|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 March 31,
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 April 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-Month Periods         Ended March 31, 2005 and 2004..............................................................................................................
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             |                       | Consolidated Balance Sheet as of March 31, 2005 (Unaudited)         and December 31, 2004 (Audited)............................................................................................................             
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             |                       | Consolidated Statement of Cash Flows (Unaudited) for the Three-Month          Periods Ended March 31, 2005 and 2004.................................................................................................        
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             |                       | Consolidated Statement of Changes in Stockholders' Equity (Unaudited)          for the Three-Month Periods Ended March 31, 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 6 -              | Exhibits..............................................................................................................................................................                                                      
|                                                                                                                                                                                                            
|Signature................................................................................................................................................................................................... | 27                   
|                                                                                                                                                                                                            
|Exhibit Index.............................................................................................................................................................................................   | 28                   
|                                                                                                                                                                                                            

2

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

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

|                                                                    | Three months ended March 31,
|------------------------------------------------------------------- | ----------------------------
|                                                                    | 2005                        
|
|Interest income                                                     | $ 282,936                   
|Interest expense                                                    | 154,041                     
|Net interest income                                                 | 128,895                     
|Less: provision for loan losses                                     | (602)                       
|Net interest income after provision for loan losses                 | 128,293                     
|Fee and other income                                                | (781)                       
|Total revenue, net                                                  | 127,512                     
|                                                                   
|
|Salaries and employee benefits                                      | 11,413                      
|Other expenses                                                      | 16,521                      
|Total operating expenses                                            | 27,934                      
|Income before income taxes                                          | 99,578                      
|Income taxes                                                        | 33,443                      
|$  66,135                                                           | $   72,860                  
|                                                                   
|$  21,600                                                           | $   18,000                  
|                                                                   
|
|
|(based on 20 million average shares outstanding)                    | $      3.31                 
|                                                                   
|$      1.08                                                         | $       0.90                
|                                                                   
|
|Net interest margin                                                 | 2.03%                       
|Operating expenses as a percentage of average managed student loans | 0.41%                       
|Return on Equity                                                    | 23.0%                       
|                                                                   

See accompanying notes to consolidated financial statements.

3

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

|                                                                 | March 31,    | December 31,
|---------------------------------------------------------------- | ------------ | ------------
|                                                                 | 2005         | 2004        
|                                                                 | (Unaudited)  | (Audited)   
|
|Student loans                                                    | $ 24,462,778 | $ 22,958,295
|Less: allowance for loan losses                                  | (4,346)      | (5,046)     
|Student loans, net                                               | 24,458,432   | 22,953,249  
|Loans held for sale                                              | 1,935,378    | 1,930,300   
|Cash                                                             | 958          | 628         
|Other assets                                                     | 604,765      | 568,664     
|                                                                
|$ 26,999,533                                                     | $
25,452,841
|                                                                
|                                                                
|
|Short-term borrowings                                            | $ 22,519,100 | $ 20,986,000
|Long-term borrowings                                             | 2,800,000    | 2,800,000   
|Deferred income taxes                                            | 199,722      | 186,082     
|Other liabilities                                                | 290,630      | 333,852     
|                                                                
|Total
Liabilities                                                | 25,809,452   | 24,305,934  
|                                                                
|Common stock, $.01 par value;
authorized 50,000,000             
|shares; 20,000,000
shares issued and outstanding                 | 200          | 200         
|Additional paid-in capital                                       | 139,249      | 139,176     
|Retained earnings                                                | 1,044,237    | 999,702     
|Accumulated other changes in equity
from nonowner        sources | 6,395        | 7,829       
|                                                                
|Total Stockholders'
Equity                                       | 1,190,081    | 1,146,907   
|                                                                
|$ 26,999,533                                                     | $ 25,452,841
|                                                                
|                                                                
|$ 25,763,313                                                     | $ 24,558,094
|(year-to-date)                                                  
|                                                                
|$ 27,578,409                                                     | $ 25,246,652
|(year-to-date)                                                  

See accompanying notes to consolidated financial statements.

4

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

|                                                                 | Three months ended
|---------------------------------------------------------------- | ------------------
|                                                                 | March 31,         
|                                                                 | 2005              
|Cash flows from operating activities:                           
|Net income                                                       | $    66,135       
|Adjustments to reconcile net income to                          
|net cash from operating
activities:                             
|Depreciation and amortization of equipment and computer software | 3,261             
|Amortization of servicing asset                                  | 881               
|Amortization of deferred loan origination and purchase costs     | 26,576            
|Provision for loan losses                                        | 602               
|Deferred tax provison                                            | 14,624            
|Gain on sale of loan assets                                      | (27)              
|Impairment loss on securitization assets                         | 5,968             
|(Increase)/decrease in accrued interest receivable               | (48,963)          
|(Increase) in other assets                                       | (997)             
|(Decrease) in other liabilities                                  | (43,148)          
|Net cash provided by operating activities                        | 24,912            
|                                                                
|Cash flows from investing activities:                           
|Disbursements of loans                                           | (1,180,908)       
|Loan portfolio purchases                                         | (1,355,037)       
|Loan purchases held for
sale                                     | (32,722)          
|Loan reductions                                                  | 1,104,875         
|Net (increase) in loan origination and purchase costs            | (74,394)          
|Proceeds from loans sold                                         | 775               
|Return on retained interest investments                          | 6,050             
|Capital expenditures on equipment
and computer software          | (4,721)           
|Net cash used in investing activities                            | (1,536,082)       
|                                                                
|Cash flows from financing activities:                           
|Net increase in borrowings
with original                        
|maturities of one
year or less                                   | 4,683,100         
|Repayments of borrowings with original terms of one year or more | (3,150,000)       
|Dividends paid to stockholders                                   | (21,600)          
|Net cash provided by financing activities                        | 1,511,500         
|                                                                
|Net increase in cash                                             | 330               
|Cash - beginning of period                                       | 628               
|                                                                
|Cash - end of period                                             | $         
958    
|                                                                
|Supplemental disclosure:                                        
|Cash paid for:                                                  
|Interest                                                         | $   132,768       
|Income taxes, net                                                | $     53,777      

