ERNST & YOUNG (Letterhead)

                   Independent Auditor's Report on Compliance
                          SMS Student Loan Trust 1999-B


USA Group Secondary Market Services, Inc.
30 South Meridian Street
Indianapolis, Indiana  46204-3503

         and
HSBC Bank USA
140 Broadway
12th Floor
New York, New York  10005

         and
The First National Bank of Chicago
153 West 51st Street, 8th Floor
New York, New York  10019

         and
Merrill Lynch Derivative Products AG
Stauffacherstrasse 5, 1st Floor
8004 Zurich
Switzerland



     We are independent  public  accountants with respect to USA Group Secondary
Market  Services,  Inc.  ("SMS") within the meaning of the Code of  Professional
Ethics of the American Institute of Certified Public Accountants.

     We have audited,  in accordance with generally accepted auditing standards,
the  consolidated  balance sheet of SMS and  subsidiary as of September 30, 1999
and the related consolidated statements of income, shareholder's equity and cash
flows for the year then ended, and have issued our report thereon dated November
24, 1999.

     In connection with our audit,  nothing came to our attention that caused us
to believe that SMS failed to comply with the terms, covenants,  provisions,  or
conditions of Sections 2(a) through (g) of the  Administration  Agreement  ("the
Agreement")  dated April 19, 1999 between SMS, as  administrator,  and HSBC Bank
USA ("the  Trustee"),  as  indenture  trustee on behalf of the  noteholders  and
certificateholders  of SMS Student  Loan Trust 1999-B  ("the  Issuer"),  for the
period  April 19, 1999  through  September  30,  1999  insofar as they relate to
accounting  matters.  However,  our  audit  was not  directed  primarily  toward
obtaining knowledge of such  noncompliance.  Further, we make no representations
as to the sufficiency of the foregoing procedures for your purposes.

     We have performed the procedures  enumerated below, which were agreed to by
SMS, the Eligible Lender Trustee,  and the Indenture  Trustee,  solely to assist
you with  respect to SMS's  administration  of the  Student  Loan  Trust  1999-B
receivables  pursuant to sections 2 (c) (i through iii), 2 (d), 2 (e) (i), and 2
(g) of the  Agreement.  This  engagement  to apply  agreed-upon  procedures  was
performed in accordance with standards  established by the American Institute of
Certified  Public  Accountants.  The sufficiency of the procedures is solely the
responsibility  of the specified users of the report.  Consequently,  we make no
representation  regarding the  sufficiency  of the  procedures  described  below
either for the purpose for which this report has been requested or for any other
purpose.

Our procedures and findings were as follows:


     1. We compared  the  initial  deposit to the  reserve  account  required by
section 2 (e) (i) of the Agreement to the respective bank statement, noting such
amount to be in agreement.

     2. We obtained  the  Quarterly  Servicing  Report - SMS Student  Loan Trust
1999-B for the  collection  period  April 19, 1999  through  September  30, 1999
prepared  by SMS  pursuant  to  section  2 (d)  and 2 (g) of the  Agreement  and
performed the following:

                    a. We compared  the April 18, 1999  amounts and  percentages
                    reported in segment I "Deal  Parameters"  (A) through (D) to
                    the  SMS  Student  Loan  Trust  1999-B  prospectus,   noting
                    agreement. We compared the April 18, 1999 amount reported in
                    segment I (E)(ii) to bank statements, noting agreement.

                    b. We compared  the  amounts  reported in segment II "Inputs
                    from Previous Quarterly Servicer Reports" (A) through (O) to
                    the  SMS  Student  Loan  Trust  1999-B  prospectus,   noting
                    agreement. We compared the amount reported in segment II (P)
                    to bank statements, noting agreement.

                    c. We compared  the  "Interest  Period Index Value - 3 Month
                    Libor"  percentage in segment IV "Interest Rate Calculation"
                    to a quoted market rate, noting  agreement.  We compared the
                    amounts  reported  in segment  III  "Inputs  for  Servicing,
                    Administrative  and  Consolidation  Rebate Fees" (D) through
                    (F) and segment IV (D) through (F) and (J) to system reports
                    prepared by USA Group Loan Services, Inc. ("Loan Services"),
                    noting  agreement.  We compared the amount in segment IV (L)
                    to external  verification  of the net swap  payment,  noting
                    agreement.  We  recalculated  the  amounts in segment IV (G)
                    through (I) and "Net Expected Interest  Collections" and the
                    "Adjusted  Student  Loan Rate"  percentage  and compared the
                    resulting  amounts and percentage to those reported,  noting
                    agreement.

