 | % |   | 2,467 |   |   | 8.0 | % |   | 6,056 |   |   | 19.6 | % |
| Increase                  in basic and diluted earning per share                                         |   | $                                                                        | 0.06   |   |   |   |   |   | 0.03 |   |   |   |   |   | 0.07 |   |   |   |   |

|                                                                                                                |   | **Six months ended June 30, 2008**              |    |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|---------|
|                                                                                                                |   | **Change from decrease of 100****basis points** |    | **Change from increase of 100****basis points** |   | **Change from increase of 200****basis points** |   |
|                                                                                                                |   |                                                                     |    |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                |   | **Dollar**                                                               |    | **Percent** |   | **Dollar** |   | **Percent** |   | **Dollar** |   | **Percent** |   |
|                                                                                                                |   | (dollars in thousands)                                         |    |
| Effect on earnings:                                                                                       |   |                                                                     |
| Increase                  (decrease) in pre-tax net income before impact of derivative                  settlements |   | $                                                                        | 22,151  |   |   | 56.4 | % |   | (22,151 | ) |   | (56.4) | % |   | (42,560 | ) |   | (108.4) | % |
| Impact                  of derivative settlements                                                                   |   |                                                                     | (14,785 | ) |   | (37.6 | ) |   | 14,785 |   |   | 37.6 |   |   | 29,570 |   |   | 75.3 |   |
| Increase                  (decrease) in net income before taxes                                                     |   | $                                                                        | 7,366   |   |   | 18.8 | % |   | (7,366 | ) |   | (18.8) | % |   | (12,990 | ) |   | (33.1) | % |
| Increase                  (decrease) in basic and diluted earning per share                                         |   | $                                                                        | 0.10    |   |   |   |   |   | (0.10 | ) |   |   |   |   | (0.18 | ) |   |   |   |

|                                                                                                     |   | **Six months ended June 30, 2007**              |   |
|----------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                                                                     |   | **Change from decrease of 100****basis points** |   | **Change from increase of 100****basis points** |   | **Change from increase of 200****basis points** |   |
|                                                                                                     |   |                                                                     |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                     |   | **Dollar**                                                               |   | **Percent** |   | **Dollar** |   | **Percent** |   | **Dollar** |   | **Percent** |   |
|                                                                                                     |   | (dollars in thousands)                                         |   |
| Effect                  on earnings:                                                                     |   |                                                                     |
| Increase                  in pre-tax net income before impact of derivative                  settlements |   | $                                                                        | 10,733 |   |   | 19.7 | % |   | 3,558 |   |   | 6.5 | % |   | 9,357 |   |   | 17.1 | % |
| Impact                  of derivative settlements                                                        |   |                                                                     | (3,843 | ) |   | (7.1 | ) |   | 3,843 |   |   | 7.1 |   |   | 7,686 |   |   | 14.1 |   |
| Increase                  in net income before taxes                                                     |   | $                                                                        | 6,890  |   |   | 12.6 | % |   | 7,401 |   |   | 13.6 | % |   | 17,043 |   |   | 31.2 | % |
| Increase                  in basic and diluted earning per share                                         |   | $                                                                        | 0.08   |   |   |   |   |   | 0.09 |   |   |   |   |   | 0.21 |   |   |   |   |

**Foreign      Currency Exchange Risk**

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*Table          of Contents*

**ITEM      4. CONTROLS AND PROCEDURES**

**Disclosure      Controls and Procedures**

**Changes      in Internal Control over Financial Reporting**

**PART      II. OTHER INFORMATION**

**ITEM      1. LEGAL PROCEEDINGS**

**General      **

**Municipal      Derivative Bid Practices Investigation**

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*Table          of Contents*

*Hinds      County, Mississippi v. Wachovia Bank, N.A. et al.*

**Industry      Investigations**

**Department      of Education Review**

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*Table          of Contents*

**Department      of Justice **

**ITEM      1A. RISK FACTORS**

***The        Company faces liquidity risks associated with financing student loan        originations and acquisitions.***