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)                                              
|                                                         
|                                                         
|                                                         

|                                                                  | Three months ended
|----------------------------------------------------------------- | ------------------
|                                                                  | March 31,         
|                                                                  | 2005              
|COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL                      
|Balance, beginning of period                                      | $    139,376      
|Other                                                             | 73                
|Balance, end of period                                            | $    139,449      
|                                                                 
|RETAINED EARNINGS                                                
|Balance, beginning of period                                      | $    999,702      
|Net income                                                        | 66,135            
|Common dividends declared, $1.08
per common share in 2005;        |                   
|$0.90 per common share in 2004                                    | (21,600)          
|Balance, end of period                                            | $ 1,044,237       
|                                                                 
|ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER
SOURCES        
|Balance, beginning of period                                      | $        7,829    
|Net change in cash flow hedges,
net of taxes of $276 in 2004      | -                 
|Net change in unrealized (losses)/gains on investment securities, |                   
|net of taxes of $(984) in 2005 and $3,067 in 2004                 | (1,434)           
|Balance, end of period                                            | $        6,395    
|                                                                 
|TOTAL STOCKHOLDERS' EQUITY                                        | $ 1,190,081       
|                                                                 
|SUMMARY OF CHANGES IN EQUITY FROM NONOWNER SOURCES               
|Net income                                                        | $      66,135     
|Changes in equity from nonowner sources, net of taxes             | (1,434)           
|Total changes in equity from nonowner sources                     | $      64,701     

See accompanying notes to consolidated financial
statements.

6

# THE STUDENT LOAN CORPORATIONNotes to Consolidated Financial Statements (Unaudited)
March 31, 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 March 31, 2005 and for the three-month periods
ended March 31, 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-month periods
ended March 31, 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Certain
amounts in the prior years financial statements have been reclassified to conform
with the current years presentation. Such reclassifications had no effect on the
results of operations as previously reported.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Federal
Family Education Loan (FFEL) Program premiums on loan portfolio purchases and loan
origination costs paid on disbursements as well as premiums and referral fees paid on
CitiAssist Loans are deferred and amortized to interest income on a level spread basis
over the expected weighted average life of the student loans in those portfolios on a pool
basis 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 insurance costs are amortized on a loan by
loan 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 be subsequently 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 spread 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 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

| | 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 over the expected weighted average lives of the student loans in those
portfolios. The determination of the expected weighted average life 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 insured against loss by private insurers or are covered under other
risk-sharing agreements with creditworthy universities.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 (i.e. 2%) 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 all previously 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 considering 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 and 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 at 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 are reflective of the difference between the carrying value of the assets sold to the trust and the fair value of the assets received, which are composed of cash
proceeds and the assets retained in the loans securitized.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 SPE obtains the cash to pay for the loan assets by issuing securities to
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, resulting in less
expensive financing costs. At March 31, 2005, the Companys SPEs met the requirements of QSPEs,
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 Companys SPEs were not consolidated with the
financial statements of the Company.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
a transfer of financial assets to be considered a sale, financial assets transferred by
the Company must have been isolated from the seller, even in bankruptcy or other
receivership; the purchaser must have the right to sell the assets transferred, or the
purchaser must be a QSPE meeting certain significant
restrictions on its activities, whose investors have the right to sell their ownership
interests in the entity; and the seller does not continue to control the assets
transferred through an agreement to repurchase them or have a 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
would not be consolidated with the Companys
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

| | other assets in the event of the
SPE's insolvency.
| | --------------------------------------------------

| | Servicing
assets, included in other assets on the consolidated balance sheet, are initially recorded in an amount
equal to the present value 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
value at the date of securitization. It is subsequently amortized in proportion to and
over the period of estimated net servicing income and is assessed for impairment based on
its current fair value.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
residual retained interests from the securitizations are accounted for as investments in
available-for-sale securities and are included in other assets. The retained interests are
carried at their estimated fair value at the balance sheet date. Changes in fair value are
recorded, net of applicable income taxes, in accumulated other changes in equity from
nonowner sources. Interest accreted on the retained interest is recorded on the effective
yield basis. Changes in expected future cash flows are reflected in the yield on a
prospective basis. The retained interest is regularly reviewed for impairment and
other-than-temporary impairment, if any, is recognized as a charge to earnings when
identified 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 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, borrower benefits and discount
rates.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Loans Held for Sale

| | Loans
held for sale are primarily those loans originated or purchased by the Company for future
securitization and are recorded at the lower of cost, including principal and deferred
costs, or market value. For the three month periods ended March 31, 2005 and 2004, the
market value exceeded the cost and no valuation allowance was necessary.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 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

| | Other Than Temporary Impairment
On December 31, 2004, the Company adopted the disclosure requirements of EITF 03-1,The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,
which provides guidance on recognizing other-than temporary impairments on certain
investments. Adoption of EITF 03-1 had no impact on the Companys disclosures.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Certain
Loans or Debt Securities Acquired in a Transfer
On
January 1, 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). SOP
03-3 requires acquired loans to be brought in at fair value and prohibits carrying over
valuation allowances in the initial accounting for loans that have exhibited deterioration
in credit quality since origination 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, loans originated by the entity, loans that are retained interests 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. Adoption of SOP 03-3 had no
material impact on the Companys financial position or results from operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 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. At March 31, 2005, the Companys student loan portfolio
was composed of $9.7 billion of Federal
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

