(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2006 or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from           to           .

Delaware		52-2013874
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
12061 Bluemont Way, Reston, Virginia		20190
(Address of principal executive offices)		(Zip Code)

Class		Outstanding at July 31, 2006
Voting common stock, $.20 par value		410,037,287 shares

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2

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Fixed Borrower Rate:			5.375	%
SAP Spread over Commercial Paper Rate:			(2.640	)%
Floor Strike Rate(1)			2.735	%

(1)	The interest rate at which the underlying index (Treasury bill or commercial paper) plus the fixed SAP spread equals the fixed borrower rate. Floor Income is earned anytime the interest rate of the underlying index declines below this rate.

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4

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5

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Part I. Financial Information
Item 1.		Financial Statements		7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		43
Item 3.		Quantitative and Qualitative Disclosures about Market Risk		105
Item 4.		Controls and Procedures		107
Part II. Other Information
Item 1.		Legal Proceedings		108
Item 1A.		Risk Factors		108
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		108
Item 3.		Defaults Upon Senior Securities		109
Item 4.		Submission of Matters to a Vote of Security Holders		109
Item 5.		Other Information		110
Item 6.		Exhibits		110
Signatures				111
Certification
Certification
Certification
Certification

6

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Item 1.	Financial Statements

			June 30,				December 31,
			2006				2005
			(Unaudited)
Assets
FFELP Stafford and Other Student Loans (net of allowance for losses of $6,890 and $6,311, respectively)			$	21,390,845			$	19,988,116
Consolidation Loans (net of allowance for losses of $10,090 and $8,639, respectively)				54,054,932				54,858,676
Private Education Loans (net of allowance for losses of $251,582 and $204,112, respectively)				6,832,843				7,756,770
Other loans (net of allowance for losses of $15,190 and $16,180, respectively)				1,050,632				1,137,987
Investments
	Available-for-sale			2,674,799				2,095,191
	Other			142,047				273,808
Total investments				2,816,846				2,368,999
Cash and cash equivalents				3,387,616				2,498,655
Restricted cash and investments				3,489,542				3,300,102
Retained Interest in off-balance sheet securitized loans				3,151,855				2,406,222
Goodwill and acquired intangible assets, net				1,080,703				1,105,104
Other assets				4,650,851				3,918,053
Total assets			$	101,906,665			$	99,338,684
Liabilities
Short-term borrowings			$	3,801,266			$	3,809,655
Long-term borrowings				90,506,785				88,119,090
Other liabilities				3,229,477				3,609,332
Total liabilities				97,537,528				95,538,077
Commitments and contingencies
Minority interest in subsidiaries				9,369				9,182
Stockholders’ equity
Preferred stock, par value $.20 per share, 20,000 shares authorized; Series A: 3,300 and 3,300 shares issued, respectively, at stated value of $50 per share; Series B: 4,000 and 4,000 shares issued, respectively, at stated value of $100 per share				565,000				565,000
Common stock, par value $.20 per share, 1,125,000 shares authorized; 430,753 and 426,484 shares issued, respectively				86,151				85,297
Additional paid-in capital				2,440,565				2,233,647
Accumulated other comprehensive income (net of tax of $196,601 and $197,834, respectively)				370,204				367,910
Retained earnings				1,775,948				1,111,743
Stockholders’ equity before treasury stock				5,237,868				4,363,597
Common stock held in treasury at cost: 19,078 and 13,347 shares, respectively				878,100				572,172
Total stockholders’ equity				4,359,768				3,791,425
Total liabilities and stockholders’ equity			$	101,906,665			$	99,338,684

