|UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|----------------------------------------------------------------------

|FORM 10-Q
|---------

X    Quarterly Report Pursuant to Section 13 or 15(d)
ofThe Securities Exchange Act of 1934

For the quarterly period ended June 30,
2005

or

    Transition Report Pursuant to Section 13 or 15(d)
ofThe Securities Exchange Act of 1934

For the transition period from    to

Commission File Number: 1-11616

THE STUDENT LOAN CORPORATION(Exact name of registrant as specified in its charter)

|Delaware                                       | 16-1427135                                
|---------------------------------------------- | ------------------------------------------
|(State or other jurisdiction
      of          | (I.R.S. Employer Identification
      No.)
|incorporation or organization)                
|                                              
|750 Washington Blvd.                           | 06901                                     
|Stamford, Connecticut                          | (Zip Code)                                
|(Address of principal executive
      offices)

|(203) 975-6237(Registrant's telephone
number, including area code)
|------------------------------------------------------------------

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

Yes X       No

Indicate by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).

Yes X       No

On July 29, 2005,
there were 20,000,000 shares of The Student Loan Corporation's Common Stock
outstanding.

Available on the World Wide Web at studentloan.com

1

Form 10-Q

|Part I                                                                                                                                                                                                      | Financial Information | Page                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            | Item 1 -              | Consolidated Financial Statements                                                                                                                                                                                                       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            |                       | Consolidated Statement of Income (Unaudited) for the Three- and Six-Month Periods         Ended June 30, 2005 and 2004..................................................................................................................
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            |                       | Consolidated Balance Sheet as of June 30, 2005 (Unaudited)         and December 31, 2004 (Audited)............................................................................................................                          
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            |                       | Consolidated Statement of Cash Flows (Unaudited) for the Six-Month Periods          Ended June 30, 2005 and 2004.................................................................................................................       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            |                       | Consolidated Statement of Changes in Stockholders' Equity (Unaudited) for the          Six-Month Periods Ended June 30, 2005 and 2004.................................................................................                  
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            |                       | Notes to Consolidated Financial Statements (Unaudited)...........................................................................                                                                                                       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            | Item 2 -              | Management's Discussion and Analysis of Financial Condition         and Results of Operations........................................................................................................................                   
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            | Item 3 -              | Quantitative and Qualitative Disclosures About Market Risk..........................................................................                                                                                                    
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            | Item 4 -              | Controls and Procedures...................................................................................................................................                                                                              
|                                                                                                                                                                                                           
|Part II                                                                                                                                                                                                     | Other Information     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            | Item 4 -              | Submission of Matters to a Vote of Security Holders......................................................................................                                                                                               
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            | Item 6 -              | Exhibits.............................................................................................................................................................                                                                   
|                                                                                                                                                                                                           
|Signature.................................................................................................................................................................................................. | 31                   
|                                                                                                                                                                                                           
|Exhibit Index...........................................................................................................................................................................................    | 32                   
|                                                                                                                                                                                                           

2

|PART I   FINANCIAL INFORMATION
|------------------------------
|                              
|                              
|Item 1. Financial Statements  

|                                                                                                                          
|--------------------------------------------------------------------------------------------------------------------------
|                                                                                                                          
|THE STUDENT LOAN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)

|                                                                                                                     | Three months ended      | Six months ended       
|-------------------------------------------------------------------------------------------------------------------- | ----------------------- | -----------------------
|                                                                                                                     | June 30,                | June 30,               
|                                                                                                                     | 2005             2004   | 2005             2004  
|
|Interest income                                                                                                      | $322,406      $218,524  | $605,342      $425,162 
|Interest expense                                                                                                     | 193,356      76,978     | 347,397      152,564   
|Net interest income                                                                                                  | 129,050        141,546  | 257,945        272,598 
|Less: provision for loan losses                                                                                      | (4,799)     (3,061)     | (5,401)      (5,296)   
|Net interest income after provision for loan losses                                                                  | 124,251        138,485  | 252,544        267,302 
|Fee and other income                                                                                                 | 39,079     5,159        | 38,298      19,205     
|Total revenue, net                                                                                                   | 163,330     143,644     | 290,842      286,507   
|                                                                                                                    
|
|Salaries and employee benefits                                                                                       | 11,827            8,466 | 23,240          15,976 
|Other expenses                                                                                                       | 28,446     20,836       | 44,966     42,080      
|Total operating expenses                                                                                             | 40,273     29,302       | 68,206     58,056      
|Income before income taxes and extraordinary item                                                                    | 123,057        114,342  | 222,636        228,451 
|Income taxes                                                                                                         | 47,616     44,676       | 81,059     85,925      
|Income before extraordinary item                                                                                     | 75,441          69,666  | 141,577        142,526 
|Gain on extinguishment of trust, net of taxes of $3,448 for the     three- and six-month periods ended June 30, 2005 | 5,465     -             | 5,465     -            
|                                                                                                                    
|$80,906     $69,666                                                                                                  | $147,042     $142,526  
|                                                                                                                    
|$21,600      $18,000                                                                                                 | $  43,200     $  36,000
|                                                                                                                    
|
|(based on 20 million average shares outstanding)                                                                     |                         |                        
|                                                                                                                    
|Income before extraordinary item                                                                                     | $ 3.78           $ 3.48 | $ 7.08           $ 7.13
|Extraordinary item                                                                                                   | 0.27      -             | 0.27      -            
|$ 4.05      $ 3.48                                                                                                   | $ 7.35      $ 7.13     
|                                                                                                                    
|$ 1.08      $ 0.90                                                                                                   | $ 2.16      $ 1.80     
|                                                                                                                    
|
|Net interest margin                                                                                                  | 1.92%           2.35%   | 1.97%           2.29%  
|Operating expense as a percentage of average managed student    loans                                                | 0.56%           0.49%   | 0.49%           0.49%  
|Return on equity                                                                                                     | 26.78%         27.54%   | 24.91%         29.00%  
|                                                                                                                    
|                                                                                                                    

See accompanying notes to Consolidated Financial Statements.

3

|THE STUDENT LOAN CORPORATION
|----------------------------
|CONSOLIDATED BALANCE SHEET  
|(Dollars in thousands)      
|                            
|                            

|                                                                 | June 30,     | December 31,
|---------------------------------------------------------------- | ------------ | ------------
|                                                                 | 2005         | 2004        
|                                                                 | (Unaudited)  | (Audited)   
|
|Student loans                                                    | $ 24,279,297 | $ 22,958,295
|Less: allowance for loan losses                                  | (4,665)      | (5,046)     
|Student loans, net                                               | 24,274,632   | 22,953,249  
|Loans held for sale                                              | 1,825,673    | 1,930,300   
|Cash                                                             | 523          | 628         
|Other assets                                                     | 699,367      | 568,664     
|                                                                
|$ 26,800,195                                                     | $
25,452,841
|                                                                
|                                                                
|
|Short-term borrowings                                            | $ 11,761,400 | $ 20,986,000
|Long-term borrowings                                             | 13,200,000   | 2,800,000   
|Deferred income taxes                                            | 243,566      | 186,082     
|Other liabilities                                                | 352,164      | 333,852     
|                                                                
|Total
Liabilities                                                | 25,557,130   | 24,305,934  
|                                                                
|Common stock, $0.01 par value;
authorized 50,000,000            
|shares; 20,000,000
shares issued and outstanding                 | 200          | 200         
|Additional paid-in capital                                       | 139,321      | 139,176     
|Retained earnings                                                | 1,103,544    | 999,702     
|Accumulated other changes in equity
from nonowner        sources | -            | 7,829       
|                                                                
|Total Stockholders'
Equity                                       | 1,243,065    | 1,146,907   
|                                                                
|$ 26,800,195                                                     | $ 25,452,841
|                                                                
|                                                                
|$ 26,349,996                                                     | $ 24,558,094
|(year-to-date)                                                  
|                                                                
|$ 28,277,167                                                     | $ 25,175,762
|(year-to-date)                                                  

See accompanying notes to Consolidated Financial Statements.

4

|THE STUDENT LOAN
CORPORATION        
|------------------------------------
|CONSOLIDATED STATEMENT OF CASH FLOWS
|(Dollars in thousands)              
|(Unaudited)                         

|                                                                 | Six months ended
|---------------------------------------------------------------- | ----------------
|                                                                 | June 30,        
|                                                                 | 2005            
|Cash flows from operating activities:                           
|Net income                                                       | $  147,042      
|Adjustments to reconcile net income to                          
|net cash from operating
activities:                             
|Depreciation and amortization of equipment and computer software | 6,644           
|Amortization of servicing asset                                  | 1,816           
|Amortization of deferred loan origination and purchase costs     | 53,214          
|Provision for loan losses                                        | 5,401           
|Deferred tax provision                                           | 62,502          
|Gain on sale of loan assets                                      | (249)           
|Gain on loans securitized from the 2005-1 Trust                  | (47,787)        
|Gain on fair value of retained interest designated as trading    | (1,589)         
|Gain on extinguishment of the 2002 Trust                         | (8,913)         
|Impairment loss on retained interests in securitized assets      | 11,817          
|Impairment loss on servicing assets in securitized assets        | 8,363           
|(Increase) in accrued interest receivable                        | (87,619)        
|(Increase)/decrease in other assets                              | (4,296)         
|Increase/(decrease) in other liabilities                         | 15,882          
|Net cash provided by operating activities                        | 162,228         
|                                                                
|Cash flows from investing activities:                           
|Disbursements of loans                                           | (1,575,283)     
|Loan portfolio purchases                                         | (3,086,534)     
|Loan purchases held for
sale                                     | (61,032)        
|Redemption of 2002 Trust beneficial interests, net of expenses   | (363,837)       
|Loan reductions                                                  | 1,972,174       
|Net (increase) in loan origination and purchase costs            | (218,685)       
|Proceeds from loans sold                                         | 12,574          
|Proceeds from securitization of the 2005-1 Trust                 | 2,026,549       
|Cash received on retained interests in securitized assets        | 6,050           
|Capital expenditures on equipment
and computer software          | (6,509)         
|Net cash used in investing activities                            | (1,294,533)     
|                                                                
|Cash flows from financing activities:                           
|Net increase in borrowings
with original                        
|maturities of one
year or less                                   | 4,825,400       
|Repayments of borrowings with original terms of one year or more | (3,650,000)     
|Dividends paid to stockholders                                   | (43,200)        
|Net cash provided by financing activities                        | 1,132,200       
|                                                                
|Net (decrease)/increase in cash                                  | (105)           
|Cash - beginning of period                                       | 628             
|                                                                
|Cash - end of period                                             | $         
523  
|                                                                
|Supplemental disclosure:                                        
|Cash paid for:                                                  
|Interest                                                         | $   312,778     
|Income taxes, net                                                | $     54,444    

See accompanying notes to Consolidated Financial Statements.

5

|THE STUDENT LOAN
CORPORATION                             
|---------------------------------------------------------
|CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
|(Dollars in thousands, except per share amounts)         
|(Unaudited)                                              
|                                                         
|                                                         
|                                                         

|                                                                  | Six months ended June 30,
|----------------------------------------------------------------- | -------------------------
|                                                                  | 2005                     
|COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL                      
|Balance, beginning of period                                      | $    139,376             
|Other                                                             | 145                      
|Balance, end of period                                            | $    139,521             
|                                                                 
|RETAINED EARNINGS                                                
|Balance, beginning of period                                      | $    999,702             
|Net income                                                        | 147,042                  
|Common dividends declared, $2.16
per common share in 2005;        |                          
|$1.80 per common share in 2004                                    | (43,200)                 
|Balance, end of period                                            | $ 1,103,544              
|                                                                 
|ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER
SOURCES        
|Balance, beginning of period                                      | $        7,829           
|Net change in cash flow hedges,
net of taxes of $300 in 2004      | -                        
|Net change in unrealized (losses)/gains on investment securities, |                          
|net of taxes of $(5,017) in 2005 and $1,960 in 2004               | (7,829)                  
|Balance, end of period                                            | $                -       
|                                                                 
|TOTAL STOCKHOLDERS' EQUITY                                        | $ 1,243,065              
|                                                                 
|SUMMARY OF CHANGES IN EQUITY FROM NONOWNER SOURCES               
|Net income                                                        | $    147,042             
|Changes in equity from nonowner sources, net of taxes             | (7,829)                  
|Total changes in equity from nonowner sources                     | $    139,213             

See accompanying notes to Consolidated Financial
Statements.