| | Stafford, $10.8 billion of Federal Consolidation,
$4.1 billion of CitiAssist, and $1.2 billion of other federally guaranteed loans,
primarily Federal Parent Loans to Undergraduate Students (PLUS), and in addition includes
deferred costs of $0.6 billion. At December 31, 2004, the Companys student loan
portfolio was composed of $9.3 billion of Federal Stafford, $10.2 billion of Federal
Consolidation, $3.6 billion of CitiAssist, and $1.2 billion of other federally guaranteed
loans, and also includes deferred costs of $0.6 billion.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Included
in the Federal Consolidation loan amounts above is an inventory of student loans held for
sale of $1.9 billion at each of March 31, 2005 and December 31, 2004.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The table below shows the Company's CitiAssist Loan delinquency trends as of March 31, 2005 and December 31, 2004.
Delinquencies impact earnings through charge offs, and increased servicing and collection fees.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(Dollars in thousands)                                                                                            | March 31, 2005  | December 31, 2004
|----------------------------------------------------------------------------------------------------------------- | --------------- | -----------------
|                                                                                                                  |                 |                  
|Total CitiAssist Loans                                                                                            | $  4,073,812    | $  3,648,496     
|CitiAssist Loans in repayment                                                                                     | $  1,830,786    | $  1,882,280     
|CitiAssist Loans delinquent 30-89 days as a % of total CitiAssist Loans in repayment                              | 2.0%            | 1.7%             
|CitiAssist Loans delinquent 90 days or greater as a % of total CitiAssist Loans in    repayment                   | 1.0%            | 0.6%             
|Total loan loss reserve for CitiAssist Loans                                                                      | $        3,659  | $        3,293   
|Loan loss reserve for CitiAssist Loans as a % of total CitiAssist Loans that are    delinquent 90 days or greater | 20.0%           | 27.4%            
|Total CitiAssist Loans insured by third party insurers                                                            | $  3,522,310    | $  3,100,596     
|Total uninsured CitiAssist Loans                                                                                  | $       551,502 | $        547,900 
|Uninsured CitiAssist Loans covered under risk-sharing agreements with schools and    universities                 | $       364,049 | $        357,091 

# 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, including the Omnibus Credit
Agreement, the 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-month periods ended March 31, 2005 and
2004.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys loan portfolio primarily consists 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 $7.4 million and
$7.3 million for the three-month periods ended March 31, 2005 and 2004, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition, the Company earned loan origination and servicing revenue of $1.7 million and
$3.4 million for the three-month periods ended March 31, 2005 and 2004, respectively, for
work performed by the Company on CitiAssist Loans held by CBNA prior to purchase by the
Company.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 each of the
quarters ended March 31, 2005 and 2004, $0.3 million was paid to CBNA under this
agreement. At March 31, 2005, the Company has 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. Amounts of $53.7 million and $24.3 million were paid to Citigroup during the
quarters ended March 31, 2005 and 2004, respectively, for tax allocation payments.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company had outstanding short- and long-term unsecured borrowings with CBNA of $22.5
billion and $2.8 billion, respectively, at March 31, 2005 and $21.0 billion and $2.8
billion, respectively, at December 31, 2004, incurred under the terms of an Omnibus
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

| | Credit
Agreement with CBNA. This agreement provides for $30 billion in total credit at March 31,
2005. At March 31, 2005 and 2004, the Companys outstanding borrowings had contracted
weighted average interest rates of 2.6% and 1.3%, respectively, based on LIBOR at the time
the borrowings were established or rates reset. For the three-month periods ended March
31, 2005 and 2004, the Company incurred $153.4 million and $75.1 million, respectively, in
interest expense payable to CBNA related to these borrowings.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
March 31, 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,
are contracted to mature between July 2005 and January 2006, and have fixed interest rates
ranging from 2.1% to 3.2%.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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, income tax payments, 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 March 31, 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, but 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-month periods ended March 31, 2005 and 2004:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(Dollars in thousands) | 2005 | 2004
|---------------------- | ---- | ----
|                       |      |     

|Balance at beginning of period                                                 | $  ---- | $  (959)
|------------------------------------------------------------------------------ | ------- | --------
|Net unrealized gain from cash flow    hedges (net of taxes of $84 for 2004)    | ----    | 121     
|Net amounts reclassified to interest   expense (net of taxes of $192 for 2004) | ----    | 275     
|                                                                               |         |         
|Balance at end of period                                                       | $  ---- | $  (563)
|                                                                               |         |         

| | In
the first quarter of 2005, the Company participated in several short-term interest rate
swaps with CBNA that did not qualify for hedge accounting treatment under SFAS No. 133.
These swaps, which matured in March 2005, resulted in the incurrence of $0.6 million of
interest expense in the first quarter of 2005.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 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 would not likely have a material adverse effect on the results of the
Companys operations, financial condition or liquidity.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
March 2005, the Company settled tax disputes with both the State of Connecticut Department
of Revenue Services and the State of Florida Department of Revenue. The resolution of
these proceedings did not have a material effect on the results of the
Companys operations, financial condition or liquidity.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