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			Three Months Ended								Six Months Ended
			June 30,								June 30,
			2006				2005				2006				2005
			(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Interest income:
	FFELP Stafford and Other Student Loans		$	337,090			$	238,510			$	635,590			$	429,243
	Consolidation Loans			841,591				554,429				1,662,926				1,062,850
	Private Education Loans			233,696				126,809				475,049				256,425
	Other loans			23,541				20,046				46,848				40,199
	Cash and investments			124,954				54,245				220,764				116,294
Total interest income				1,560,872				994,039				3,041,177				1,905,011
Interest expense:
	Short-term debt			55,523				48,012				104,758				78,218
	Long-term debt			1,148,544				616,239				2,192,093				1,150,245
Total interest expense				1,204,067				664,251				2,296,851				1,228,463
Net interest income				356,805				329,788				744,326				676,548
Less: provisions for losses				67,396				78,948				127,715				125,471
Net interest income after provisions for losses				289,409				250,840				616,611				551,077
Other income:
	Gains on student loan securitizations			671,262				262,001				701,285				311,895
	Servicing and securitization revenue			82,842				149,931				181,773				292,892
	Gains (losses) on derivative and hedging activities, net			122,719				(105,940	)			35,980				(140,191	)
	Guarantor servicing fees			33,256				25,686				60,163				58,226
	Debt management fees			90,161				82,589				181,773				168,341
	Collections revenue			67,357				41,881				124,038				76,764
	Other			66,557				55,748				134,985				118,067
Total other income				1,134,154				511,896				1,419,997				885,994
Operating expenses:
	Salaries and benefits			168,727				151,336				344,067				298,268
	Other			147,875				136,077				295,844				251,436
Total operating expenses				316,602				287,413				639,911				549,704
Income before income taxes and minority interest in net earnings of subsidiaries				1,106,961				475,323				1,396,697				887,367
Income taxes				381,828				176,573				518,873				363,039
Income before minority interest in net earnings of subsidiaries				725,133				298,750				877,824				524,328
Minority interest in net earnings of subsidiaries				1,355				2,235				2,445				4,429
Net income				723,778				296,515				875,379				519,899
Preferred stock dividends				8,787				3,908				17,088				6,783
Net income attributable to common stock			$	714,991			$	292,607			$	858,291			$	513,116
Basic earnings per common share			$	1.74			$	.70			$	2.08			$	1.22
Average common shares outstanding				410,957				419,497				411,811				420,206
Diluted earnings per common share			$	1.52			$	.66			$	1.96			$	1.15
Average common and common equivalent shares outstanding				454,314				461,900				453,803				462,454
Dividends per common share			$	.25			$	.22			$	.47			$	.41

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																																Accumulated
																																Other
				Preferred				Common Stock Shares																				Additional				Comprehensive												Total
				Stock																Preferred				Common				Paid-In				Income				Retained				Treasury				Stockholders’
				Shares				Issued				Treasury				Outstanding				Stock				Stock				Capital				(Loss)				Earnings				Stock				Equity
Balance at March 31, 2005					3,300,000				484,917,447				(62,936,107	)			421,981,340			$	165,000			$	96,984			$	1,969,881			$	374,574			$	2,662,316			$	(2,203,773	)		$	3,064,982
Comprehensive income:
	Net income																																				296,515								296,515
	Other comprehensive income, net of tax:
		Change in unrealized gains (losses) on investments, net of tax																															87,529												87,529
		Change in unrealized gains (losses) on derivatives, net of tax																															11,018												11,018
Comprehensive income																																													395,062
Cash dividends:
	Common stock ($.22 per share)																																				(92,193	)							(92,193	)
	Preferred stock, series A ($.87 per share)																																				(2,875	)							(2,875	)
	Preferred stock, series B ($.25 per share)																																				(995	)							(995	)
Issuance of common shares									1,788,696				8,711				1,797,407								357				57,781												440				58,578
Issuance of preferred shares					4,000,000																400,000																								400,000
Preferred stock issuance costs and related amortization																													(2,962	)							(38	)							(3,000	)
Tax benefit related to employee stock option and purchase plans																													10,976																10,976
Repurchase of common shares:
	Equity forwards:
		Exercise cost, cash											(3,347,272	)			(3,347,272	)																							(162,500	)			(162,500	)
		(Gain) loss on settlement																																							(3,807	)			(3,807	)
	Benefit plans												(257,237	)			(257,237	)																							(12,490	)			(12,490	)
Balance at June 30, 2005					7,300,000				486,706,143				(66,531,905	)			420,174,238			$	565,000			$	97,341			$	2,035,676			$	473,121			$	2,862,730			$	(2,382,130	)		$	3,651,738
Balance at March 31, 2006					7,300,000				429,329,362				(16,599,155	)			412,730,207			$	565,000			$	85,866			$	2,364,252			$	328,496			$	1,163,570			$	(752,256	)		$	3,754,928
Comprehensive income:
	Net income																																				723,778								723,778
	Other comprehensive income, net of tax:
		Change in unrealized gains (losses) on investments, net of tax																															38,138												38,138
		Change in unrealized gains (losses) on derivatives, net of tax																															3,570												3,570
Comprehensive income																																													765,486
Cash dividends:
	Common stock ($.25 per share)																																				(102,613	)							(102,613	)
	Preferred stock, series A ($.87 per share)																																				(2,875	)							(2,875	)
	Preferred stock, series B ($1.44 per share)																																				(5,750	)							(5,750	)
Issuance of common shares									1,424,153				7,747				1,431,900								285				65,253												407				65,945
Preferred stock issuance costs and related amortization																													162								(162	)							—
Tax benefit related to employee stock option and purchase plans																													10,898																10,898
Repurchase of common shares:
	Equity forwards:
		Exercise cost, cash											(2,086,571	)			(2,086,571	)																							(114,219	)			(114,219	)
		(Gain) loss on settlement																																							7,887				7,887
	Benefit plans												(400,509	)			(400,509	)																							(19,919	)			(19,919	)
Balance at June 30, 2006					7,300,000				430,753,515				(19,078,488	)			411,675,027			$	565,000			$	86,151			$	2,440,565			$	370,204			$	1,775,948			$	(878,100	)		$	4,359,768