6

# THE STUDENT LOAN CORPORATIONNotes to Consolidated Financial Statements (Unaudited)
June 30, 2005

# 1.       Significant Accounting Policies

Interim Financial Information

| | The
accompanying consolidated financial statements of The Student Loan Corporation (the
Company), a Delaware corporation, include the accounts of the Company and its wholly owned
subsidiary, Educational Loan Center, Inc. (ELC). All intercompany balances and
transactions have been eliminated.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
financial information of the Company as of June 30, 2005 and for the three- and six-month
periods ended June 30, 2005 and 2004 is unaudited and includes all adjustments (consisting
of normal recurring accruals) which, in the opinion of management, are necessary to state
fairly the Companys financial position and results of operations in conformity with
U.S. generally accepted accounting principles. The results for the three- and six-month
periods ended June 30, 2005 may not be indicative of the results for the full year ended
December 31, 2005.The accompanying consolidated financial statements should be
read in conjunction with the financial statements and related notes included in the
Companys 2004 Annual Report and Form 10-K.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Use
of Estimates

| | The
preparation of the consolidated financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the balance sheet date and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those
estimates.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Revenue
Recognition

| | Revenues,
which include net interest, fees and gains on loans sold or securitized, if any, are
recognized as they are earned. Interest income may include special allowance payments made
by the federal government as prescribed under the Federal Higher Education Act of 1965, as
amended (the Act).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Loan
purchase premiums and origination costs are deferred and amortized in accordance with
Statement of Financial Accounting Standards (SFAS) No. 91, Accounting for Nonrefundable
Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct
Costs of Leases. CitiAssist Loan insurance costs and origination costs on Federal
Family Education Loan (FFEL) Program loans with original disbursements after April 1, 2005
are amortized on a loan by loan basis. Premiums on FFEL Program loan portfolio purchases,
premiums and referral fees paid on CitiAssist Loans, and origination costs on FFEL Program
loans disbursed prior to April 1, 2005 are deferred and amortized to interest income on a
level yield basis over the expected weighted average life of the student loans in those
portfolios on a pool basis. The expected weighted average lives of loans with costs
accounted for on a pool basis are determined by several factors, the most significant of
which is forecasted prepayments. Expected life, which is initially determined and may
subsequently be revised, may be different from one portfolio to another based upon loan type,
year of origination or purchase or other factors. Therefore, different lives are used for
different portfolio types based upon these underlying loan characteristics and historical
performance. Since the Company holds a large number of similar loans for which prepayments
are probable and can be reasonably estimated, the Company considers estimates of future
prepayment in the calculation of weighted average life. If a difference arises between the
Companys anticipated prepayments and the actual prepayment rates, the Company
recalculates the effective yield to reflect actual prepayments to date, with a
corresponding adjustment to current period interest income. In addition, the expected
future weighted average lives of these loans are reviewed quarterly. Any difference
between the future weighted average lives and the past estimates are adjusted to current
interest income to arrive at the investment balance that would have been remaining had the
new effective yield been applied since loan inception.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

Loans

| | Loans
primarily consist of student loans originated under the FFEL Program authorized by the
U.S. Department of Education (the Department) under the Act, and are insured by guaranty
agencies (guarantors). Student loan interest, inclusive of special allowance payments and
floor income, if any, is recognized as it is earned. Federally mandated loan origination
or lender fees paid on disbursements, as well as other qualifying loan origination costs
and premiums on loan portfolio purchases, are deferred and amortized to interest income on
a level yield basis using either a pool basis or a loan by loan basis. The determination of the
expected weighted average life, over which pooled loans are amortized, is based upon a consideration of a variety
of factors, the most significant of which is forecasted prepayments.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company also has a portfolio of alternative loans, primarily CitiAssist Loans. Generally,
such loans are either insured against loss by private insurers or are covered under other
risk-sharing agreements with creditworthy universities. Premiums and referral fees paid on
CitiAssist Loans are deferred and amortized to income on a pool basis.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company immediately discontinues accruing interest on loans when: (1) FFEL Program loans
have lost their guarantees, (2) uninsured CitiAssist Loans reach 90 days of delinquency
and (3) insured CitiAssist Loans reach 150 days of delinquency. The Company immediately
writes off the unguaranteed portion of FFEL Program Loans at 270 days of
delinquency and the uninsured portion of CitiAssist Loans at 120 days of delinquency. The
Company charges off the outstanding principal balance to the allowance for loan losses and
reduces interest income by the amounts of accrued, uncollected interest.
Recoveries on loans previously charged off are recorded as increases to the allowance for
loan losses. Accrual of interest is resumed when the loan guarantee is reinstated.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Allowance
for Loan Losses

| | Most
of the Companys FFEL Program and alternative loans have a guarantee, insurance
coverage, or are covered under risk-sharing agreements to minimize the Companys
exposure to loan losses. However, for loans in which the principal and interest are not
100% covered under such policies or agreements, the Company has an allowance for loan
losses that provides a reserve for estimated losses on: (1) the portion of the FFEL
Program loan portfolio that is subject to the 2% risk-sharing provisions of the Act, and
(2) the CitiAssist Loan portfolio, after taking into consideration the risk-sharing provisions of any
credit risk insurance coverage obtained from third parties and the benefits of any
risk-sharing agreements with third parties. Amounts of estimated potential future losses
are expensed currently and increase the provision for loan losses. Actual losses are
charged off against the reserve as they occur. Subsequent recoveries increase the
allowance for loan losses.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
size of the allowance is established based on amounts of estimated probable losses
inherent in the Companys CitiAssist and FFEL Program loan portfolios as of the first
day of delinquency. Estimated losses, which are based on historical delinquency and credit
loss experience updated for recent trends and conditions, are determined after
considering the current aging of the portfolio.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Transfer
of Student Loans through Securitization

| | The
Company accounts for its securitization transactions in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, a
replacement of FASB Statement No. 125. Since the securitizations meet the SFAS No. 140
criteria for sale recognition, and the trust qualifies as a qualifying special purpose
entity (QSPE), gains or losses on the sale of the student loans are recorded at the time
of securitization. Gains or losses on securitization depend primarily on the previous carrying amount of the
loans involved in the transfer.  This carrying amount is allocated between the loans sold and the interests retained, including servicing assets.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

| | Securitization
is a process by which loans are transferred to a special purpose entity (SPE), thereby
converting those loans into cash before they would have been realized in the normal course
of business. The SPEs obtain the cash to pay for the loan assets by issuing securities to
outside investors in the form of debt instruments (asset-backed securities). Investors have
recourse to the assets in the SPE, but not to the Company, and benefit from other credit
enhancements, such as a cash collateral account and other specified enhancements.
Accordingly, the SPE can typically obtain a more favorable credit rating from rating
agencies than the Company could obtain for its own debt issuances, which may result in less
expensive financing costs than the Company could obtain from other sources. At June 30, 2005, the SPEs continued to meet the requirements
for QSPE status, and were, therefore, not subject to Financial Accounting Standards Board
(FASB) Interpretation No. 46, Consolidation of Variable Interest Entities (revised
December 2003) (FIN 46-R), which requires consolidation of the variable interest
entity by its primary beneficiary. As such, the SPEs were not consolidated with the
financial statements of the Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
a transfer of financial assets to be considered a sale, the assets transferred by
the Company must either have been isolated from the seller if in bankruptcy or other
receivership and the purchaser must have the right to sell the assets transferred. In addition, the
purchaser must be a QSPE meeting certain significant restrictions on its activities, its investors
must have the right to sell their ownership interests in the entity, and the seller
must not continue to control the assets transferred either through an agreement to repurchase
them or by the right to cause the assets to be returned (known as a call option). A
transfer of financial assets that meets these sale requirements is removed from the
Companys Consolidated Balance Sheet. If the conditions for sale are not met, the
transfer is considered to be a secured borrowing, and the assets remain on the
Companys Consolidated Balance Sheet. In determining whether financial assets
transferred have, in fact, been isolated from the Company, an opinion of legal counsel is
generally obtained for complex transactions or transactions in which the Company has
continuing involvement with the assets transferred or with the securitization entity. For
sale treatment to be appropriate, the legal opinion must state that the assets transferred are legally isolated from the seller and
would not be consolidated with the Companys other assets in the event of the
SPEs insolvency.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The servicing
assets, which represent the unamortized servicing rights, are included in other assets. They are initially recorded
in an amount equal to the allocated basis of the estimated future servicing revenue
that would be received in excess of the fair market value of such services, based on their
relative fair values at the date of securitization. The servicing assets are amortized in
proportion to and over the period of estimated net servicing income. The servicing assets are assessed for
impairment by comparing their carrying values to their current fair values.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company retains the residual interests from the securitizations and records them in other assets. These residual retained interests are recorded at the present value of the
estimated net cash flows expected to be generated from the loans sold
to the trusts in excess of the estimated note interest and other expenses expected to be paid by the trusts. Retained interests are accounted for as either investments in
available-for-sale securities or as trading securities, depending on the designation at the
time of securitization, and are carried at their estimated fair values at the balance sheet date. Temporary changes in fair
value for those securities accounted for as investments in available-for-sale securities are recorded, net of applicable income taxes, in accumulated other changes in equity from
nonowner sources and are reflected in the yield on a prospective basis. The fair values of the retained interests are
determined after interest income is accreted on the asset in accordance with Emerging Issues Task Force (EITF) Issue No. 99-20,Recognition of Interest Income and Impairment on Purchased
and Retained Beneficial Interests in Securitized Financial Assets.  The retained interest
is regularly reviewed for impairment and other-than-temporary impairment, if any, is
charged against fee and other income when identified in accordance with EITF 99-20. Interest accreted on the retained interest is recorded on the effective yield
basis. The initial value of the retained interest is determined by allocating the carrying
value of the loans securitized between the assets sold and the interest retained based on
their relative fair values at the securitization date. Initial and subsequent measurements
of the fair value of the retained interest are performed using a discounted cash flow
model that incorporates managements best estimates of key assumptions, including
prepayment speeds, discount rates, and borrower benefits. Borrower benefits are interest rate and/or principal reductions that are made
to loans that meet certain eligibility requirements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

Loans
Held for Sale

| | At June 30, 2005, loans
held for sale were primarily those loans originated or purchased by the Company for future
securitization or sale. These loans are recorded at the lower of either cost, consisting of principal and deferred
costs, or market value. For the three- and six-month periods ended June 30, 2005 and 2004,
the market value exceeded the cost. Thus, no valuation allowance was necessary at those dates.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Internally
Developed Software

| | Certain
direct development costs associated with the development of internally developed software
are capitalized. The Company capitalizes internally developed software costs in accordance
with the provisions of Statement of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. These
costs are included in other assets and are amortized starting with the project in service date over a period not to exceed five
years. Deferral of costs starts after the preliminary project stage is completed and ends
when the project is substantially complete and ready for its intended use. Capitalized
internally developed software costs are reflected net of amounts written off for
obsolescence and abandonment. Amounts written off are recorded in amortization expense.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 2.       New Accounting Standards

| | Certain
Loans or Debt Securities Acquired in a Transfer

During the first quarter of 2005, the Company adopted the requirements of Statement of Position No. 03-3,
Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP
03-3), for loan acquisitions. SOP 03-3 requires acquired loans to be recorded at fair value. SOP 03-3 prohibits
carrying over from the seller valuation allowances in the initial accounting of loans acquired in a transfer that have evidence
of deterioration in credit quality, when it is probable that the investor
will be unable to collect all contractual cash flows. Loans carried at fair value,
mortgage loans held-for-sale and loans to borrowers in good standing under revolving credit agreements are
excluded from the scope of SOP 03-3.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | SOP
03-3 limits the yield that may be accreted to the excess of the undiscounted expected cash
flows over the investors initial investment in the loan. The excess of the
contractual cash flows over expected cash flows may not be recognized as an adjustment of
yield. Subsequent increases in cash flows expected to be collected are recognized
prospectively through an adjustment of the loans yield over its remaining life.
Decreases in expected cash flows are recognized as impairment. The adoption of SOP 03-3 had no
impact on the Companys financial condition or results from operations, as the Company did not
 have any loan acquisitions that met the criteria of SOP 03-3 during the first six months of 2005.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 3.       Student Loans

| | The
Companys portfolio of student loans consists of FFEL Program guaranteed student
loans authorized by the Department under the Act, as well as CitiAssist Loans originated
through an alternative student loan program. CitiAssist Loans are generally insured by
private third-party insurers.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

| | The Company's loans are summarized by program type as follows:
| | --------------------------------------------------------------