# 7.       Student Loan Securitization

| | The
Company maintains a program to securitize certain portfolios of FFEL Program student loan
assets and enters into securitization transactions from time to time. The Company 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 March 31, 2005, the Companys securitizations used trust
arrangements that met the QSPE conditions of SFAS No.
140, and, therefore, its QSPEs' financial statements were not consolidated with the
financial statements of the Company. No new securitization transactions were entered into
during the first quarter of 2005.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
March 31, 2005 and December 31, 2004, approximately $1.8 billion of student loan assets
were held by the trusts. At March 31, 2005 and December 31, 2004, the Company had retained
interests in the assets securitized of approximately $60.2 million and $72.7 million,
respectively, recorded at fair value. The $12.5 million decrease in the retained interest
for the three-month period ended March 31, 2005 was due to a $2.4 million decrease in the
fair value estimate, an impairment of $5.7 million and $6.0 million cash received from the
trust, partially offset by the accretion of interest income of $1.6 million in the first
three months of 2005. The impairment was recorded as a reduction of fee and other income.
Interest income of $1.6 million and $3.9 million was accreted on the retained interests in
the trusts during the first three months of 2005 and 2004, respectively. During the first
quarters of 2005 and 2004, the trusts paid $10.8 million and $1.1 million, respectively,
in note interest to third party investors.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company accounts for the retained interests as investments in available-for-sale
securities and records them in other assets in the consolidated financial statements. At
March 31, 2005, the Company had an unrealized holding gain on its retained interests of
$6.4 million (net of taxes of $4.0 million), recorded in accumulated other changes in
equity from nonowner sources.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 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 unsecuritized student loans to be part of the business it
manages. At March 31, 2005 and December 31, 2004, the Companys servicing asset was
$27.0 million and $28.2 million, respectively, representing the amount of unamortized
carrying value at that date. The fair value of the servicing asset was $27.0 million and
$28.5 million at March 31, 2005 and December 31, 2004, respectively, measured using the
following key assumptions: discount rate of 5.88%, servicing revenue of 49 basis points
and fair market value of the servicing costs of approximately 23 basis points. An impairment charge of $0.3 million was recorded on the servicing
asset during the quarter ended March 31, 2005. There was no impairment at December 31, 2004. For the three-month periods ended March 31,
2005 and 2004, the Company received cash flows of $1.9 million and $0.1 million,
respectively, for loan servicing and administrative fees as the master servicer.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table summarizes the changes in the Companys servicing asset for the 2004
trust for the first three months of 2005:
| | ----------------------------------------------------------------------------------------------------------------------------------

|(Dollars in thousands)         |            
|------------------------------ | -----------
|                               |            
|Balance at beginning of year   | $    28,177
|Impairment of servicing assets | (267)      
|Amortization                   | (881)      
|                               |            
|Balance at March 31, 2005      | $    27,029
|                               |            

| | There
were $1.8 million of receivables due from the trusts at each of March 31, 2005 and
December 31, 2004 and $1.0 million and $0.9 million of payables due to the trusts at March
31, 2005 and December 31, 2004, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
key assumptions used to value the combined retained interests for both the 2004 and 2002
securitization trusts were as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------

|(Dollars in thousands)                               | March 31, 2005         | December 31, 2004     
|---------------------------------------------------- | ---------------------- | ----------------------
|                                                     |                        |                       
|Fair value of the retained interests                 | $60,203                | $72,733               
|Discount Rate                                        | 10.0%                  | 10.0%                 
|Consolidation prepayment rates                       | Up to 8.0% in 10 years | Up to 8.0% in 10 years
|Anticipated net credit losses                        | 0.0%                   | 0.0%                  
|Basis spread between LIBOR and Commercial Paper rate | 0.10%                  | 0.10%                 
|Borrower Benefits - Automated Clearing House         | 40.0%                  | 38.8% to 40.0%        
|Borrower Benefits - On time payments                 | 24.6% to 28.0%         | 13.6% to 17.6%        

12

| | For
the 2004 securitization trust, a prepayment curve called the Consolidation Loan Ramp (CLR)
was used for the prepayment assumption. The CLR is the industry standard consolidation
loan prepayment ramp that estimates prepayment rates at a graduated level from 0% to 8%
over the first ten years and stays flat at 8% thereafter. 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 consecutive on
time payments and keep making on time payments.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Due
to the 2004 benefits from the Exceptional Performer designation, the Company used an
anticipated net credit loss assumption of 0% for the securitized loans.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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, 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 below.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(Dollars in thousands)                                                                                               | March 31, 2005                           | December 31, 2004                        
|-------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | -----------------------------------------
|                                                                                                                     |                                          |                                          
|Retained interests                                                                                                   | $                60,203                  | $                 72,733                 
|                                                                                                                     |                                          |                                          
|Discount rate                                                                                                        | 10.0%                                    | 10.0%                                    
|+10%    (reflecting a discount rate of 11.0% for each of 2005 and 2004)                                              | $             (2,909.4)                  | $             (2,865.8)                  
|+20%    (reflecting a discount rate of 12.0% for each of 2005 and 2004)                                              | $             (5,556.5)                  | $             (5,512.3)                  
|                                                                                                                    
|Consolidation Loan Ramp prepayment rate                                                                              | Up to 8.0% in 10                   years | Up to 8.0% in 10                    years
|+10%    (reflecting a Consolidation Loan Ramp prepayment rate of 6.6%    to 8.8% for 2005 and 5.5% to 8.8% for 2004) | $                (776.1)                 | $                (960.1)                 
|+20%    (reflecting a Consolidation Loan Ramp prepayment rate of 7.2%    to 9.6% for 2005 and 6.0% to 9.6% for 2004) | $             (1,521.5)                  | $             (1,822.0)                  
|                                                                                                                    
|Basis spread                                                                                                         | 0.10%                                    | 0.10%                                    
|+10%    (reflecting a basis spread of 0.11% for each of 2005 and 2004)                                               | $                (969.6)                 | $                (983.0)                 
|+20%    (reflecting a basis spread of 0.12% for each of 2005 and 2004)                                               | $             (1,938.2)                  | $             (1,991.9)                  
|                                                                                                                    
|Borrower Benefits - ACH                                                                                              | 40.0%                                    | 38.8% to 40.0%                           
|+10%    (reflecting borrower benefits of 44.0% for 2005 and    42.68% to 44.00% for 2004)                            | $                (877.7)                 | $                (960.2)                 
|+20%    (reflecting borrower benefits of 48.0% for 2005 and    46.56% to 48.00% for 2004)                            | $             (1,755.0)                  | $             (1,901.6)                  
|                                                                                                                    
|Borrower Benefits - on time payments                                                                                 | 24.6% to 28.0%                           | 13.6% to 17.6%                           
|+10%    (reflecting borrower benefits of 27.06% to 30.80% for 2005 and   and 14.96% to 19.36% for 2004)              | $             (1,810.2)                  | $             (1,112.4)                  
|+20%    (reflecting borrower benefits of 29.52% to 33.60% for 2005    and 16.32% to 21.12% for 2004)                 | $             (3,621.6)                  | $             (2,203.5)                  
|                                                                                                                     |                                          |                                          