                    d. We compared the amounts reported in segments V "Servicing
                    Fee  Calculation" (A) and (D); VI "Cash Inputs" (A) and (B);
                    VII "Other Servicer Inputs" (A)(ii) through (A)(iv), (C)(i),
                    and (C)(ii);  IX "Quarterly Flow of Loan  Principal"  (A)(i)
                    through  (A)(iv),   (B)(ii),  (C)(i),  and  (C)(ii);  and  X
                    "Quarterly Uninsured Loss and Recoveries  Reporting" (A)(ii)
                    and (B) to system reports prepared by Loan Services,  noting
                    agreement.  We compared  the amount in segment  VII(A)(i) to
                    the Student Loan Trust 1999-A prospectus,  noting agreement.
                    We recalculated  the amounts reported in segment V (C), (E),
                    and (F);  segment  VII (A)(v);  segment IX (A)(vi),  B)(iv),
                    (C)(iii), (D), and (E); and segment X (A)(i), (A)(iii), (C),
                    and  (D)  and  compared  the  resulting   amounts  to  those
                    reported, noting agreement.

                    e. We compared the amounts  reported in segment VIII "Inputs
                    from Other  Sources"  (A)  through  (C) to bank  statements,
                    noting  agreement.  We  recalculated  the amount reported in
                    segment VIII (E), (F), (H), and (I) and compared the amounts
                    to those reported, noting agreement.

                    f.  We  recalculated  the  amounts  and  percentages  in the
                    segments  "Summary of Quarterly  Cash  Generation and Usage"
                    (A) through (O);  "Distributions of Cash" (A)(i),  (A)(iii),
                    (B)(i),   (B)(iii),   C(iii),   C(v),   D(i)  and  (D)(iii);
                    "Reconciliation  of Reserve  Account" (A), (B), and (E); and
                    "Reconciliation  of  Collateral  Reinvestment  Account" (A),
                    (B),  and  (D)  through  (I);  and   "Additional   Reporting
                    Requirements" (A), (B), and (D) through (G) and compared the
                    amounts and percentages to that reported, noting agreement.

                    g. We compared the amounts in the  segments  "Reconciliation
                    of Reserve  Account" (E) and  "Reconciliation  of Collateral
                    Reinvestment  Account" (I) to the  reconciliations  of trust
                    accounts  performed  by SMS  pursuant  to  section  2 (c) (i
                    through iii) of the Agreement, noting agreement. We compared
                    the bank balances per the  reconciliations of trust accounts
                    to bank statements, noting agreement.

     We were not  engaged  to,  and did not  perform  an audit of the  Quarterly
Servicing  Report - SMS Student Loan Trust 1999-B,  the objective of which would
be the expression of an opinion on the specified  elements,  accounts,  or items
thereof.  Accordingly,  we do not  express  such an  opinion.  Had we  performed
additional procedures, other matters might have come to our attention that would
have been reported to you.

     For  your  information,  we have  audited,  in  accordance  with  generally
accepted  auditing  standards,  the  statement  of  financial  position  of Loan
Services as of  September  30, 1999 and the related  statements  of revenues and
expenses  and changes in net assets and cash flows for the year then ended,  and
have issued our report  thereon dated  November 18, 1999. At the request of SMS,
however, we did not perform any tests of Loan Services' servicing of the Student
Loan Trust 1999-B receivables,  because a separate single auditor report of Loan
Services'  servicing  systems  has  been  issued.  Had we  performed  additional
procedures  or had we made an  examination  of Loan  Services'  servicing of the
Student Loan Trust 1999-B,  other  matters may have come to our  attention  that
would have been reported to you.

     This report is intended  solely for the use of the  specified  users listed
above and should not be used by those who have not agreed to the  procedures and
taken responsibilities for the sufficiency of the procedures for their purposes.

Ernst & Young LLP /s/

Indianapolis, Indiana
November 24, 1999