|(Dollars in thousands)                                              | June 30,2005   | December 31, 2004
|------------------------------------------------------------------- | -------------- | -----------------
|                                                                    |                |                  
|Federal Stafford Loans                                              | $    9,684,584 | $  9,286,217     
|Federal Consolidation Loans                                         | 8,102,921      | 8,316,851        
|Federal SLS/PLUS/HEAL Loans                                         | 1,097,358      | 1,164,783        
|CitiAssist Loans                                                    | 4,705,891      | 3,648,496        
|Other alternative loans                                             | 126            | 134              
|                                                                    |                |                  
|Total student loans held, excluding deferred costs                  | 23,590,880     | 22,416,481       
|Deferred origination and premium costs                              | 688,417        | 541,814          
|                                                                    |                |                  
|Loans held                                                          | 24,279,297     | 22,958,295       
|Less: allowance for loan losses                                     | (4,665)        | (5,046)          
|                                                                    |                |                  
|Loans held, net                                                     | 24,274,632     | 22,953,249       
|                                                                    |                |                  
|Federal Consolidation Loans held for sale, excluding deferred costs | 1,785,755      | 1,883,084        
|Deferred origination costs                                          | 39,918         | 47,216           
|                                                                    |                |                  
|Loans held for sale                                                 | 1,825,673      | 1,930,300        
|                                                                    |                |                  
|Total loan assets                                                   | $ 26,100,305   | $24,883,549      
|                                                                    |                |                  

| | The
table below provides a comparison of the Companys CitiAssist Loan delinquencies and insurance coverage
as of the dates specified below. Delinquencies impact earnings through charge offs, and
increased servicing and collection fees.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(Dollars in thousands)                                                                                                                                                                                      | June 30, 2005   | December 31, 2004
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------- | -----------------
|                                                                                                                                                                                                            |                 |                  
|Total CitiAssist Loans                                                                                                                                                                                      | $  4,705,891    | $  3,648,496     
|CitiAssist Loans in repayment                                                                                                                                                                               | $  2,000,429    | $  1,882,280     
|CitiAssist Loans delinquent 30-89 days as a % of total CitiAssist Loans in repayment                                                                                                                        | 1.6%            | 1.7%             
|CitiAssist Loans delinquent 90 days or greater as a % of total CitiAssist Loans in    repayment                                                                                                             | 0.7%            | 0.6%             
|Total allowance for loan losses for CitiAssist Loans                                                                                                                                                        | $        3,327  | $        3,293   
|Allowance for loan losses for CitiAssist Loans as a % of total CitiAssist Loans that are    delinquent 90 days or greater                                                                                   | 23.9%           | 27.4%            
|Total CitiAssist Loans insured by third party insurers(1)                                                                                                                                                   | $  4,040,131    | $  3,100,596     
|Total uninsured CitiAssist Loans(2)                                                                                                                                                                         | $       665,760 | $        547,900 
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|(1) Claims on these loans are subject to 5% - 20% risk-sharing. Therefore, the insurer reimburses the Company 80% - 95% of the approved claim amounts.                                                     
|(2) Of the uninsured CitiAssist Loans, $472.1 million and $436.9 million are covered under risk-sharing agreements with schools and universities at June 30, 2005 and      December 31, 2004, respectively.

11

# 4.       Related Party Transactions

| | Citibank,
N.A. (CBNA), an indirect wholly owned subsidiary of Citigroup Inc. (Citigroup), owns 80%
of the outstanding common stock of the Company. A number of significant transactions are
carried out between the Company and Citigroup and its affiliates. CBNA is a party to
certain intercompany agreements entered into by the Company. These intercompany agreements include the Omnibus Credit
Agreement, a tax-sharing agreement and the CitiAssist Loan originations and servicing
agreements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Detailed
below is a description of, and amounts relating to, the Companys transactions with
CBNA or other Citigroup affiliates that have been reflected in the accompanying
consolidated financial statements for the three- and six-month periods ended June 30, 2005
and 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys loan portfolio consists primarily of student loans originated under the
FFEL Program through a trust agreement with CBNA. The majority of the Companys loan
originations and servicing is performed through the provisions of intercompany agreements
with affiliates of Citigroup. Expenses related to these agreements were $7.9 million and
$7.2 million for the three-month periods ended June 30, 2005 and 2004, respectively. For
the six-month periods ended June 30, 2005 and 2004, the expenses related to those
agreements were $15.4 million and $14.5 million, respectively.

The Company earned loan origination and servicing revenue of $0.9 million and
$1.1 million for the three-month periods ended June 30, 2005 and 2004, respectively, for
work performed by the Company on CitiAssist Loans held by CBNA prior to purchase by the
Company. For the six-month periods ended June 30, 2005 and 2004, the Company earned loan
origination and servicing revenue on CitiAssist Loans of $2.6 million and $4.4 million,
respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company shares with CBNA 50% of the deferred tax assets resulting from the payments made
to Citibank (New York State) (CNYS) in 1992 by the Company in exchange for the transfer of
assets to the Company and the execution of a noncompetition agreement. CNYS merged with
CBNA in August 2003. For the six-month periods ended June 30, 2005 and 2004, $0.3 million
and $0.6 million, respectively, was paid to CBNA under this agreement. At June 30, 2005,
the Company had a remaining liability under this agreement of $3.3 million recorded in
other liabilities. The Company is also included in the consolidated federal income tax
return of Citigroup, and is included in certain combined or unitary state/local income or
franchise tax returns of Citicorp/Citigroup or its subsidiaries. For the six-month periods
ended June 30, 2005 and 2004, the Company paid amounts of $53.7 million and $50.2 million,
respectively, to Citigroup for tax allocation payments.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company had outstanding short- and long-term unsecured borrowings with CBNA of $11.8
billion and $13.2 billion, respectively, at June 30, 2005 and $21.0 billion and $2.8
billion, respectively, at December 31, 2004, incurred under the terms of an Omnibus Credit
Agreement with CBNA. At June 30, 2005, the Company reclassified $5.0 billion of short-term borrowings to
long-term borrowings based upon a refinancing agreement with CBNA effective July 1, 2005. This agreement provides for $30 billion in total credit at June 30,
2005. At June 30, 2005 and 2004, the Companys outstanding borrowings had contracted
weighted average interest rates of 3.0% and 1.4%, respectively, based on LIBOR at the time
the borrowings were established or rates reset. For the three-month periods ended June 30,
2005 and 2004, the Company incurred $193.3 million and $76.0 million, respectively, in
interest expense payable to CBNA related to these borrowings. For the six-month periods
ended June 30, 2005 and 2004, the Company incurred $346.6 million and $151.1 million,
respectively, in interest expense payable to CBNA related to these borrowings.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
June 30, 2005, the Company had no forward funding commitments. At December 31, 2004, the
Company was a party to forward funding commitments with CBNA to procure short- and
long-term funding in amounts of $0.2 billion and $1.1 billion, respectively, at specified
times in the future. All of the loan commitments, which were drawn upon in January 2005,
were contracted to mature between July 2005 and January 2006, and have fixed interest
rates ranging from 2.1% to 3.2%.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

| | In
addition, Citigroup and its subsidiaries engage in other transactions and servicing
activities with the Company, including employee stock-based compensation plans, cash
management, data processing, communication, loan servicing, employee benefits, payroll
administration and facilities management. Management believes that the terms under which
these transactions and services are provided are, in the aggregate, no less favorable to
the Company than those that could be obtained from third parties.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 5.       Interest Rate Swap Agreements

| | From
time to time, the Company enters into interest rate swap agreements to manage its basis
risk exposure resulting from interest rate variability between the rates paid on its
borrowings and received on its loan assets. The Company had no swap agreements outstanding
at June 30, 2005. Prior to 2005, the Company participated with CBNA, an investment grade
counter-party, in interest rate swap agreements under a swap program that met the hedge
accounting requirements of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities,as amended. To the extent the derivatives were effective
and exactly matched the variability of the cash flows being hedged, changes in their fair
values were not reflected in current earnings. These changes in fair values were recorded net of taxes in the
accumulated other changes in equity from nonowner sources component of stockholders
equity. When participating in these agreements, the Company receives payments based on LIBOR and makes
payments based on the asset yield, generally the 91-day Treasury Bill rate. These
agreements, which had been designated as hedges, were effective in offsetting the changes
in cash flow hedges for the risk being hedged. The swap agreements had notional amounts
totaling $1.1 billion at December 31, 2004. These swaps matured on January 4, 2005 and had
no reportable value at December 31, 2004. No amounts were excluded from the assessment of
effectiveness and no hedge ineffectiveness was recognized in earnings pursuant to these
swap agreements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Accumulated
other changes in equity from nonowner sources from cash flow hedges, net of taxes, are
summarized as follows for the three- and six-month periods ended June 30, 2005 and 2004:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                       | Three-month period ended | Six-month period ended
|---------------------- | ------------------------ | ----------------------
|                       | June 30,                 | June 30,              
|(Dollars in thousands) | 2005                     | 2004                  
|                       |                          |                       

|Balance at beginning of year                                                                                                                                                                                | $ -- | $(563)   | $ -- | $(959)  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | -------- | ---- | --------
|Net unrealized (loss) from   cash flow hedges                                                                                                                                                               | --   | (563)(1) | --   | (442)(1)
|Net amounts reclassified to   earnings                                                                                                                                                                      | --   | 600(2)   | --   | 875(2)  
|                                                                                                                                                                                                            |      |          |      |         
|Balance at end of period                                                                                                                                                                                    | $ -- | $(526)   | $ -- | $(526)  
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|(1) Amounts are net of taxes of $(388) and $(303) for the three- and six-month periods, respectively.
    (2) Amounts are net of taxes of $412 and $604 for the three- and six-month periods, respectively.

| | In
the six-month period ended June 30, 2005, the Company participated in certain short-term
interest rate swaps with CBNA, an investment-grade counterparty, that did not qualify for hedge accounting treatment under
SFAS No. 133. These swaps, which had a notional amount of $8.0 billion, matured by the end of the second quarter
of 2005.  Therefore, as of June 30, 2005 the Company had no swaps outstanding. The swaps incurred $0.1 million of interest expense in the second quarter of 2005 and $0.7
million of interest expense for the six-month period ended June 30, 2005. In 2004, all of
the Companys swaps met the requirements of SFAS No. 133.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 6.       Commitments and Contingencies

| | In
the ordinary course of business, the Company is involved in various litigation proceedings
incidental to and typical of the business in which it is engaged. The ultimate resolution
of these proceedings are not likely to have a material adverse effect on the results of the
Companys operations, financial condition or liquidity.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

# 7.       Student Loan Securitizations

| | The
Company maintains a program to securitize certain portfolios of FFEL Program student loan
assets. From time to time, the Company enters into securitization transactions and accounts
for its securitization transactions in accordance with the provisions of SFAS No. 140.
Under the Companys program to securitize student loans, the loans are removed from
the consolidated financial statements of the Company and ultimately sold to an independent
trust. In turn, the trust sells debt securities, backed by the student loan assets, to
outside investors. At June 30, 2005, the Companys securitizations used trust
arrangements that met the QSPE conditions of SFAS No. 140. Therefore, its QSPEs
financial statements were not consolidated with the financial statements of the Company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2005, the Company securitized approximately $2.0 billion of FFEL Program Consolidation
Loans. These loans were sold to a trust (the 2005-1 Trust), through a wholly owned special purpose
subsidiary that was established for that purpose. The securitization resulted in a gain on
sale of $47.8 million (pretax). The Company also recognized a $1.6 million (pretax) gain
to record the fair value of the retained interest designated as a trading investment. The
gain reflects the difference between the carrying value of the assets sold to the 2005-1
Trust by the Companys special purpose subsidiary and the fair value of assets
received, composed of cash proceeds and retained interests.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the second quarter of 2005, the Company completed a tender offer to purchase the notes of one of its trusts,
which had been originally issued in 2002 (the 2002 Trust), and extinguished that trust,
bringing $370.3 million in student loan assets back on the Companys balance sheet at
fair value and recorded a loan premium of $12.0 million. The premium will be amortized
over the estimated remaining lives of the loans. The transaction resulted in an
extraordinary gain of $8.9 million (before taxes of $3.4 million).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
June 30, 2005, approximately $1.4 billion and $2.0 billion of student loan assets were
held by the securitization trust formed in 2004 (the 2004 Trust) and the 2005-1
Trust, respectively. At December 31, 2004, approximately $1.5 billion and $0.4 billion of
student loan assets were held by the 2004 and 2002 Trusts, respectively. At June 30, 2005
and December 31, 2004, the Company had retained interests in the assets securitized of
approximately $95.3 million and $72.7 million, respectively, that were recorded at fair value.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table summarizes the changes in the Companys retained interests during the
three- and six-month periods ended June 30, 2005 and 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