| | If
the Company lost its Exceptional Performer designation, the fair value of the retained
interests for net credit losses would be decreased by approximately $1.3 million. Also, a
change in market interest rates could affect the value of the retained interests.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 impairment and may not be fully recoverable.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 8.       Fee and Other Income

| | For
the three-month period ended March 31, 2005, a loss of $6.0 million (pre-tax) was recorded
in fee and other income as a result of an impairment on the 2004 Trusts retained
interest and servicing asset. For the three-month period ended March 31, 2004, a gain $8.1
million was recorded in fee and other income as a result of a non-recurring sale of a $532
million student loan portfolio to a third party.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

# 9.       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. On January 1, 2003, the Company adopted the fair value recognition provisions
of SFAS No. 123, Accounting for Stock-Based Compensation, prospectively to all awards
granted, modified or settled after December 31, 2002. In December 2004, 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 values. Originally, SFAS 123-R was to be effective for interim and annual reporting
periods beginning after June 15, 2005. However, in April 2005, the effective date was amended to the first interim reporting date of the next fiscal year 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 have a
material impact on the Companys financial condition or results of operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Other-than-Temporary
Impairment
On
March 31, 2004, the FASB ratified EITF 03-1, which applies to other-than-temporary
impairment evaluations for investments accounted for under SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, as well as nonmarketable equity
securities accounted for under the cost method, and was initially scheduled to be
effective for reporting periods beginning after June 15, 2004. On September 30, 2004, the
FASB voted unanimously to delay the effective date of EITF 03-1. The delay applies to both
debt and equity securities and specifically applies to impairments caused by interest rate
and sector spreads. In addition, the provisions of EITF 03-1 that have been delayed relate
to the requirements that a company declare its intention to hold the security to recovery
and designate a recovery period in order to avoid recognizing an other-than-temporary
impairment charge through earnings. The FASB will be issuing proposed implementation
guidance related to this topic. EITF 03-1 is not expected to have a material
impact on the Companys financial condition or results of operations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

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 first
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

| | Other
Than Temporary Impairment
On
December 31, 2004, the Company adopted the disclosure requirements of EITF 03-1,The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments
which provides guidance on recognizing other-than temporary impairments on certain
investments. Adoption of EITF 03-1 had no impact on the Companys disclosures.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Certain
Loans or Debt Securities Acquired in a Transfer
On
January 1, 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). SOP
03-3 requires acquired loans to be brought in at fair value and prohibits carrying over
valuation allowances in the initial accounting for loans that have exhibited deterioration
in credit quality since origination, 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, loans originated by the entity, loans that are retained interests 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 that
are directly originated by the Company are serviced by the Company throughout their
lifecycle.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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). 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 and acting upon fluctuations in the interest rate curves, and
also 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 Income on page 20.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition to floor income and portfolio growth, other factors
that may impact earnings are applicable laws and regulations, prepayment rates on student
loans including those resulting from student loan consolidations, the number of borrowers
eligible for benefits, financing options available to students and their parents, and
competitors initiatives.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Also impacting earnings is the amount of asset sales and securitizations, included in fees and
other income, which can fluctuate on a quarterly basis.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 23.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15

Financial Condition

| | Citibank,
N.A. (CBNA), an indirect wholly owned subsidiary of Citigroup Inc. (Citigroup), owns 80%
of the outstanding common stock of the Company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------

| | At
March 31, 2005, the Companys student loan assets were composed of a $24.5 billion
portfolio of loans held and a $1.9 billion inventory of loans held for sale. The combined
$26.4 billion of loan assets, composed primarily of loans originated under the Federal
Family Education Loan (FFEL) Program, increased by $1.5 billion (6%) from $24.9 billion at
December 31, 2004. This growth was attributable to FFEL Program Stafford and Parent Loans
to Undergraduate Students (PLUS) loan disbursements totaling $1,181 million and loan
purchases of $1,388 million in the first three months of 2005, partially offset by $1,105
million in loan reductions (attributable primarily to borrower principal payments, loan
consolidations and claims paid by guarantors), loan portfolio sales of $1 million and deferred costs and other adjustments of $46 million.
During the first three months of 2004, the Company had FFEL Program Stafford and PLUS loan
disbursements of $1,074 million, loan purchases of $1,104 million, loan reductions of
$1,090 million, loan portfolio sales of $532 million and deferred costs and other adjustments of $30 million.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Loan Activity

| | The
Companys loan disbursements and loan commitments to finance education for the first
three months of 2005 and 2004 are presented below:
| | -------------------------------------------------------------------------------------------------------------------------------------------