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																																Accumulated
																																Other
				Preferred				Common Stock Shares																				Additional				Comprehensive												Total
				Stock																Preferred				Common				Paid-In				Income				Retained				Treasury				Stockholders’
				Shares				Issued				Treasury				Outstanding				Stock				Stock				Capital				(Loss)				Earnings				Stock				Equity
Balance at December 31, 2004					3,300,000				483,266,408				(59,634,019	)			423,632,389			$	165,000			$	96,654			$	1,905,460			$	440,672			$	2,521,740			$	(2,027,222	)		$	3,102,304
Comprehensive income:
	Net income																																				519,899								519,899
	Other comprehensive income, net of tax:
		Change in unrealized gains (losses) on investments, net of tax																															30,744												30,744
		Change in unrealized gains (losses) on derivatives, net of tax																															1,705												1,705
Comprehensive income																																													552,348
Cash dividends:
	Common stock ($.41 per share)																																				(172,126	)							(172,126	)
	Preferred stock, series A ($1.74 per share)																																				(5,750	)							(5,750	)
	Preferred stock, series B ($.25 per share)																																				(995	)							(995	)
Issuance of common shares									3,439,735				64,997				3,504,732								687				110,860												3,275				114,822
Issuance of preferred shares					4,000,000																400,000																								400,000
Preferred stock issuance costs and related amortization																													(2,962	)							(38	)							(3,000	)
Tax benefit related to employee stock option and purchase plans																													22,318																22,318
Repurchase of common shares:
	Equity forwards:
		Exercise cost, cash											(6,469,653	)			(6,469,653	)																							(320,086	)			(320,086	)
		(Gain) loss on settlement																																							(13,830	)			(13,830	)
	Benefit plans												(493,230	)			(493,230	)																							(24,267	)			(24,267	)
Balance at June 30, 2005					7,300,000				486,706,143				(66,531,905	)			420,174,238			$	565,000			$	97,341			$	2,035,676			$	473,121			$	2,862,730			$	(2,382,130	)		$	3,651,738
Balance at December 31, 2005					7,300,000				426,483,527				(13,346,717	)			413,136,810			$	565,000			$	85,297			$	2,233,647			$	367,910			$	1,111,743			$	(572,172	)		$	3,791,425
Comprehensive income:
	Net income																																				875,379								875,379
	Other comprehensive income, net of tax:
		Change in unrealized gains (losses) on investments, net of tax																															(6,812	)											(6,812	)
		Change in unrealized gains (losses) on derivatives, net of tax																															9,101												9,101
		Minimum pension liability adjustment																															5												5
Comprehensive income																																													877,673
Cash dividends:
	Common stock ($.47 per share)																																				(194,086	)							(194,086	)
	Preferred stock, series A ($1.74 per share)																																				(5,750	)							(5,750	)
	Preferred stock, series B ($2.74 per share)																																				(11,017	)							(11,017	)
Issuance of common shares									4,269,988				53,749				4,323,737								854				168,638												2,975				172,467
Preferred stock issuance costs and related amortization																													321								(321	)							—
Tax benefit related to employee stock option and purchase plans																													37,959																37,959
Repurchase of common shares:
	Equity forwards:
		Exercise cost, cash											(4,534,403	)			(4,534,403	)																							(248,213	)			(248,213	)
		(Gain) loss on settlement																																							7,081				7,081
	Benefit plans												(1,251,117	)			(1,251,117	)																							(67,771	)			(67,771	)
Balance at June 30, 2006					7,300,000				430,753,515				(19,078,488	)			411,675,027			$	565,000			$	86,151			$	2,440,565			$	370,204			$	1,775,948			$	(878,100	)		$	4,359,768

