[Ernst & Young Letterhead]

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

Board of Directors
USA Group Loan Services, Inc.

     We have examined management's assertions that USA Group Loan Services, 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, 1999 and about the  effectiveness  of Loan
Service'  internal  control over compliance with the  aforementioned  compliance
requirements  as of September  30, 1999 that are  described in the  accompanying
reported titled "Servicer Management  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  Audit  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 a 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 controls,  errors or irregularities may
occur and not be detected.  Also,  projections of any evaluation of the controls
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, 1999 and that
Loan Services  maintained  effective  internal  control over compliance with the
aforementioned  compliance  requirements  as of  September  30,  1999 are fairly
stated, in all material  respects,  based upon the criteria for internal control
described in the "Internal Control-Integrated Framework" issued by the Committee
of Sponsoring Organizations of the Treadway Commission.

     This  report  is  intended  solely  for the  information  of the  board  of
directors and management of Loan Services and the ED. However,  this report is a
matter of public record and its distribution is not limited.

                                                     Ernst & Young LLP

November 30, 1999