|                      |      |     
|--------------------- | ---- | ----
|(Dollars in millions) | 2005 | 2004
|                      |      |     

|FFEL Program Stafford and PLUS Loan disbursements   | $1,181  | $1,074  | $    107 | 10.0%
|--------------------------------------------------- | ------- | ------- | -------- | -----
|CitiAssist Loans under commitments to purchase      | 548 (1) | 465 (2) | 83       | 17.8%
|                                                    |         |         |          |      
|Total loan disbursements and CitiAssist commitments | $1,729  | $1,539  | $    190 | 12.3%
|                                                    |         |         |          |      

|(1) |  | This amount is composed of the CitiAssist Loans that were disbursed by CBNA in
                    the first quarter of 2005, but have not yet been purchased by the Company. In
                    addition, $17 million of CitiAssist Loan commitments are awaiting disbursement
                    by CBNA. These Loans will be purchased by the Company after final disbursement.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | This amount is composed of the CitiAssist Loans that had been disbursed by CBNA
                    in the first quarter of 2004, but had not yet been purchased by the Company. In
                    addition, $12 million of CitiAssist Loan commitments were awaiting disbursement
                    by CBNA. These loans were purchased by the Company after final disbursement.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
$107 million increase in FFEL Program loan disbursements for the first three months of
2005, compared to the same period last year, is primarily attributable to ongoing sales
initiatives and overall growth in the marketplace.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 costs, the total of which approximates fair value. 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 first three
months of 2005 and 2004 are presented in the table below:
| | --------------------------------------------------------------------------------------------------------------------------------------------------

|(Dollars in millions) | 2005 | 2004 | Difference | %
Change
|--------------------- | ---- | ---- | ---------- | --------
|                      |      |      |            |         

|FFEL Program Consolidation Loan volume                                                                                                                                              | $   797 | $   648 | $ 149 | 23.0% 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ------- | ----- | ------
|CitiAssist Loan purchases                                                                                                                                                           | 507 (1) | 369 (2) | 138   | 37.4% 
|Other loan purchases                                                                                                                                                                | 84      | 88      | (4)   | (4.5%)
|                                                                                                                                                                                    |         |         |       |       
|Total loan purchases                                                                                                                                                                | $1,388  | $1,105  | $ 283 | 25.6% 
|                                                                                                                                                                                    |         |         |       |       
|(1)    
          Reflects purchases of CitiAssist Loans disbursed by CBNA prior to 2005. (2)    
          Reflects purchases of CitiAssist Loans disbursed by CBNA prior to 2004.

| | From
time to time, the Company makes student loan purchases. For the first three months of
2005, the Companys loan purchases
| | -----------------------------------------------------------------------------------------------------------------------------

16

| | were $1,388 million, an increase of $283 million
compared to the same period last year. Proportionately, CitiAssist Loan growth has been
faster than FFEL Program growth, reflecting 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 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. These loan consolidations have comprised a sizeable
portion of the Companys overall loan volume for several years. As interest rates
rise and loan consolidation becomes less attractive, consolidation activity and related
prepayment levels are expected to moderate.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
portion of the Federal 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. The size of the held for sale portfolio is dependent upon the needs of the
securitization program. The Companys decision to participate in securitization and
secondary market loan activities is made after analyzing market conditions. Of the
Consolidation Loan volume presented in the table above, $308 million and $290 million for
the first three months of 2005 and 2004, respectively, were consolidations of federally
guaranteed student loans already held in the Companys loan portfolio. For the first
three months of 2005, the Companys student loan purchases included $1,355 million
purchased for its portfolio and $33 million purchased for its resale inventory. During the
three months ended March 31, 2004, the Company purchased $715 million of student loans for
its portfolio and $390 million for its resale inventory.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Loans

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

|(Dollars in thousands)                                                 | March 31, 2005 | December 31, 2004
|---------------------------------------------------------------------- | -------------- | -----------------
|                                                                       |                |                  
|Federal Stafford Loans                                                 | $9,686,895     | $9,286,217       
|Federal Consolidation Loans                                            | 8,894,883      | 8,316,851        
|Federal SLS/PLUS/HEAL Loans                                            | 1,218,269      | 1,164,783        
|CitiAssist/other alternative loans                                     | 4,073,940      | 3,648,630        
|                                                                       |                |                  
|Total student loans held, excluding deferred costs                     | 23,873,987     | 22,416,481       
|Deferred origination and premium costs                                 | 588,791        | 541,814          
|                                                                       |                |                  
|Loans held                                                             | 24,462,778     | 22,958,295       
|Less: allowance for loan losses                                        | (4,346)        | (5,046)          
|                                                                       |                |                  
|Loans held, net                                                        | 24,458,432     | 22,953,249       
|                                                                       |                |                  
|Federal Consolidation Loans held for sale, excluding deferred    costs | 1,887,323      | 1,883,084        
|Deferred origination costs                                             | 48,055         | 47,216           
|                                                                       |                |                  
|Loans held for sale                                                    | 1,935,378      | 1,930,300        
|                                                                       |                |                  
|Total loan assets                                                      | $26,393,810    | $24,883,549      
|                                                                       |                |                  

| | Both
FFEL Program and CitiAssist Loan volumes are 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 $4.3 million at March 31, 2005 is composed of
$0.6 million for its FFEL Program loan portfolio and $3.7 million for its CitiAssist
Loans. The allowance at December 31, 2004 of $5.0 million is composed of $1.7 million for
its FFEL Program loans and $3.3 million for its CitiAssist Loans.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Alternative Loans in Repayment

| | The
Companys alternative loan portfolio is primarily composed of CitiAssist Loans that
are not guaranteed by the federal
| | -------------------------------------------------------------------------------------------------------------------------