|                                   | Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended
|---------------------------------- | ------------------ | ------------------ | ---------------- | ----------------
|(Dollars in thousands)             | June 30, 2005      | June 30, 2004      | June 30, 2005    | June 30, 2004   
|                                   |                    |                    |                  |                 
|Balance at beginning of period     | $60,203            | $40,733            | $72,733          | $28,672         
|Accreted interest                  | 980                | 3,298              | 2,620            | 7,156           
|Cash flows from trusts             | -                  | (7,600)            | (6,050)          | (7,600)         
|Change in fair value               | (565)              | (2,834)            | (2,983)          | 5,369           
|Impairment                         | (6,115)            | -                  | (11,817)         | -               
|Securitization of the 2005-1 Trust | 58,922             | -                  | 58,922           | -               
|Extinguishment of the 2002 Trust   | (18,088)           | -                  | (18,088)         | -               
|                                   |                    |                    |                  |                 
|Balance at end of period           | $95,337            | $33,597            | $95,337          | $33,597         
|                                  

| | The
retained interest in the 2004 Trust is accounted for as an investment in
available-for-sale securities. The retained interest in the 2005-1 Trust is accounted for as
a trading security.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with the securitization of loans, the Company retains servicing rights which
entitle the Company to a future stream of cash flows based on the outstanding principal
balances of the loans and the contractual per loan servicing fee. Failure to service the
loans in accordance with contractual requirements could lead to a termination of the
servicing rights and the loss of future servicing fees. As a result, the Company considers
both the securitized and owned student loans to be part of the business it
manages.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

| | The
following table summarizes the changes in the Companys servicing assets during the
three- and six-month periods ended June 30, 2005. The 2002 Trust had no servicing assets.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                   | Three Months Ended | Six Months Ended
|---------------------------------- | ------------------ | ----------------
|(Dollars in thousands)             | June 30, 2005      | June 30, 2005   
|                                   |                    |                 
|Balance at beginning of year       | $    27,029        | $    28,177     
|Securitization of the 2005-1 Trust | 29,114             | 29,114          
|Impairment                         | (8,096)            | (8,363)         
|Amortization                       | (935)              | (1,816)         
|                                   |                    |                 
|Balance at June 30, 2005           | $    47,112        | $    47,112     
|                                   |                    |                 

| | During the second quarter of 2005, the Company increased its prepayment rate assumption, contributing to the
         second quarter's $6.1 million retained interest impairment and $8.1 million servicing asset impairment. For the
         securitization trusts, a prepayment ramp is used that estimates prepayment rates at a graduated level from 0% to
         10.0% over the first five to ten years and approximately 10% thereafter.  Depending on asset class, the total
         prepayment and speed of prepayments may vary. During the first quarter of 2005, the impairments were the result
         of more borrowers than expected receiving borrower benefits.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For the three-month periods ended June 30, 2005 and 2004, the Company received cash flows of $1.8 million and $0.1
million, respectively, for loan servicing and administrative fees as the master servicer. For the six-month periods ended
June 30, 2005 and 2004, the Company received cash flows of $3.7 million and $0.2 million, respectively, for loan
servicing and administrative fees.  The Company had receivables due from the trusts of $1.0 million and $1.8 million at
June 30, 2005 and December 31, 2004, respectively, and $1.3 million and $0.9 million of payables due to the trusts at
June 30, 2005 and December 31, 2004, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
key assumptions used to value the combined retained interests and servicing assets for the securitization trusts
at June 30, 2005 were as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     | Retained Interests           | Servicing Assets            
|---------------------------------------------------- | ---------------------------- | ----------------------------
|                                                     |                              |                             
|Discount rate                                        | 10.0%                        | 5.6%                        
|Consolidation prepayment rates                       | Up to 10.0% in 5 to 10 years | Up to 10.0% in 5 to 10 years
|Servicing margin                                     | -                            | 26 basis points             
|Anticipated net credit losses                        | 0.0%                         | -                           
|Basis spread between LIBOR and Commercial Paper rate | 0.10%                        | -                           
|Borrower Benefits - Automated Clearing House         | 30.6% to 39.0%               | -                           
|Borrower Benefits - On time payments                 | 26.3% to 30.2%               | -                           
|                                                     |                              |                             

| | The
key assumptions used to value the combined retained interests and servicing assets for the securitization trusts
at December 31, 2004 were as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     | Retained Interests     | Servicing Assets      
|---------------------------------------------------- | ---------------------- | ----------------------
|                                                     |                        |                       
|Discount rate                                        | 10.0%                  | 5.9%                  
|Consolidation prepayment rates                       | Up to 8.0% in 10 years | Up to 8.0% in 10 years
|Servicing margin                                     | -                      | 23 basis points       
|Anticipated net credit losses                        | 0.0%                   | -                     
|Basis spread between LIBOR and Commercial Paper rate | 0.10%                  | -                     
|Borrower Benefits - Automated Clearing House         | 38.8% to 40.0%         | -                     
|Borrower Benefits - On time payments                 | 13.6% to 17.6%         | -                     
|                                                     |                        |                       

| | The
loans held in the trust are eligible for various borrower benefits. Specifically,
borrowers receive a 25 basis point rate reduction if they sign up for automated clearing
house payments. In addition, borrowers can receive a 1% rate reduction if they make 36, 48
or 60 consecutive on time payments, depending on the program, and continue to make on time payments.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Due
to the benefits from the Exceptional Performer designation, the Company used an
anticipated net credit loss assumption of 0% for the securitized loans at June 30, 2005
and December 31, 2004.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15

| | As
required by SFAS No. 140, the effects of two negative changes in each of the key
assumptions used to determine the fair value of the retained interests are disclosed. The
negative effect of the change in each assumption must be calculated independently while holding
all other assumptions constant. Because the key assumptions may not be independent, the
net effect of simultaneous adverse changes in the key assumptions may be different from
the sum of the individual effects shown in the table.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The effects of the key assumptions on the retained interests and
servicing assets are presented below:
| | ------------------------------------------------------------------------------------------------------

|(Dollars in thousands)                                               | Retained Interests           | Servicing Assets            
|-------------------------------------------------------------------- | ---------------------------- | ----------------------------
|                                                                     |                              |                             
|Fair value at June 30, 2005                                          | $                95,337      | $                47,919     
|                                                                     |                              |                             
|Discount rate                                                        | 10.0%                        | 5.6%                        
|+10%    (reflecting a discount rate of 11.0%)                        | $             (4,021.8)      | $                (859.5)    
|+20%    (reflecting a discount rate of 12.0%)                        | $             (7,758.0)      | $             (1,696.7)     
|                                                                    
|Consolidation prepayment rate                                        | Up to 10.0% in 5 to 10 years | Up to 10.0% in 5 to 10 years
|+10%    (reflecting consolidation prepayment rates of 0.0% to 11.0%) | $             (1,896.3)      | $                (708.2)    
|+20%    (reflecting consolidation prepayment rates of 0.0% to 12.0%) | $             (3,741.1)      | $             (1,396.8)     
|                                                                    
|Servicing margin                                                     | -                            | 26 basis points             
|+10%  (reflecting a servicing margin of 29 basis points)             | -                            | $             (4,282.7)     
|+20%  (reflecting a servicing margin of 31 basis points)             | -                            | $             (8,565.4)     
|                                                                    
|Basis spread                                                         | 0.10%                        | -                           
|+10%    (reflecting a basis spread of 0.11%)                         | $             (1,563.6)      | -                           
|+20%    (reflecting a basis spread of 0.12%)                         | $             (3,127.0)      | -                           
|                                                                    
|Borrower benefits - ACH                                              | 30.6% to 39.0%               | -                           
|+10%    (reflecting borrower benefits of 33.7% to 42.9%)             | $             (1,290.1)      | -                           
|+20%    (reflecting borrower benefits of 36.7% to 46.8%)             | $             (2,580.2)      | -                           
|                                                                    
|Borrower benefits - on time payments                                 | 26.3% to 30.2%               | -                           
|+10%    (reflecting borrower benefits of 28.9% to 33.2%)             | $             (3,113.4)      | -                           
|+20%    (reflecting borrower benefits of 31.6% to 36.2%)             | $             (6,226.8)      | -                           
|                                                                     |                              |                             

| | If
the Company lost its Exceptional Performer designation, the fair value of the retained
interests at June 30, 2005 would be decreased by approximately $4.7 million. Also, a
change in market interest rates could affect the value of the retained interest.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | These
estimates and assumptions are subject to change and, therefore, the fair values of the
retained interests as presented in the consolidated financial statements are subject to
possible further impairment and may not be fully recoverable.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 8.       Future Application of Accounting Standards

| | Stock-based
Compensation
The
Company participates in various Citigroup stock-based compensation plans under which
Citigroup stock or stock options are granted to certain of the Companys officers and
employees. In December 2004, the FASB issued
SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS 123-R), which replaces the
existing SFAS 123 and supersedes APB 25. SFAS 123-R requires companies to measure and
record compensation expense for stock options and other share-based payment based on the
instruments fair value. SFAS 123-R as issued is effective for interim and
annual reporting periods beginning after June 15, 2005. However, in April 2005, the Securities
and Exchange Commission (SEC) announced the adoption of a new rule that amends the compliance date for
SFAS 123-R.  The SEC's new rule allows companies to implement SFAS 123-R at the start of their
fiscal year beginning after June 15, 2005. Therefore, the Company will adopt SFAS 123-R on January 1, 2006 by
using the modified prospective approach, which requires recognizing expense for options
granted prior to the adoption date equal to the fair value of the unvested amounts over
their remaining vesting period. The portion of these options fair value attributable
to vested awards prior to the adoption of SFAS 123-R is never recognized. For unvested
stock-based awards granted before January 1, 2003 (APB 25 Awards), the Company
will expense the fair value of the awards as at the grant date over the remaining vesting
period. The impact of recognizing compensation expense for the unvested APB 25 awards is
not expected to be material to the Companys 2006 financial condition or
results of operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16

Item 2.      Management's Discussion and Analysis of Financial Condition and Results of Operations

Critical
Accounting Policies

| | There
were no material changes to The Student Loan Corporations (the Companys)
critical accounting policies in the second quarter of 2005. The Company considers its
accounting policies on revenue recognition, allowance for loan losses and student loan
securitizations to be its critical accounting policies. For a description of these and
other significant accounting policies, see Notes 1, 3 and 7 to the consolidated financial
statements or the notes to the financial statements in the Companys 2004 Annual
Report and Form 10-K.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

New Accounting Standards

| | Certain
Loans or Debt Securities Acquired in a Transfer
During the first quarter of 2005, the Company adopted the requirements of Statement of Position No. 03-3,
Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP
03-3) for loan acquisitions. SOP 03-3 requires acquired loans to be recorded at fair value. SOP 03-3 prohibits
carrying over from the seller valuation allowances in the initial accounting of loans acquired in a transfer that have evidence
of deterioration in credit quality, when it is probable that the investor
will be unable to collect all contractual cash flows. Loans carried at fair value,
mortgage loans held-for-sale, and loans to borrowers in good standing under revolving credit agreements are
excluded from the scope of SOP 03-3.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | SOP
03-3 limits the yield that may be accreted to the excess of the undiscounted expected cash
flows over the investors initial investment in the loan. The excess of the
contractual cash flows over expected cash flows may not be recognized as an adjustment of
yield. Subsequent increases in cash flows expected to be collected are recognized
prospectively through an adjustment of the loans yield over its remaining life.
Decreases in expected cash flows are recognized as impairment. The adoption of SOP 03-3 had no
impact on the Companys financial condition or results of operations, as the Company did not have any loan
acquisitions that met the criteria of SOP 03-3 during the first six months of 2005.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management Summary

| | The
Company is a market leader in education finance and offers a full array of student loan
products to students and their parents. Generally, most of the loans directly
originated by the Company are serviced by the Company throughout their lifecycles.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
earnings of the Company are primarily generated by the spread between the interest earned
on its loan assets (based on either the 91-day Treasury Bill rate or the 90-day Commercial
Paper rate) and the interest paid on its borrowings (based on LIBOR). This earnings spread
between the interest earned and the interest expensed represents net interest income.
The Companys earnings are also impacted by floor income and portfolio growth, as described below. Net
interest income may be adversely impacted by changes in the current interest rate
environment and, especially, by spread changes between either the 91-day Treasury Bill
rate or the commercial paper rate and LIBOR. The Company manages these risks by regularly
monitoring interest rates. The Company acts upon fluctuations in the interest rate curves and
may enter into interest rate swap agreements on portions of its portfolio. In
declining short-term rate environments, the Companys net interest income may benefit
from floor income, which is generated when the Companys cost of funds declines while
borrower and government subsidized interest rates remain fixed at the annual reset rate,
yielding net interest income in excess of the minimum expected spread. Also, although the
fixed interest rate at which borrowers pay interest on Federal Consolidation Loans is
generally not subject to the annual reset provisions, a decline in the Companys cost
of funds during the term of such loans could contribute to floor income. See the
definition of floor income in Special Allowance and Floor Incomeon page 23.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition to floor income and portfolio growth, the Companys earnings may also be
impacted by the number and size of asset sales and securitizations, which can fluctuate on
a quarterly basis. Other factors that may impact earnings are loan servicing revenue and
loan servicing costs, applicable laws and regulations, prepayment rates on student loans
including those resulting from student loan consolidations, the number of borrowers
eligible for borrower benefits, financing options available to students and their parents,
and competitors initiatives.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Certain
of the above statements are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. See Forward-Looking Statements on page 27.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