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*Table                of Contents*

**ITEM      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF      PROCEEDS**

***Stock      Repurchases***

|                                    |   |                   |   |                |   | **Total number of**          |   | **Maximum number**               |   |
|-----------------------------------------|--------|------------------------|--------|---------------------|--------|----------------------------------------|--------|---------------------------------------|--------|
|                                    |   |                   |   |                |   | **shares purchased**              |   | **of shares that may** |   |
|                                    |   | **Total number**  |   | **Average**         |   | **as part of publicly** |   | **yet be purchased**        |   |
|                                    |   | **of shares**     |   | **price paid** |   | **announced plans**               |   | **under the plans**         |   |
| **Period**                              |   | **purchased (1)** |   | **per share**  |   | **or programs (2) (3)** |   | **or programs (4)**         |   |
|                                    |   |                   |   |                |   |                                   |   |                                  |   |
| April                1 - April 30, 2008 |   |                   | 11,358 |                | $      | 12.81                                  |   |                                  | 11,358 |   |   | 7,478,139 |   |
| May                1 - May 31, 2008     |   |                   | 1,162  |                |   | 13.83                                  |   |                                  | 1,162  |   |   | 7,390,551 |   |
| June                1 - June 30, 2008   |   |                   | 1,474  |                |   | 11.99                                  |   |                                  | 1,474  |   |   | 7,871,390 |   |
| Total                                   |   |                   | 13,994 |                | $      | 12.80                                  |   |                                  | 13,994 |   |   |   |   |

|   | (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 April, May, or June 2008. Shares of Class A common                stock                purchased pursuant to the 2006 Plan included (i) 3,388 shares, 1,162                shares, and 1,474 shares in April, May, and June, 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, and (ii) 7,970 shares purchased in April                2008 from                employees upon cancellation of loans associated with shares originally                acquired pursuant to the 2006 ESLP. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

|   | (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. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **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 ESLP** |   |
|------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| April 30, 2008     |   |                                                                                                                                    | 4,628,256 |                                                                                                                                                 |   | 36,450,000                                                                                                                                      |   |                                                                                                                                                           | 12.79  |                                                                                                                                                                               |   | 2,849,883 |   |   | 7,478,139 |   |
| May                31, 2008  |   |                                                                                                                                    | 4,627,094 |                                                                                                                                                 |   | 36,450,000                                                                                                                                      |   |                                                                                                                                                           | 13.19  |                                                                                                                                                                               |   | 2,763,457 |   |   | 7,390,551 |   |
| June                30, 2008 |   |                                                                                                                                    | 4,625,620 |                                                                                                                                                 |   | 36,450,000                                                                                                                                      |   |                                                                                                                                                           | 11.23  |                                                                                                                                                                               |   | 3,245,770 |   |   | 7,871,390 |   |

***Working      capital and dividend restrictions/limitations***

|   | · | 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;                or |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*pari      passu*

|   | · | 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;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | purchase                common stock for issuance pursuant to any employee benefit                plans. |
|--------|--------|----------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

**ITEM      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY      HOLDERS**

|   | 1. | To                elect nine directors to serve on the Company’s Board of Directors for                one-year terms or until their successors are elected and qualified.                All                directors seeking election were in attendance at the annual meeting. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                  |   | **Number of Shares** |        |
|---------------------------------------|--------|--------------------------------|-------------|
|                                  |   | **Votes For**             |        | **Votes Against** |   | **Abstain** |   |
| James P. Abel               |   |                           | 149,084,383 |   |   | 1,000,456 |   |   | 107,672 |   |
| Stephen                F. Butterfield |   |                           | 149,907,990 |   |   | 186,362 |   |   | 98,158 |   |
| Michael                S. Dunlap      |   |                           | 149,157,652 |   |   | 936,646 |   |   | 98,213 |   |
| Kathleen                A. Farrell    |   |                           | 149,150,104 |   |   | 935,965 |   |   | 106,442 |   |
| Thomas                E. Henning      |   |                           | 149,158,969 |   |   | 925,302 |   |   | 108,240 |   |
| Brian                J. O'Connor      |   |                           | 149,155,801 |   |   | 928,320 |   |   | 108,390 |   |
| Kimberly                K. Rath       |   |                           | 149,156,683 |   |   | 927,092 |   |   | 108,736 |   |
| Michael                D. Reardon     |   |                           | 149,881,696 |   |   | 202,574 |   |   | 108,240 |   |
| James                H. Van Horn      |   |                           | 149,965,815 |   |   | 120,736 |   |   | 105,960 |   |