17

| | government. Most of the CitiAssist Loan portfolio is
insured by private third party insurers. However, a portion is not covered by insurance.
At March 31, 2005, approximately $361 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. See Student
Loans in Note 3 to the consolidated financial statements for further information about
delinquency rates and the loan loss reserve for CitiAssist Loans.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|Insured CitiAssist Loans            | $1,470 | 80%  | $1,502 | 80% 
|----------------------------------- | ------ | ---- | ------ | ----
|Uninsured CitiAssist Loans          | 361    | 20%  | 380    | 20% 
|                                    |        |      |        |     
|Total CitiAssist Loans in repayment | $1,831 | 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 when the July 1, 2005 reset occurs, as higher borrower
interest rates are expected at that time.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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
realizing cash flows from these loans before they would have been received 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 any available 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, resulting in less expensive financing costs. The Companys SPEs meet
the requirements of a qualifying special purpose entity (QSPE), and are, 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 Companys SPEs are not consolidated with the financial
statements of the Company.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
2002 and 2004, the Company securitized certain portfolios of FFEL Program Consolidation
Loans through a wholly owned SPE formed to acquire them from the
Company. During the three-month periods ended March 31, 2005 and 2004, the Company did not
enter into any new securitizations. At March 31, 2005, $1.8 billion of student loan assets
were held by the Trusts.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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. Securitization gains or losses are reflective of the difference between
the carrying value of the assets sold to the trust and the fair value of the assets
received, which are composed of cash proceeds and residual interests
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18

| | retained in the loans
securitized. The Company accounts for the retained interests as investments in
available-for-sale securities and records them in other assets in the consolidated financial
statements. They are regularly reviewed for impairment in accordance with EITF Issue No.
99-20.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
March 31, 2005 and December 31, 2004, the Company had retained interests in the assets
securitized of approximately $60.2 million and $72.7 million, respectively, recorded at
fair value. The $12.5 million decrease in the retained interest for the three-month period
ended March 31, 2005 was due to a $2.4 million decrease in the fair value estimate, an
impairment of $5.7 million and $6.0 million cash received from the trust, partially offset
by the accretion of interest income of $1.6 million in the first three months of 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 March 31,
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. For the 2004 securitization trust, a prepayment curve called the Consolidation
Loan Ramp (CLR) was used for the prepayment assumption. The CLR is the industry standard
consolidation loan prepayment ramp that estimates prepayment rates at a graduated level
from 0% to 8% over the first ten years and stays flat at 8% thereafter. The prepayment
rate assumption was utilized in structuring the debt tenors and was disclosed to the
investors of such notes. 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. If future securitizations were to include loans other than FFEL
Program Consolidation Loans, this could impact the prepayment rates used in calculating
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 or its
third party servicers were to lose their Exceptional Performer designations, the value of
the retained interests would decline. 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 consecutive on-time payments and keeps making on time payments.
Management has estimated that, on average, up to approximately 28% 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
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 unsecuritized student loans to be part of the business it manages. At
March 31, 2005 and December 31, 2004, the Companys servicing asset was $27.0 million
and $28.2 million, respectively, representing the amount of unamortized carrying value at
that date. The fair value of the servicing asset was $27.0 million and $28.5 million at
March 31, 2005 and December 31, 2004, respectively, measured using a discount rate of
5.85% to 5.88%, servicing revenue of 49 basis points and servicing costs of approximately
23 basis points. During the first quarter of 2005, an
impairment charge of $0.3 million was recorded on the servicing asset.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 that is 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 also provides a reserve for certain CitiAssist Loans that are neither
insured against loss nor covered under risk-sharing agreements with third parties.
Provisions of estimated potential 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
2003, 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, in 2004, third party servicers
servicing $5.5 billion of the Companys FFEL Program loan portfolio received the
Exceptional Performer designation. Of the Companys FFEL Program loans, only those
that are serviced by the Company or its qualified and designated third party servicers
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

19

| | 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 first quarter of 2005
was $0.6 million, $1.6 million less than the provision for the same period of 2004. The
decrease was attributable to lower risk-sharing losses resulting from the receipt of the
Exceptional Performer designation by certain of the Companys loan servicing vendors
in 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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. The Company had no swaps outstanding at March 31,
2005. Prior to 2005, the Company participated in a swap program that met the hedge
accounting requirements of SFAS No. 133,Accounting for Derivative Instruments and Hedging
Activities, as amended.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
2004, the Company had interest rate swap agreements with CBNA, to receive payments based
on LIBOR and make payments based on the asset yield at 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. All of the Companys
outstanding swaps under this program matured on January 4, 2005.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the first quarter of 2005, the Company participated in several short-term interest rate
swaps with CBNA that did not qualify for hedge accounting treatment under SFAS No. 133.
The swaps, which matured in March 2005, resulted in the incurrence of $0.6 million of
interest expense in the first quarter of 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 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the three-month periods ended March 31, 2005 and 2004, the Company earned $25.7 million
and $37.0 million, respectively, of floor income. The decrease in 2005 floor income,
compared to the prior year, is primarily a result of higher short-term interest rates in
2005. Floor income, which is included in interest income, will decline in periods of
higher short-term interest rates and is generally affected by the overall interest rate
environment. The Company has entered into contracts to hedge a portion of floor income.
However, should the implied forward rates rise, the income and the opportunity to hedge this income will decline.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20