17

Financial Condition

| | During
the six month period ending June 30, 2005, the Companys managed student loan
portfolio grew by $4.5 billion (18%) to $29.5 billion. Included in this amount are the
Companys owned student loans of $26.1 billion, which consist primarily of loans
originated under the Federal Family Education Loan (FFEL) Program and $3.4 billion of student loans held in securitization trusts. The Companys
owned assets, which consisted of $24.3 billion of loans held in its portfolio and a $1.8 billion
inventory of loans held for sale, increased by $1.2 billion (5%) from $24.9 billion at
December 31, 2004.The table below shows the student loan activity for the loans held in the
Company's portfolio for the six-month periods ended June 30, 2005 and 2004.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(Dollars in millions)                                                                                                              | June 30, 2005 | June 30, 2004
|---------------------------------------------------------------------------------------------------------------------------------- | ------------- | -------------
|                                                                                                                                   |               |              
|Balance at beginning of period                                                                                                     | $    24,889   | $    23,225  
|FFEL Program Stafford and PLUS Loan(1)disbursements                                                                                | 1,575         | 1,450        
|Loan Purchases                                                                                                                     | 3,148         | 2,195        
|Redemption of the 2002 Trust                                                                                                       | 370           | -            
|Loan reductions(2)                                                                                                                 | (1,968)       | (1,737)      
|Loan securitizations                                                                                                               | (2,026)       | -            
|Portfolio sales                                                                                                                    | (12)          | (617)        
|Deferred costs and other adjustments                                                                                               | 129           | 61           
|                                                                                                                                   |               |              
|Balance at end of period                                                                                                           | $    26,105   | $    24,577  
|                                                                                                                                   |               |              
|                                                                                                                                  
|(1)  FFEL Program PLUS Loans are Parent Loans to Undergraduate Students.                                                          
|(2)  Loan reductions are attributable primarily to borrower principal payments, loan consolidations and claims paid to guarantors.

Loan Activity

| | Loan disbursements continued to increase during the first six months of 2005 compared to the same period last year.
Loan disbursements represent the amount of cash outlaid for loan principal related to loan originations. The
Companys loan disbursements and loan commitments to finance education for the three-
and six-month periods ended June 30, 2005 and June 30, 2004 are presented in the table below:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                      | Three-month periods | Six-month periods
|--------------------- | ------------------- | -----------------
|(Dollars in millions) | 2005                | 2004             
|                      |                     |                  

|FFEL Program Stafford and PLUS Loan disbursements               | $394   | $376  | $1,575 | $1,450
|--------------------------------------------------------------- | ------ | ----- | ------ | ------
|CitiAssist Loans disbursed under commitments to   purchase, net | 140(1) | 98(2) | 688(1) | 563(2)
|                                                                |        |       |        |       
|Total loan disbursements and commitments                        | $534   | $474  | $2,263 | $2,013
|                                                               

|(1) |  | These amounts consist of the CitiAssist Loans that were disbursed by CBNA in
                    the three- and six-month periods ended June 30, 2005.  Out of the originations, approximately $129 million were under commitment
                    to purchase at June 30, 2005.  In addition, $120 million of CitiAssist Loan
                    commitments were awaiting disbursement by CBNA. These loans will be purchased by
                    the Company after final disbursement.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | These amounts consist of the CitiAssist Loans that had been disbursed by CBNA
                    in the three- and six-month periods ended June 30, 2004.  Out of the originations, approximately $88 million
                    were under commitment to purchase at June 30, 2004.  In addition, $129 million of CitiAssist Loan
                    commitments were awaiting disbursement by CBNA. These loans were purchased by
                    the Company after final disbursement.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
$125 million increase in FFEL Program loan disbursements for the first six months of 2005,
compared to the same period last year, is primarily attributable to ongoing sales
initiatives and overall growth in the marketplace.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18

| | In
order to comply with certain regulatory requirements, CitiAssist Loans are originated by
CBNA through an intercompany agreement. Following full disbursement, the Company purchases
all qualified CitiAssist Loans at CBNAs carrying value at the time of purchase, plus
contractual fees. CitiAssist Loans are
originated through an alternative loan program and do not carry federal government
guarantees.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys secondary market and other loan procurement activities for the three- and
six-month periods are presented in the table below:
| | -------------------------------------------------------------------------------------------------------------------------------------------

|                      | Three-month periods ended June 30, | Six-month periods ended June 30,
|--------------------- | ---------------------------------- | --------------------------------
|(Dollars in millions) | 2005                               | 2004                            
|                      |                                    |                                 

|FFEL Program Consolidation Loan volume                                            | $   730(1) | $   320(2) | $1,527(3) | $   968(4)
|--------------------------------------------------------------------------------- | ---------- | ---------- | --------- | ----------
|Purchases of CitiAssist Loans                                                     | 710        | 621        | 1,217     | 990       
|Other loan purchases                                                              | 320        | 150        | 404       | 237       
|                                                                                  |            |            |           |           
|Total loan purchases                                                              | $1,760     | $1,091     | $3,148    | $2,195    
|                                                                                 
|(1)  Amount includes $702 purchased for portfolio and $28 purchased for resale.  
|(2)  Amount includes $121 purchased for portfolio and $199 purchased for resale. 
|(3)  Amount includes $1,466 purchased for portfolio and $61 purchased for resale.
|(4)  Amount includes $380 purchased for portfolio and $588 purchased for resale. 

| | For
the first six months of 2005, the Company purchased loans of $3,148 million, an
increase of $953 million (43%) compared to the same period last year. The loan
consolidation growth resulted primarily from the rising interest rate environment as
described below. CitiAssist Loan growth reflected borrowers increased need to find
alternative sources of education funding outside of the FFEL Loan Program. This need for
alternative financing is due to the rising cost of education and the flat loan limits that
exist under the current FFEL Program.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The historically low interest rate environment has encouraged borrowers to consolidate their
eligible student loans to lock in their interest rates, resulting in continued higher
prepayments of Federal Stafford Loans over the past several years. These loan consolidations have comprised a sizeable
portion of the Companys overall loan volume. As interest
rates rise and loan consolidation becomes less attractive, consolidation activity and
related prepayment levels are expected to moderate. Of the Consolidation Loan volume presented in the table above, $439 million and $389 million for
the first six months of 2005 and 2004, respectively, were consolidations of federally
guaranteed student loans already held in the Companys loan portfolio.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As noted above, a portion of the FFEL Program Consolidation Loans were purchased for the Companys held for
sale inventory, which was established to create a portfolio of loans held for future
securitization or sale. The size of the held-for-sale portfolio is primarily dependent upon the needs of the
securitization program. The decrease in the volume of loans purchased for the Company's resale inventory year over year is due to a change in the mix of loans designated held-for-sale and a refinement in
loan procurement sources.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Loans

| | The
Companys portfolio of FFEL Program Stafford Loans of $9.7 billion at June 30, 2005 grew
$0.4 billion (4%) from December 31, 2004. Including the Companys loans held for
sale, FFEL Program Consolidation Loans of $9.9 billion decreased $0.3 billion (3%) from
December 31, 2004. This decrease reflects $2.0 billion in FFEL Program Consolidation Loans that
were securitized in the second quarter of 2005. CitiAssist Loans of $4.7 billion increased
$1.1 billion (29%) from December 31, 2004. See the summary of the Companys loans by
program type in Note 3 to the consolidated financial statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
the first six months of 2005, both FFEL Program and CitiAssist Loan volumes were experiencing steady growth. Given the rising cost of education and students needs
for alternative sources of education financing, CitiAssist Loans continue to be the
fastest growing segment of the Companys loan portfolio. Although loan consolidation
volume has increased substantially in recent years, this volume is expected to temper not
only as interest rates rise, but also as the number of borrowers who have not yet
consolidated their eligible loans declines.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys allowance for loan losses of $4.7 million at June 30, 2005 is composed of
$1.4 million for its FFEL Program loan portfolio and $3.3 million for its CitiAssist
Loans. The allowance at December 31, 2004 of $5.0 million was composed of $1.7 million for
its FFEL Program loans and $3.3 million for its CitiAssist Loans. See more information on the allowance for loan losses beginning on page 22.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

19

Alternative Loans in Repayment

| | The
Companys alternative loan portfolio consists primarily of CitiAssist Loans that
are not guaranteed by the federal government. Most of the CitiAssist Loan portfolio is
insured by private third party insurers. However, a portion is not covered by insurance.
At June 30, 2005, approximately $364 million of the CitiAssist Loans in repayment are
self-insured by the Company, do not carry outside credit risk insurance, and are either
covered under risk-sharing agreements or are self-insured. SeeStudent
Loans in Note 3 to the consolidated financial statements for further
information about delinquency rates and the allowance for loan losses for CitiAssist Loans.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
insured and uninsured amounts of CitiAssist Loans in repayment are presented in the table
below:
| | ----------------------------------------------------------------------------------------------------

|(Dollars in millions) | June 30, 2005 | % | December 31, 2004 | %
|--------------------- | ------------- | - | ----------------- | -
|                      |               |   |                   |  

|Insured CitiAssist Loans            | $1,636 | 82%  | $1,502 | 80% 
|----------------------------------- | ------ | ---- | ------ | ----
|Uninsured CitiAssist Loans          | 364    | 18%  | 380    | 20% 
|                                    |        |      |        |     
|Total CitiAssist Loans in repayment | $2,000 | 100% | $1,882 | 100%
|                                    |        |      |        |     

Revenue Recognition

| | As
discussed in Note 1 to the consolidated financial statements, the Company holds a large
number of similar loans for which prepayments are probable and the timing of payments can
be reasonably estimated. The Company considers estimates of future prepayments in the
calculation of weighted average life. Estimates of future prepayment speeds are based on a
combination of actual past prepayment rates as well as managements estimate of
future consolidation rates, which are influenced by current and future interest rates.
Future prepayment speeds are also impacted by whether the underlying Stafford or PLUS
Loans are consolidated off-balance sheet (i.e. prepayments) or are retained in the
Companys own portfolio, which is not accounted for as prepayment. Historically low
interest rates have led to a record level of loan consolidations, which have decreased the
weighted average lives of Stafford and PLUS Loans. Management believes that the high
consolidation rate will continue in the short term, but will begin to decline from the
record levels recently experienced after July 1, 2005, when the benchmark interest rate
was raised.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Unamortized
deferred origination costs and loan premiums currently on the balance sheet may be
impacted by actual prepayment rates that differ from the original estimated assumption. If
a difference arises between the Companys anticipated prepayments and the actual
prepayment rates, the Company recalculates the effective spread to reflect actual payments
to date, with a corresponding adjustment to current period interest income. In addition,
the expected future weighted average lives of these loans are reviewed periodically and
any difference between the future weighted average lives and the past estimates are
adjusted to current interest income to arrive at the investment balance that would have
been remaining had the new effective spread been applied since loan inception.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Securitization Activity and Off Balance Sheet Transactions