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				Six Months Ended June 30,
				2006				2005
				(Unaudited)				(Unaudited)
Operating activities
Net income				$	875,379			$	519,899
Adjustments to reconcile net income to net cash used in operating activities:
	Gains on student loan securitizations				(701,285	)			(311,895	)
	Unrealized (gains)/losses on derivative and hedging activities, excluding equity forwards				(208,045	)			(174,737	)
	Unrealized (gains)/losses on derivative and hedging activities — equity forwards				82,693				98,235
	Provisions for losses				127,715				125,471
	Minority interest, net				(3,408	)			(4,763	)
	Mortgage loans originated				(718,223	)			(798,044	)
	Proceeds from sales of mortgage loans				719,490				730,936
	(Increase) in restricted cash				(441,551	)			(319,396	)
	(Increase) in accrued interest receivable				(473,161	)			(321,428	)
	Increase in accrued interest payable				102,612				5,936
	Adjustment for non-cash (income)/loss related to Retained Interest				144,020				24,769
	(Increase) decrease in other assets, goodwill and acquired intangible assets, net				(224,208	)			313,547
	(Decrease) increase in other liabilities				(264,168	)			716,397
	Total adjustments				(1,857,519	)			85,028
	Net cash (used in) provided by operating activities				(982,140	)			604,927
Investing activities
	Student loans acquired				(15,981,396	)			(14,976,607	)
	Loans purchased from securitized trusts (primarily loan consolidations)				(3,451,932	)			(4,252,382	)
	Reduction of student loans:
		Installment payments			4,620,579				2,722,009
		Claims and resales			589,069				527,901
		Proceeds from securitization of student loans treated as sales			14,439,628				9,045,932
		Proceeds from sales of student loans			91,050				17,572
	Other loans originated				(516,283	)			(199,270	)
	Other loans repaid				602,757				351,106
	Purchases of available-for-sale securities				(31,972,221	)			(35,376,983	)
	Proceeds from sales of available-for-sale securities				3,252				983,469
	Proceeds from maturities of available-for-sale securities				31,575,939				35,291,350
	Purchases of held-to-maturity and other securities				(339,187	)			(229,716	)
	Proceeds from maturities of held-to-maturity securities and other securities				461,372				340,058
	Return of investment from Retained Interest				55,688				117,487
	Net cash provided by (used in) investing activities				178,315				(5,638,074	)
Financing activities
	Short-term borrowings issued				15,355,095				37,970,620
	Short-term borrowings repaid				(15,358,062	)			(37,947,271	)
	Long-term borrowings issued				4,696,532				3,271,567
	Long-term borrowings repaid				(3,647,340	)			(2,935,640	)
	Borrowings collateralized by loans in trust issued				3,091,347				2,287,461
	Borrowings collateralized by loans in trust — activity				(2,114,262	)			19,694
	Tax benefit from the exercise of stock-based awards				23,846				—
	Common stock issued				172,467				114,822
	Common stock repurchased				(315,984	)			(344,353	)
	Common dividends paid				(194,086	)			(172,126	)
	Preferred stock issued				—				397,000
	Preferred dividends paid				(16,767	)			(6,745	)
	Net cash provided by financing activities				1,692,786				2,655,029
	Net increase (decrease) in cash and cash equivalents				888,961				(2,378,118	)
	Cash and cash equivalents at beginning of period				2,498,655				3,395,487
	Cash and cash equivalents at end of period			$	3,387,616			$	1,017,369
Cash disbursements made for:
	Interest			$	2,066,876			$	1,039,093
	Income taxes			$	570,492			$	87,373

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1.	Significant Accounting Policies

	Basis of Presentation

	Reclassifications

	Recently Issued Accounting Pronouncements

	Accounting for Uncertainty in Income Taxes

	•	Changes historical methods of recording the impact to the financial statements of uncertain tax positions from a model based upon probable liabilities to be owed, to a model based upon the tax benefit most likely to be sustained.
	•	Prescribes a threshold for the financial statement recognition of tax positions taken or expected to be taken in a tax return, based upon whether it is more likely than not that a tax position will be sustained upon examination.
	•	Provides rules on the measurement in the financial statements of tax positions that meet this recognition threshold, requiring that the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement to be recorded.
	•	Provides guidance on the financial statement treatment of changes in the assessment of an uncertain tax position, as well as accounting for such changes in interim periods.
	•	Requires new disclosures regarding uncertain tax positions.

