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[Ernst & Young Letterhead]

     IV.  Independent  Accountants'  Report on Assertions on Compliance with-and
          Internal  Control  Over  Compliance   with-Specified   Federal  Family
          Education Loan Program Requirements Under Standard Engagement


Board of Directors
USA Education, Inc.

We have examined management's  assertions that USA Group Loan Services, Inc. and
USA  Education,  Inc.  (Loan  Services)  complied  with certain  Federal  Family
Education Loan (FFEL) Program compliance requirements relative to Loan Services'
administration  of the FFEL  Program on behalf of its lender  clients  listed in
Exhibit A of this report during the year ended  September 30, 2000 and about the
effectiveness  of Loan  Services'  internal  control  over  compliance  with the
aforementioned  compliance  requirements  as of  September  30,  2000  that  are
described in the accompanying report titled Servicer Management's  Assertions on
Compliance  with-and  Internal  Control Over Compliance  with-Specified  Federal
Family Education Loan Program  Requirements.  Management is responsible for Loan
Services'  compliance  with-and the  effectiveness  of Loan  Services'  internal
control  over  compliance  with-those  requirements.  Our  responsibility  is to
express an opinion on management's  assertions  about Loan Services'  compliance
with-and the  effectiveness  of Loan Services'  internal control over compliance
with-the specified compliance requirements based on our examination.

Our  examination  was made in accordance  with  Government  Auditing  Standards,
issued by the Comptroller General of the United States; standards established by
the  American  Institute  of Certified  Public  Accountants;  and the 1996 Audit
Guide,  Compliance  Audits  (Attestation  Engagements)  for  Lenders  and Lender
Servicers  Participating in the Federal Family Education Loan Program, issued by
the U.S.  Department  of  Education  (ED),  Office of  Inspector  General,  and,
accordingly,  included  obtaining an  understanding of the internal control over
compliance  with the specified  requirements;  testing and evaluating the design
and operating effectiveness of internal control over compliance;  and examining,
on  a  test  basis,   evidence  about  Loan  Services'   compliance  with  those
requirements and performing such other procedures as we considered  necessary in
the circumstances.  We believe that our examination  provides a reasonable basis
for our opinion.  Our examination does not provide a legal determination on Loan
Services' compliance with specified requirements.

Because of inherent  limitations in any control,  misstatements due to errors or
fraud may occur and not be detected.  Also, projections of any evaluation of the
internal  control over  compliance  with the  specified  requirements  to future
periods  are  subject  to the risk that  controls  over  compliance  may  become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the controls may deteriorate.

In our opinion,  management's  assertions  that Loan Services  complied with the
aforementioned  requirements for the year ended September 30, 2000 and that Loan
Services  maintained   effective  internal  control  over  compliance  with  the
aforementioned  compliance  requirements  as of  September  30,  2000 are fairly
stated, in all material  respects,  based upon the criteria for internal control
described in "Internal Control-Integrated  Framework" issued by the Committee of
Sponsoring Organizations of the Treadway Commission.

This  report is  intended  solely  for the  information  and use of the board of
directors  and  management of Loan Services and the ED and is not intended to be
and should not be used by anyone other than these specified parties.

November 10, 2000