|  | 2. | To ratify                  the appointment of KPMG LLP as independent auditors for                  2008. |
|--|----|----------------------------------------------------------------------------------------------------------------|

| **Number of Shares** |   |
|--------------------------------|--------|
| **Votes For**             |   | **Votes Against** |   | **Abstain** |   |
| 149,965,815                    |   |   | 120,736 |   |   | 105,960 |   |

|   | 3. | To                approve an amendment to the Directors Stock Compensation Plan to                increase                the authorized number of shares of Class A common stock that may                be issued                under the plan from a total of 100,000 shares to a total of 400,000                shares. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Number of Shares** |   |
|--------------------------------|--------|
| **Votes For**             |   | **Votes Against** |   | **Abstain** |   |
| 145,532,849                    |   |   | 1,073,119 |   |   | 111,764 |   |

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*Table          of Contents*

**ITEM      6. EXHIBITS**

|   | 4.1                          | Indenture                of Trust by and between Nelnet Student Loan Trust 2008-2 and Zions                First                National Bank, dated as of April 1, 2008, filed as Exhibit 4.1 to                Nelnet                Student Loan Trust 2008-2’s Current Report on Form 8-K filed on April 9,                2008 and incorporated herein by reference.   |
|--------|------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                         |                                                                                                                                                                                                                                                                                                                                                                              |
|   | 4.2                          | Indenture                of Trust by and between Nelnet Student Loan Trust 2008-3 and Zions                First                National Bank, dated as of April 15, 2008, filed as Exhibit 4.1 to                Nelnet                Student Loan Trust 2008-3’s Current Report on Form 8-K filed on April 30,                2008 and incorporated herein by reference. |
|   |                         |                                                                                                                                                                                                                                                                                                                                                                              |
|   | 4.3                          | Indenture                of Trust by and between Nelnet Student Loan Trust 2008-4 and Zions                First                National Bank, dated as of May 1, 2008, filed as Exhibit 4.1 to Nelnet                Student Loan Trust 2008-4’s Current Report on Form 8-K filed on May 23,                2008 and incorporated herein by reference.                     |
|   |                         |                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.1+                        | Nelnet,                Inc. Directors Stock Compensation Plan, as amended through April                18, 2008,                filed as Exhibit 99.1 to Nelnet, Inc.’s Registration Statement on Form S-8                filed on June 27, 2008 and incorporated herein by                reference.                                                                       |
|   |                         |                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.2*                        | Seventh                Amendment of Amended and Restated Participation Agreement, dated                as of                July 1, 2008 by and between Union Bank and Trust Company and Nelnet,                Inc.                (f/k/a/ NELnet, Inc.) (subsequently renamed National Education Loan                Network, Inc.).                                            |
|   |                         |                                                                                                                                                                                                                                                                                                                                                                              |
|   | 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.                                                                                                                                                                                                              |

***      **

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*Table          of Contents*

**SIGNATURES**

|                                 | NELNET,                INC. |
|--------------------------------------|-----------------------------|
|                                 |                        |   |
| Date:                August 11, 2008 | By:                         | /s/                MICHAEL S. DUNLAP |
|                                 | Name:                       | Michael                S. Dunlap |
|                                 | Title:                      | Chairman                and Chief Executive Officer |
|                                 |                        |   |
|                                 | By:                         | /s/                TERRY J. HEIMES |
|                                 | Name:                       | Terry                J. Heimes |
|                                 | Title:                      | Chief                Financial Officer |

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