| | From
time to time, the Company enters into securitization transactions and considers
securitization proceeds to be an alternative source of financing. Securitization is a
process by which loans are transferred to a special purpose entity (SPE), thereby
converting those loans into cash before they would have been realized in the normal
course of business. The securitized loans are removed from the financial statements of the
Company and ultimately sold to the SPEs (independent trusts) through a wholly owned entity
formed to acquire the Companys loans. The SPEs obtain the cash to pay for the loan
assets received by issuing securities to outside investors in the form of debt instruments
(asset-backed securities). Investors have recourse to the assets in the SPE, but not to
the Company, and benefit from other credit enhancements, such as a cash collateral
account and other specified enhancements. Accordingly, the SPE can typically obtain a more
favorable credit rating from rating agencies than the Company could obtain for its own
debt issuances, which may result in less expensive financing costs than the Company could obtain from
other sources. At June 30, 2005, the SPEs continued to meet
the requirements of qualifying special purpose entities (QSPEs), and were, therefore,
not subject to FASB Interpretation No. 46, Consolidation of Variable Interest Entities
(revised December 2003) (FIN 46-R), which requires consolidation of the
variable interest entity by the primary beneficiary. As such, the SPEs were
not consolidated with the financial statements of the Company.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company securitizes certain portfolios of FFEL Program Consolidation
Loans through a wholly owned SPE formed to acquire them from the Company. During the
three-month period ended June 30, 2005, the Company securitized $2.0 billion in FFEL Program Consolidation Loans and recorded a $47.8 million (pretax) gain on sale. The Company also
recognized a $1.6 million (pretax) gain to record the fair value of the retained interest,
designated as a trading investment. Also during this quarter, the Company completed a
tender offer to purchase the notes of SLC Student Loan Trust-I (the 2002 Trust) and extinguished the trust,
bringing $370.3 million
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20

| | of loans back onto its balance sheet at fair value and realizing
an extraordinary gain of $8.9 million (pretax). At June 30, 2005, approximately $1.4
billion and $2.0 billion of student loan assets were held by the 2004 and 2005-1 Trusts,
respectively. At December 31, 2004, approximately $1.5 billion and $0.4 billion of student
loan assets were held by the 2004 and 2002 Trusts, respectively. During the six-month
period ended June 30, 2004, the Company did not enter into any new securitizations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company accounts for its securitization transactions in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, a
replacement of FASB Statement No. 125. Gains or losses on securitization depend primarily on the previous carrying amount
of the loans involved in the transfer. This carrying amount is allocated between the loans sold and the interests retained, including servicing assets.
The Company accounts for the retained interests from
the 2004 securitization as investments in available-for-sale securities and its retained
interests from the 2005 securitization as investments in trading securities, in accordance with their designation
at the time of securitization. The retained interests, which are recorded at fair value, are reported in other assets.
The retained interests are regularly reviewed for impairment in accordance with EITF Issue No. 99-20.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table summarizes the changes in the Companys retained interests during the
three- and six-month periods ended June 30, 2005 and 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

|                                   | Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended
|---------------------------------- | ------------------ | ------------------ | ---------------- | ----------------
|(Dollars in thousands)             | June 30, 2005      | June 30, 2004      | June 30, 2005    | June 30, 2004   
|                                   |                    |                    |                  |                 
|Balance at beginning of period     | $60,203            | $40,733            | $72,733          | $28,672         
|Accreted Interest                  | 980                | 3,298              | 2,620            | 7,156           
|Cash flows from trusts             | -                  | (7,600)            | (6,050)          | (7,600)         
|Change in fair value               | (565)              | (2,834)            | (2,983)          | 5,369           
|Impairment                         | (6,115)            | -                  | (11,817)         | -               
|Securitization of the 2005-1 Trust | 58,922             | -                  | 58,922           | -               
|Extinguishment of the 2002 Trust   | (18,088)           | -                  | (18,088)         | -               
|                                   |                    |                    |                  |                 
|Balance at end of period           | $95,337            | $33,597            | $95,337          | $33,597         
|                                  

| | Initial and subsequent measurements of the fair value of the retained interests are performed using a discounted
         cash flow model.  The discount rate, basis spreads, anticipated net credit loss rate, average loan life, and
         borrower benefits are the key assumptions utilized to measure the fair value of the retained interests.  The
         Company estimates the market discount rate based on its required return on equity, which was 10% at June 30, 2005
         and December 31, 2004.  Changes in the prepayment rates also impact the valuation of the retained interests.
         Historical statistics on prepayments and borrower defaults are utilized to estimate prepayment rates. In
         addition, since the underlying asset class has long maturities, market data is also utilized to predict future
         prepayment speeds for periods into the future that are longer than the Company's historical data can predict.
         Previously, a prepayment curve called the Consolidation Loan Ramp (CLR) was used for the prepayment assumption.
         The CLR is the industry standard for predicting prepayment rates on loan consolidations. The CLR predicts prepayment
         rates at a graduated level from 0% to 8% over the first ten years and stays flat at 8% thereafter. Due to recent
         activity, the Company has raised its current prepayment ramp to graduated levels up to 10% in five to ten years.
         This was the primary contributor to the second quarter's retained interest impairment of $6.1 million and
         servicing asset impairment of $8.1 million. When prepayment rates increase and the average life of the student
         loan decreases, a corresponding decrease is reflected in the fair value of the retained interests.  Anticipated
         net credit losses are based on the benefits from the Exceptional Performer designation, resulting in an
         anticipated net credit loss assumption of 0% for the specific loans securitized.  If the Company were to lose its
         Exceptional Performer designation, the fair value of the retained interests at June 30, 2005 would be decreased by approximately $4.7 million.
         In addition, the loans held in the trusts are eligible for various borrower benefits of which the largest is a 1% rate reduction if the
         borrower makes 36, 48 or 60 consecutive on-time payments, depending on the program, and continues to make on time payments. Management has estimated that,
         on average, up to approximately 30% of the borrowers will receive the 1% rate reduction. This estimate is based
         on historical on-time payment statistics for similar assets in the Company's portfolio.  To the extent the actual
         results differ from this estimate, the fair value of the residual will be impacted accordingly.  In addition, a change in market interest rates could offset the value of the retained interests.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with the securitization of loans, the Company retains servicing rights which
entitle the Company to a future stream of cash flows based on the outstanding principal
balances of the loans and the contractual servicing fee. Failure to service the loans in
accordance with contractual requirements may lead to a termination of the servicing rights
and the loss of future servicing fees. As a result, the Company considers both the
securitized and owned student loans to be part of the business it manages. At June 30,
2005 and December 31, 2004, the Companys servicing assets were $47.1 million and
$28.2 million, respectively, representing the unamortized carrying value at that date.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21

| | The
following table summarizes the changes in the Companys servicing assets during the
three- and six-month periods ended June 30, 2005. The 2002 Trust had no servicing assets.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                   | Three Months Ended | Six Months Ended
|---------------------------------- | ------------------ | ----------------
|(Dollars in thousands)             | June 30, 2005      | June 30, 2005   
|                                   |                    |                 
|Balance at beginning of year       | $    27,029        | $    28,177     
|Securitization of the 2005-1 Trust | 29,114             | 29,114          
|Impairment                         | (8,096)            | (8,363)         
|Amortization                       | (935)              | (1,816)         
|                                   |                    |                 
|Balance at June 30, 2005           | $    47,112        | $    47,112     
|                                   |                    |                 

| | The
fair value of the servicing assets were $47.9 million and $28.5 million at June 30, 2005
and December 31, 2004, respectively, measured using discounts rate of 5.6% to 5.9%,
a servicing margin of 26 basis points and a prepayment rate of up to 10% in 5 to 10 years. The impairment charges recorded on the servicing asset
during the three- and six-month periods ended June 30, 2005 were a result of an increase
in the prepayment assumptions, as described above.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | See
Note 7 to the consolidated financial statements for further information on the
Companys securitization transactions.
| | -------------------------------------------------------------------------------------------------------------------------

Allowance for Loan Losses

| | The
Company has an allowance for loan losses for those loans or portions of loans in its
portfolio that are not 100% insured under government guarantees or private credit
insurance. The allowance provides a reserve for estimated losses on the portion of the
FFEL Program loan portfolio subject to the 2% risk-sharing provisions of the Act,
as well as the portion of the CitiAssist Loan portfolio that is subject to the
risk-sharing provisions of the credit risk insurance obtained from third parties after
considering the benefits of risk-sharing agreements with other third parties. Most insured
CitiAssist Loans are subject to risk-sharing provisions of 5% to 20% of the claim amount.
 The allowance primarily consists of a reserve for those CitiAssist Loans that are neither
insured against loss nor covered under risk-sharing agreements with third parties. These uninsured loans, which are fully reserved
at 120 days of delinquency are written off at that time. For
information on insured and uninsured CitiAssist Loans, reserves and delinquency rates at
June 30, 2005 and December 31, 2004, see note 3 to the consolidated financial statements.
Estimated provisions of probable future losses increase the allowance for loan losses and
are expensed currently. Actual losses are charged off against the reserve as they occur
and subsequent recoveries increase the reserve.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
January 1, 2004, the Company was designated as an Exceptional Performer by the Department
in recognition of its exceptional level of performance in servicing FFEL Program loans. As
a result of this designation, the Company receives 100% reimbursement on all eligible FFEL
Program default claims filed for reimbursement after December 31, 2003 on loans that are
serviced by the Company, and the Company is not subject to the 2% risk-sharing loss for
eligible claims submitted after that date.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Similarly, as of June 30, 2005, third party
servicers servicing $3.4 billion of the Companys FFEL Program loan portfolio have
the Exceptional Performer designation. During the second quarter of 2005, the Company was
notified that one of its third party servicers lost its Exceptional Performer designation
effective September 1, 2004. This resulted in the Companys accrual of $0.6
million of other liabilities for amounts refundable to guarantors. In addition, the Company increased its allowance by
$1.3 million to provide for probable risk-sharing costs associated with this portfolio. Of
the Companys FFEL Program loans, only those that are serviced by the Company or its
qualified and designated third party servicers are subject to this designation. Under
current Department rules, as long as the Company and these servicers continue to meet
eligibility standards and maintain their Exceptional Performer designation, their serviced
portfolios are not subject to the risk-sharing provisions and they will receive 100%
reimbursement on all eligible FFEL Program default claims filed.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys provision for loan losses for the second quarter of 2005 was $4.8 million,
$1.7 million higher than the provision for the same period of 2004. The increase is
attributable to a third party servicer that lost its Exceptional Performer designation, as
described above, as well as increases in the size of the CitiAssist Loan portfolio.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
size of the allowance is established based on amounts of estimated probable losses
inherent in the Companys CitiAssist and FFEL Program loan portfolios starting with
the first day of each loans delinquency. These losses are estimated from historical
delinquency and credit loss experience, updated for current conditions, applied
to the current aging of the portfolio. Actual losses, including those that arise from
claims with guarantors and private insurers, are charged against the allowance as they
occur. Changes in the quality of loans moving into repayment status as well as the
Companys collections strategies could impact the delinquency
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

22

| | rates and credit
losses. Past experience has indicated that either of these changes could significantly
impact the reserve requirements.
| | ----------------------------------------------------------------------------------------------------------------------------------------

| | An analysis of the allowance for loan losses and its components is presented in the
table below:
| | ------------------------------------------------------------------------------------------------

|(Dollars in thousands)         | Second Quarter 2005 | First Quarter 2005 | Fourth Quarter 2004 | Third Quarter 2004 | Second Quarter 2004
|------------------------------ | ------------------- | ------------------ | ------------------- | ------------------ | -------------------
|                               |                     |                    |                     |                    |                    
|Balance at beginning of period |                     |                    |                     |                    |                    
|FFEL Program                   | 1,602               | 1,753              | 1,821               | 1,950              | 2,722              
|CitiAssist                     | 2,744               | 3,293              | 3,724               | 3,596              | 2,423              
|                               | 4,346               | 5,046              | 5,545               | 5,546              | 5,145              
|Provision for loan losses      |                     |                    |                     |                    |                    
|FFEL Program                   | 919                 | 502                | (340)               | 166                | (228)              
|CitiAssist                     | 3,880               | 100                | 1,839               | 1,028              | 3,289              
|                               | 4,799               | 602                | 1,499               | 1,194              | 3,061              
|Charge Offs                    |                     |                    |                     |                    |                    
|FFEL Program                   | (1,184)             | (801)              | 83                  | (421)              | (648)              
|CitiAssist                     | (3,511)             | (1,470)            | (2,373)             | (1,086)            | (2,784)            
|                               | (4,695)             | (2,271)            | (2,290)             | (1,507)            | (3,432)            
|Recoveries                     |                     |                    |                     |                    |                    
|FFEL Program                   | 1                   | 148                | 189                 | 126                | 104                
|CitiAssist                     | 214                 | 821                | 103                 | 186                | 668                
|                               | 215                 | 969                | 292                 | 312                | 772                
|                               |                     |                    |                     |                    |                    
|Balance at end of period       |                     |                    |                     |                    |                    
|FFEL Program                   | 1,338               | 1,602              | 1,753               | 1,821              | 1,950              
|CitiAssist                     | 3,327               | 2,744              | 3,293               | 3,724              | 3,596              
|                               | $4,665              | $4,346             | $5,046              | $5,545             | $5,546             
|                              