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 $199.7 million at March 31, 2005 increased $13.6 million compared to
year-end 2004. This increase is primarily attributable to increased deferred tax
liabilities related to deferred loan origination costs.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
March 2005, the Company settled tax disputes with both the State of Connecticut Department
of Revenue Services and the State of Florida Department of Revenue. The resolution of
these proceedings did not have a material effect on the results of the
Companys operations, financial condition or liquidity.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Borrowings

| | The Company's short- and long-term borrowings were procured primarily through the Omnibus Credit
Agreement with CBNA.  Total short- and long-term borrowings of $25.3 billion at March 31, 2005 increased $1.5 billion compared to year-end 2004. The increased borrowings
were used to fund new loan originations and purchases.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
March 31, 2005 and 2004, the outstanding borrowings had contracted weighted average
interest rates of 2.6% and 1.3%, respectively, based on LIBOR at the time the borrowings
were established or rates reset. For the three-month periods ended March 31, 2005 and
2004, the Company recorded $153.4 million and $75.1 million, respectively, in interest
expense payable to CBNA related to these borrowings.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dividends

| | The
Company paid a quarterly dividend of $1.08 per common share on March 1, 2005. On April 15,
2005, the Board of Directors declared a regular quarterly dividend on the Companys
common stock of $1.08 per share to be paid June 1, 2005 to stockholders of record on May
16, 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Results of Operations

Quarter Ended
March 31, 2005

Net Income

| | Net
income was $66.1 million ($3.31 basic and diluted earnings per share) for the first
quarter of 2005. This was a decrease of $6.7 million (9%) compared to earnings for the
same period last year. The decrease in net income is primarily attributable to reduced
floor income of $6.9 million (after tax) in the first quarter of 2005 (see Special Allowance and Floor Income for further information), and the occurrence
of a first quarter 2004 after tax gain of $5.0 million from a nonrecurring portfolio sale.
The reductions were partially offset by portfolio growth of 11% over the previous twelve
months and a lower effective tax rate in the first quarter of 2005 compared to the same
quarter of 2004.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fee and Other Income

| | Fee
and other income decreased $14.8 million from $14.0 million earned in the first
quarter of 2004 to a loss of $0.8 million for the same period in 2005. Fee and other
income included a first quarter 2005 $6.0 million (pre-tax) impairment charge resulting
from a decrease in the values of the securitization retained interests and the servicing
asset. In addition, the first quarter of 2004 included a pre-tax gain of $8.1 million in fee and other income.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21

Net Interest Income

| | Net
interest income of $128.9 million for the first quarter of 2005 was $2.2 million (2%)
lower than the same period of 2004. The decrease was primarily attributable to the $11.3
million (pretax) decrease in floor income. The net interest margin for the first quarter
of 2005 was 2.03%, down 19 basis points from 2.22% for the same period of 2004.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating Expenses

| | Total
operating expenses for the first quarter of 2005 of $27.9 million decreased $0.8 million
(3%) from the same period last year. This decrease is reflective of a $5.8 million
(pre-tax) release of accrued expenses due to the favorable settlement of certain state tax
proceedings, partially offset by expenses related to portfolio growth and other ongoing
infrastructure investments. For the first quarter of 2005, the Companys expense
ratio, total operating expenses as a percentage of average managed student loans, was 41
basis points, a decrease of seven basis points compared to the first quarter 2004 ratio.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Loan Losses

| | Changes
in the allowance for loan losses for the three-month periods ended March 31, 2005 and 2004
are as follows:
| | ------------------------------------------------------------------------------------------------------------------

|(Dollars in thousands)         | 2005     | 2004    
|------------------------------ | -------- | --------
|                               |          |         
|Balance at beginning of period | $  5,046 | $  3,670
|Provision for loan losses      | 602      | 2,235   
|Charge offs                    | (2,271)  | (1,020) 
|Recoveries                     | 969      | 260     
|                               |          |         
|Balance at end of period       | $  4,346 | $  5,145

| | The
provision for loan losses decreased $1.6 million for the first quarter of 2005 compared to
the same period last year. The decrease was primarily attributable to lower credit losses
resulting from the receipt of the Exceptional Performer designation by certain of the
Companys loan servicing vendors in mid-2004. Of the $4.3 million balance in the allowance for loan losses at March 31, 2005, $0.6 million is for its FFEL Program portfolio and
$3.7 million is for its CitiAssist Loan portfolio.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Return on Average Equity

| | The
Companys return on average equity was 23.0% for the first quarter of 2005, down 7.5%
compared to 30.5% for the same period of 2004. The decrease in return on equity was a result of the year over year decrease in net income as well as an increase in the equity base.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Effect of Taxes

| | The
Companys effective tax rates were 33.6% for the first quarter of 2005, and 36.1% 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

22

| | 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, that affect the demand for and interest rates on
student loans, loan origination costs, and 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, 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 and in the quality and profitability of those loans that move into
repayment status; the Companys ability to continue to service its loan portfolio in
accordance with its contractual obligations; the volume of loan consolidations; the
Companys ability to maintain its Exceptional Performer status and the benefits
available to servicers with that designation; the effect 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23

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 March 31, 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 $21.3 million for the next twelve months and approximately $86.7
million thereafter. A 35 basis point decrease in the interest yield curve as of March 31,
2005 would have a potential positive impact on the Companys pretax earnings of
approximately $19.5 million for the next twelve months and approximately $86.7 million
thereafter. The increase in the March 31, 2005 Earnings-at-Risk, compared to that at March
31, 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

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 quarter ended March 31, 2005 that have materially affected, or are reasonably likely
to materially affect, the Companys internal control over financial reporting.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

PART II   OTHER INFORMATION

Item 6.    
Exhibits

See Exhibit Index.

26

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: May 6, 2005

The Student Loan Corporation

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

27

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).     
|              
|10.3           |  | 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., incorporated by reference to Exhibit 10.7 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2004 (File No. 1-11616)
|              
|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



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