Interest Rate Swap Agreements

| | From
time to time, the Company enters into interest rate swap agreements on portions of its
loan portfolio to manage its basis risk exposure resulting from interest rate variability
between the rates paid on its borrowings (based on LIBOR) and received on its loan assets
based on the 91-day Treasury Bill rate. In the second quarter of 2005, the Company entered
into several short-term interest rate swaps with CBNA that did not qualify for hedge
accounting treatment under SFAS No. 133,Accounting for Derivative Instruments and
Hedging Activities,as amended. The swaps, which matured in June 2005, had a notional
amount of $8.0 billion and incurred $0.1 million of interest expense in the second quarter
of 2005 ($0.7 million for the first six months of 2005). The Company had no other swap transactions
during the first six months of 2005 and no swaps outstanding at June 30, 2005. Prior to 2005,
the Company participated with CBNA in interest rate swap agreements that had been
designated as hedges and met the hedge accounting requirements of SFAS No. 133. These
swaps were effective in offsetting the changes in cash flow hedges for the risk being
hedged. All of the Companys outstanding swaps under this program matured on January
4, 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Special Allowance and Floor Income

| | Most
FFEL Program Stafford and PLUS Loans originated prior to July 23, 1992 have fixed interest
rates. Those originated subsequent to July 23, 1992 generally have variable rates. Most
FFEL Program loans also qualify for the federal governments special allowance
payment (SAP). Whenever the stated interest rate on these FFEL Program loans provides less
than prescribed rates of return, as defined by the Act, the federal government makes a
SAP, which increases the lenders loan yield by markups ranging from 1.74 to 3.50
percentage points per annum, over a base rate tied to either the 91-day Treasury Bill
auction yield or the 90-day Commercial Paper rate, depending on the loans
origination date.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
purposes of evaluating the Companys financial results, management determines floor
income to be the amount of additional interest income generated when net interest margin
exceeds the minimum expected spreads. Generally, floor income is earned in declining
short-term interest rate environments when the Companys cost of funds declines while
borrower and government subsidized interest rates remain fixed. Floor income, as
determined by the Company, is a financial measure that is not defined by U.S. generally
accepted accounting principles (GAAP). Depending on the manner in which the Companys
assets are funded, the Company may earn net interest margin spreads, which include floor
income, on portions of its portfolio. Also, the rate at which borrowers pay
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23

| | interest on
FFEL Program Consolidation Loans, which generally provides the Company with the majority
of its floor income, is generally fixed and is not subject to the annual reset provisions.
A decline in the Companys cost of funds during the term of such loans contributes to
floor income. Specifically, floor income occurs when the borrower rate less the
Department-stipulated asset spread is greater than the funding cost of the asset. For more
information on floor income, see the Companys 2004 Annual Report and Form 10-K.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the three- and six-month periods ended June 30, 2005, the Company earned $21.1 million and
$46.8 million, respectively, of floor income. During the three- and six-month periods
ended June 30, 2004, the Company earned $35.6 million and $72.6 million, respectively, of
floor income. The decrease in 2005 floor income, compared to the prior year, is primarily
attributable to higher 2005 short-term interest rates. Floor income, which is included in
interest income, may be further reduced in future quarters should short-term interest
rates continue to rise. The Company has entered into short-term fixed rate funding contracts on a portion of floor
income. However, should the implied forward rates rise, this funding opportunity will decline.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Taxes

| | The
Company is included in the consolidated federal income tax return of Citigroup, and is
also included in certain combined or unitary state/local income or franchise tax returns
of Citigroup or its subsidiaries.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Deferred
income taxes of $243.6 million at June 30, 2005 increased $57.5 million compared to
year-end 2004. This increase is primarily attributable to deferred tax liability increases of $44.4 million
related to deferred loan origination costs and $18.5 million related to the gain on the sale of loans
to the 2005-1 Trust, partially offset by the effects of the retained interest and servicing asset impairments and other
adjustments.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Liabilities

| | The
$18.3 million (5%) increase in other liabilities from $333.9 million at December 31, 2004
to $352.2 million at June 30, 2005 is primarily attributable to a change to a loan by loan amortization methodology
for certain loans, resulting in the accrual of some interest adjustments earlier than under the pool method.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Borrowings

| | The
Companys short- and long-term borrowings were procured primarily through the Omnibus
Credit Agreement with CBNA, which expires December 2009. Total short- and long-term borrowings of $25.0 billion at June
30, 2005 increased $1.2 billion compared to year-end 2004. The increased borrowings were
used to fund new loan originations and purchases.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
June 30, 2005 and 2004, the outstanding borrowings had contracted weighted average
interest rates of 3.0% and 1.4%, respectively, based on LIBOR at the time the borrowings
were established or rates reset. For the three-month periods ended June 30, 2005 and 2004,
the Company recorded $193.3 million and $76.0 million, respectively, in interest expense
payable to CBNA related to these borrowings. For the six-month periods ending June 30,
2005 and 2004, the Company incurred $346.6 million and $151.1 million, respectively, in
interest expense on its borrowings.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dividends

| | The
Company paid a quarterly dividend of $1.08 per common share on June 1, 2005. On July 13,
2005, the Board of Directors declared a regular quarterly dividend on the Companys
common stock of $1.08 per share to be paid September 1, 2005 to stockholders of record on
August 15, 2005.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sources and Uses of Cash

| | Cash
received from borrower repayments, claim payments and subsidized interest and SAP from the
federal government are the Companys primary sources of cash. The Company carefully
weighs interest rate risk in choosing between funding alternatives. Currently, it
primarily meets its funding requirements through credit facilities provided by CBNA. In
addition, from time to time the Company utilizes alternative sources of financing, such as
securitizations. The Companys primary uses of cash are for new loan originations and
purchases. The Companys current funding sources are sufficient to meet the
Companys cash needs for operational activities, including debt service.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

Results of Operations

Quarter Ended June 30, 2005

Net Income

| | Net
income was $80.9 million ($4.05 basic and diluted earnings per share) for the second
quarter of 2005. This was an increase of $11.2 million (16%) compared to earnings for the
same period last year. The increase in net income is primarily attributable to a securitization gain of $30.3 million (after tax) relating to the securitization
of $2.0 billion in student loans in the second quarter of 2005. An extraordinary gain of $5.5 million (after tax) relating to the
extinguishment of one of the Companys securitization trusts in the second quarter of
2005 also contributed to the net income growth. These gains were partially offset by a
$8.9 million (after tax) reduction in floor income, a securitization impairment charge of
$8.7 million (after tax) and increased operating expenses of $6.7 million (after tax) for
the quarter, compared to the same quarter of 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fee and other income

| | Fee
and other income increased $33.9 million from $5.2 million earned in the second quarter of
2004 to $39.1 million for the same period in 2005. Fee and other income for the second
quarter of 2005 included a $47.8 million (pretax) securitization gain on the sale of
student loan assets. Also related to the 2005 securitization, the Company recognized a $1.6 million (pretax) gain to record
the fair value of the retained interest, accounted for as a trading security. These second
quarter 2005 increases were partially offset by a $14.2 million (pre-tax) impairment
charge resulting from greater than expected loan prepayments in the 2004 Trust, which
reduced the values of the retained interest and servicing asset in the second quarter of 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net interest income

| | Net
interest income of $129.1 million for the second quarter of 2005 was $12.5 million (9%)
lower than for the same period of 2004. The net interest margin for the second quarter of
2005 was 1.92%, a decrease of 43 basis points from 2.35% for the same period of 2004. The decreases in net interest income and net interest margin were
primarily attributable to the $14.5 million (pre-tax) decrease in floor income for the second quarter of 2005 compared
to the same period of 2004 (see Special Allowance and Floor Income
on page 23 for further information).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating expenses

| | Total
operating expenses for the second quarter of 2005 of $40.3 million, increased $11.0
million (37%) from the same period last year. For the second quarter of 2005,
the Companys expense ratio, total operating expenses as a percentage of average
managed student loans, was 0.56%, an increase of seven basis points compared to the second
quarter 2004 ratio. This increase is reflective of expenses
related to portfolio growth and other ongoing infrastructure investments, including higher
amortization costs related to computer software upgrades.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Extraordinary Item

| | The
Company recorded an extraordinary gain from the extinguishment of one of the
Companys securitization trusts in the second quarter of 2005. The extinguishment
resulted in a pretax gain of $8.9 million resulting from the transfer at fair value of
$370.3 million of student loan assets back to the Company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Loan losses

| | The
provision for loan losses increased $1.7 million to $4.8 million for the second quarter of
2005 from $3.1 million for the same period last year. Of this increase, $1.3 million was
attributable to the loss of the Exceptional Performer designation by a third party
servicer vendor in the second quarter of 2005, retroactive to September 1, 2004. Increases
in the size of the CitiAssist Loan portfolio in repayment also contributed to the
provision increase. Of the $4.7 million balance in the Companys allowance for loan losses at June 30, 2005,
$1.4 million is for its FFEL Program portfolio and $3.3 million is for its CitiAssist Loan portfolio.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Return on Average Equity

| | The
Companys return on average equity was 26.8% for the second quarter of 2005, down
0.7% compared to 27.5% for the same period of 2004. The decrease was a result of the
larger equity base.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

Effect of Taxes

| | The
Companys effective tax rates were 38.7% for the second quarter of 2005, and 39.1%
for the same period of the prior year.
| | -----------------------------------------------------------------------------------------------------------------------------

Six Months Ended June 30, 2005

Net income

| | Net
income was $147.0 million ($7.35 basic and diluted earnings per share) for the first six
month period of 2005. This was an increase of $4.5 million (3%) compared to earnings for
the same period last year. The increase in net income is primarily attributable to the
second quarter 2005 gain on sale of $30.3 million (after tax) relating to the
securitization of $2.0 billion in student loans and an extraordinary gain of $5.5 million
(after tax) relating to the extinguishment of one of the Companys securitization
trusts in the second quarter of 2005. These gains were partially offset by a $15.8 million
(after tax) reduction in floor income, a securitization impairment charge of $12.4 million
(after tax) and increased operating expenses for the six-month period, compared to the same period of 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fee
and other income

| | Fee
and other income increased $19.1 million from $19.2 million earned during the first six
month period of 2004 to $38.3 million for the same period in 2005. Fee and other income
included a second quarter 2005 securitization gain on sale of $47.8 million (pre-tax). The
Company also recognized a $1.6 million (pretax) gain to record the fair value of the
retained interest, accounted for as a trading security, partially offset by a $20.2 million
(pre-tax) impairment charge resulting from a decline in the values of the 2004
securitization retained interest and servicing asset. In addition, the first quarter of
2004 included a pre-tax gain of $8.1 million in fee and other income related to
nonrecurring portfolio sales.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net
interest income

| | Net
interest income of $257.9 million for the first six month period of 2005 was $14.7 million
(5%) lower than that for the same period of 2004. The net interest margin for the first six month
period of 2005 was 1.97%, down 32 basis points from 2.29% for the same period of 2004. The decreases in net interest income and net interest margin were
primarily attributable to the $25.8 million (pre-tax) decrease in floor income for the first six months of 2005
compared to the same period of 2004.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating
expenses

| | Total
operating expenses for the first six month period of 2005 of $68.2 million increased
$10.1 million (17%) from the same period last year. This increase is reflective of
expenses related to portfolio growth and other ongoing infrastructure investments,
including higher amortization costs related to computer software upgrades. For the first
six month period of 2005, the Companys expense ratio, total operating expenses as a
percentage of average managed student loans, was 0.49%, consistent with that of the second
quarter of 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Loan
losses

| | The
Companys provision for loan losses of $5.4 million increased $0.1 million for the
first six months of 2005 compared to the same period last year. The increase was primarily
attributable to the loss of the Exceptional Performer designation by a third party
servicer vendor in the second quarter of 2005, retroactive to September 1, 2004. Of the
$4.7 million balance in the Companys allowance for loan losses at June 30, 2005,
$1.4 million is for its FFEL Program portfolio and $3.3 million is for its CitiAssist Loan
portfolio.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Return
on Average Equity

| | The
Companys return on average equity was 24.9% for the first six months of 2005, down
4.1% compared to 29.0% for the same period of 2004. The decrease was a result of the
larger equity base.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Effect
of Taxes

| | The
Companys effective tax rates were 36.5% for the first six months of 2005, and 37.6%
for the same period of the prior year. The decrease in the effective tax rate was
primarily attributable to a reduction in tax estimates for certain states and the impact
of the reduction on the Companys existing deferred tax assets and liabilities.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

Regulatory Impacts

| | Over
the past decade, certain amendments to the Act governing the FFEL Program have reduced the
interest spread earned by holders of FFEL Program guaranteed student loans as new loans
with lower yields were added to the portfolio and older, more profitable loans were
repaid. Despite reductions in funding costs and their effects on net income, pressure on
margins is expected to continue as more loans are originated with lower lender yields.
Amendments to the Act also introduced a competitor program, the Federal Direct Student
Loan Program (Direct Lending), in which private lenders, such as the Company, do not
participate. Direct Lending accounts for less than 24%, on a national basis, of all
student loans originated under federally sponsored programs. In addition, reauthorization
of the Act, which may occur in 2005, may result in a reduction in Exceptional Performer
benefits below the current 100% claim guarantee. The reauthorization, as well as other
amendments to the Act, which could ultimately result in further reductions in FFEL Program
loan subsidies and lender net interest margins, could influence customer prepayments. Any
reduction below the 100% claim guarantee would result in higher net credit losses. Any
such amendments, in part or in combination, could adversely affect the Companys
business and prospects.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company continues to search for ways to take advantage of greater economies of scale. It
is pursuing both new and existing marketing programs and continues to expand its guarantor
relationships and pursue alternative loan products, such as CitiAssist, that are not
dependent on federal funding and program authorization.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Certain
of the statements above are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. See Forward-Looking Statements below.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Forward Looking Statements

| | Certain
statements contained in this report that are not historical facts are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act. The
Companys actual results may differ materially from those suggested by the
forward-looking statements, which are typically identified by the words or phrases
believe, expect, anticipate, intend,
estimate, may increase, may result in, and similar
expressions or future or conditional verbs such as will, should,
would and could. These forward-looking statements involve risks
and uncertainties including, but not limited to: the effects of legislative changes,
particularly those relating to the re-authorization and amendment of the Federal Higher
Education Act of 1965, as amended: the demand for and interest rates on student loans;
loan origination costs; the availability and amount of loan subsidies; the cost of
education; the availability of alternative financing options to students and their
parents, including competitive products offered by other lenders; the effects of changes
in accounting standards; actual credit losses, loan collection strategies and their impact
on delinquency rates, and the adequacy of loan loss reserves; fluctuations in interest
rates and between various interest rate indices, particularly the manner in which
short-term rates affect the Companys funding costs, consolidation rates, the rates
at which interest accrues on its loan portfolio, the demand for student loans, and floor
income; changes in prepayment rates on student loans from anticipated rates and in the
quality and profitability of those loans that move into repayment status; the
Companys and other servicers ability to continue to service the loan portfolio
in accordance with its contractual obligations; the volume of loan consolidations; the
Companys and other servicers ability to maintain their Exceptional Performer
status and the level of benefits available to servicers with that designation; the volume
of timely loan payments by borrowers on the reduction of applicable loan interest rates;
the adequacy of the Companys capital expenditures and the success of its marketing
efforts; the Companys ability to acquire or originate loans in the amounts
anticipated and with interest rates that generate sufficient yields and margins; the
Companys ability to continue to develop its electronic commerce initiatives; the
performance of the Companys loan portfolio servicers, insurers and risk-sharers; the
adequacy of funds allocated for future capital expenditures; the Companys ability to
utilize alternative sources of funding, including its ability to continue to securitize
loan portfolios; as well as general economic conditions, including the performance of
financial markets.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27

Item 3.      Quantitative and Qualitative Discussion About Market Risk

| | The
Companys primary market risk exposure results from fluctuations in the spreads
between the Companys borrowing and lending rates, which may be impacted by shifts in
market interest rates. Market risk is measured using various tools, including
Earnings-at-Risk. The Earnings-at-Risk calculation seeks to estimate the effect that
shifts in interest rates are expected to have on net interest margin in future periods.
The Company prepares Earnings-at-Risk calculations to measure the discounted pre-tax
earnings impact over a preset time span of a specific parallel upward and downward shift
in the interest rate yield curve. The Earnings-at-Risk calculation, a static and passive
measurement that excludes managements responses to prospective changes in market
interest rates, reflects the repricing gaps in the position as well as option positions,
both explicit and embedded, in the loan portfolio. Earnings-at-Risk is calculated by
multiplying the gap between interest sensitive items, including assets, liabilities and
derivative instruments, by 35 and 100 basis point changes in the yield curve. A 35 basis
point change in the yield curve represents approximately a two standard deviation change.
The one hundred basis point information is provided for comparative purposes.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Earnings-at-Risk calculation measures the Companys position at one point in time. As
indicated in the table below, as of June 30, 2005, a 35 basis point increase in the
interest yield curve would have a potential negative impact on the Companys pretax
earnings of approximately $15.3 million for the next twelve months and approximately $81.2
million thereafter. A 35 basis point decrease in the interest yield curve as of June 30,
2005 would have a potential positive impact on the Companys pretax earnings of
approximately $16.1 million for the next twelve months and approximately $81.1 million
thereafter. The increase in the June 30, 2005 Earnings-at-Risk, compared to that at June
30, 2004, was due to the change in the interest rate environment and its impact on floor
income.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Earnings-at-Risk (on pre-tax
earnings)
|--------------------------------------
|                                      
|                                      
|                                      
|(Dollars in millions)                 
|                                      
|Thirty-five basis point increase      
|Thirty-five basis point decrease      
|One hundred basis point increase      
|One hundred basis point decrease      
|                                      

| | In
addition, the Company has significantly greater exposure to uneven shifts in interest rate
curves (i.e., the Treasury Bill to LIBOR rate spreads). The Company, through its
Asset/Liability Management Committee, actively manages these risks by setting
Earnings-at-Risk limits and takes actions in response to interest rate movements against
the existing structure.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

28

Item 4.      Controls and Procedures

(a) Disclosure Controls and Procedures

| | The
Companys management, with the participation of the Companys Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the Companys
disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of
the end of the period covered by this report. Based on such evaluation, the Companys
Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of
such period, the Companys disclosure controls and procedures are effective in
recording, processing, summarizing and reporting, on a timely basis, information required
to be disclosed by the Company in the reports that it files or submits under the Exchange
Act.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b) Internal Control Over Financial Reporting

| | There
have not been any changes in the Companys internal controls over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
the fiscal quarter to which this report relates that have materially affected, or are reasonably likely
to materially affect, the Companys internal control over financial reporting.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29

PART II   OTHER INFORMATION

Item 4.    
Submission of Matters to a Vote of Security Holders

| | At
the Companys 2005 Annual Meeting of Stockholders, held May 19, 2005, the
Companys Stockholders took the following      action:
| | -----------------------------------------------------------------------------------------------------------------------------------

| | 1.  

                     Five directors were elected to the Board of Directors: Gina Doynow (with
                    holders of 18,381,719 shares voting in favor, 1,350,556 shares withheld and none
                    abstaining); Rodman L. Drake (with holders of 19,647,934 shares voting in favor,
                    84,341 shares withheld and none abstaining); Stephanie B. Mudick (with holders
                    of 18,381,819 shares voting in favor, 1,350,456 shares withheld and none
                    abstaining); Michael J. Reardon (with holders of 18,180,738 shares voting in
                    favor, 1,551,537 shares withheld and none abstaining); Simon Williams (with
                    holders of 18,382,238 shares voting in favor, 1,350,036 shares withheld and none
                    abstaining). Ms. Doynow, Mr. Drake and Ms. Mudick will serve until the year 2008
                    annual meeting of stockholders. Mr. Reardon will serve until the year 2007
                    annual meeting of stockholders and Mr. Williams will serve until the 2006 annual
                    meeting of stockholders.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.  

                     The selection of KPMG LLP as the Companys independent auditors for the
                    2005 fiscal year was ratified (with holders of 19,385,034 shares voting in
                    favor, 325,101 voting against and 21,140 abstaining).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 6.     
Exhibits

| | See Exhibit Index.
| | ------------------

30

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 8, 2005

The Student Loan Corporation

By /s/ Daniel P. McHugh      Daniel P. McHugh                                              Principal Financial and Accounting Officer

31

EXHIBIT INDEX



|Exhibit Number |  | Description of Exhibit                                                                                                                                                                                                                                                        
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              
|3.1            |  | Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Companys
1992 Annual Report on Form 10-K (File No. 1-11616).                                                                                                           
|              
|3.2            |  | By-Laws of the Company, as amended, incorporated by reference to Exhibit 3.2 to the Companys Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1993 (File No. 1-11616).                                                                                    
|              
|10.1           |  | Trust Agreement, dated as of December 21, 1992, between the Company and CNYS, incorporated by reference to Exhibit
10.2 to the Companys 1992 Annual Report on Form 10-K (File No. 1-11616).                                                                                  
|              
|10.2.1         |  | Non-Competition Agreement, dated as of December 22, 1992, among the Company, CNYS and Citicorp, incorporated by reference to Exhibit
10.4 to the Companys 1992 Annual Report on Form 10-K (File No. 1-11616).                                                                
|              
|10.2.2         |  | Amendment No. 1, dated as of June 22, 2000, to Non-Competition Agreement among the Company, CNYS and Citigroup
Inc., incorporated by reference to Exhibit 10.2.2 to the Company's 2001 Annual Report on Form 10-K (File No. 1-11616).                                         
|              
|10.2.3         |  | Amendment No. 2, dated as of June 22, 2001, to Non-Competition Agreement among the Company, CNYS and Citigroup
Inc., incorporated by reference to Exhibit 10.2.3 to the Company's 2001 Annual Report on Form 10-K (File No. 1-11616).                                         
|              
|10.2.4         |  | Amendment No. 3, dated as of May 5, 2002, to Non-Competition Agreement among the Company, CNYS and Citigroup
Inc., incorporated by reference to Exhibit 10.2.4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2004 (File No. 1-11616).  
|              
|10.2.5         |  | Amendment No. 4, dated as of June 22, 2003, to Non-Competition Agreement among the Company, CNYS and Citigroup
Inc., incorporated by reference to Exhibit 10.2.5 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2004 (File No. 1-11616).
|              
|10.2.6         |  | Amendment No. 5, dated as of June 22, 2004, to Non-Competition Agreement among the Company, CBNA and Citigroup
Inc., incorporated by reference to Exhibit 10.2.6 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2004 (File No. 1-11616).
|              
|10.2.7     *   |  | Amendment No. 6, dated as of June 22, 2005, to Non-Competition Agreement among the Company, CBNA and Citigroup
Inc.                                                                                                                                                           
|              
|10.3           |  | Tax Agreement, dated as of December 22, 1992, between the Company and CNYS, incorporated by reference to Exhibit 10.5
to the Companys 1992 Annual Report on Form 10-K (File No. 1-11616).                                                                                    
|              
|10.4           |  | Omnibus Credit Agreement, dated November 30, 2000, between the Company and CNYS, incorporated by reference to Exhibit
10.10 to the Companys 2000 Annual Report on Form 10-K (File No. 1-11616).                                                                              
|              
|10.4.1         |  | Amendment No. 1, dated as of October 15, 2002, to Omnibus Credit Agreement between the Company and CNYS, incorporated by reference to Exhibit 10.4.1 to the Company's 2002 Annual Report on Form 10-K (File No. 1-11616).                                                     
|              
|10.4.2         |  | Amendment No. 2, dated as of March 5, 2004, to Omnibus Credit Agreement between the Company and CBNA (as successor to CNYS), incorporated by reference to Exhibit 10.4.2 to the Company's 2003
Annual Report on Form 10-K (File No. 1-11616).                                 
|              
|10.4.3         |  | Amendment No. 3, dated as of January 20, 2005, to Omnibus Credit Agreement between the Company and CBNA (as successor to CNYS), incorporated by reference to Exhibit 10.4.3 to the Current Report on
Form 8-K filed January 20, 2005 (File No. 1-11616).                      
|              
|10.5           |  | Facilities Occupancy, Management and Support Service Agreement, dated as of January 1, 1998, by and between the
Company, CNYS and Citicorp North America, Inc., incorporated by reference to Exhibit 10.5 to the Company's 2001 Annual Report on Form 10-K (File No. 1-11616).
|              
|10.6           |  | Retention Agreement for Sue F. Roberts, dated April 28, 2003, incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2004 (File No. 1-11616).                                                        
|              
|10.6.1         |  | Letter Agreement, dated as of February 11, 2005, by and between the
Company and Sue F. Roberts.                                                                                                                                                                               
|              
|10.7           |  | Amended and Restated Agreement for Educational Loan Servicing among the Company, Citibank USA, N.A. and Citibank, N.A.                                                                                                                                                        
|              
|31.1     *     |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                       
|              
|31.2     *     |  | Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                        
|              
|32.1     *     |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                

---

*Filed herewith



32