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1.	Significant Accounting Policies (Continued)

	Accounting for Servicing of Financial Assets

	•	Requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset as the result of i) a transfer of the servicer’s financial assets that meet the requirement for sale accounting; ii) a transfer of the servicer’s financial assets to a qualifying special-purpose entity in a guaranteed mortgage securitization in which the transferor retains all of the resulting securities and classifies them as either available-for-sale or trading securities in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”; or iii) an acquisition or assumption of an obligation to service a financial asset that does not relate to financial assets of the servicer or its consolidated affiliates.
	•	Requires all separately recognized servicing assets or liabilities to be initially measured at fair value, if practicable.
	•	Permits an entity to either i) amortize servicing assets or liabilities in proportion to and over the period of estimated net servicing income or loss and assess servicing assets or liabilities for impairment or increased obligation based on fair value at each reporting date (amortization method); or ii) measure servicing assets or liabilities at fair value at each reporting date and report changes in fair value in earnings in the period in which the changes occur (fair value measurement method). The method must be chosen for each separately recognized class of servicing asset or liability.
	•	At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under SFAS No. 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing assets or liabilities that a servicer elects to subsequently measure at fair value.
	•	Requires separate presentation of servicing assets and liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and liabilities.

	Accounting for Certain Hybrid Financial Instruments

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1.	Significant Accounting Policies (Continued)

	•	Allows a hybrid financial instrument containing an embedded derivative that would have required bifurcation under SFAS No. 133 to be measured at fair value as one instrument on a case by case basis;
	•	Clarifies which interest-only strips and principal-only strips are exempt from the requirements of SFAS No. 133;
	•	Requires that all interests in securitized financial assets be evaluated to determine if the interests are free standing instruments or if the interests contain an embedded derivative;
	•	Clarifies that the concentrations of credit risk in the form of subordination are not an embedded derivative; and
	•	Amends SFAS Statement No. 140 to eliminate the prohibition of a qualifying special purpose entity from holding a derivative financial instrument that pertains to beneficial interests other than another derivative financial instrument.

	Accounting for Loans Held for Investment and Loans Held for Sale

	Accounting for Stock-Based Compensation

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1.	Significant Accounting Policies (Continued)

			Three Months Ended				Six Months Ended
			June 30, 2005				June 30, 2005
Net income:
	Reported net income		$	292,607			$	513,116
	Less: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects			(7,633	)			(17,413	)
	Pro forma net income		$	284,974			$	495,703
Earnings per common share:
	Reported basic earnings per common share		$	.70			$	1.22
	Pro forma basic earnings per common share		$	.68			$	1.18
	Reported diluted earnings per common share		$	.66			$	1.15
	Pro forma diluted earnings per common share		$	.64			$	1.11

15

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2.	Allowance for Student Loan Losses

			Three Months Ended								Six Months Ended
			June 30,								June 30,
			2006				2005				2006				2005
Balance at beginning of period			$	247,677			$	197,729			$	219,062			$	179,664
	Provisions for student loan losses			64,817				75,373				122,616				118,517
	Charge-offs			(36,765	)			(38,303	)			(70,153	)			(68,290	)
	Recoveries			6,040				4,605				12,429				9,513
	Net charge-offs			(30,725	)			(33,698	)			(57,724	)			(58,777	)
	Balance before reductions for student loan sales and securitizations			281,769				239,404				283,954				239,404
	Reductions for student loan sales and securitizations			(13,207	)			(5,886	)			(15,392	)			(5,886	)
Balance at end of period			$	268,562			$	233,518			$	268,562			$	233,518

16

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2.	Allowance for Student Loan Losses (Continued)

			Three Months								Six Months
			Ended June 30,								Ended June 30,
			2006				2005				2006				2005
(Dollars in millions)
Allowance at beginning of period			$	232			$	191			$	204			$	172
	Provision for Private Education Loan losses			62				36				116				79
	Change in estimate			—				40				—				40
	Total provision			62				76				116				119
	Charge-offs			(36	)			(38	)			(69	)			(66	)
	Recoveries			6				5				13				9
	Net charge-offs			(30	)			(33	)			(56	)			(57	)
Balance before securitization of Private Education Loans				264				234				264				234
Reduction for securitization of Private Education Loans				(12	)			(6	)			(12	)			(6	)
Allowance at end of period			$	252			$	228			$	252			$	228
Net charge-offs as a percentage of average loans in repayment (annualized)				3.13	%			4.33	%			3.05	%			3.86	%
Allowance as a percentage of the ending total loan balance				3.55	%			3.61	%			3.55	%			3.61	%
Allowance as a percentage of ending loans in repayment				6.66	%			7.41	%			6.66	%			7.41	%
Allowance coverage of net charge-offs (annualized)				2.09				1.73				2.22				2.00
Average total loans			$	7,961			$	6,376			$	8,485			$	6,321
Ending total loans			$	7,085			$	6,325			$	7,085			$	6,325
Average loans in repayment			$	3,838			$	3,042			$	3,720			$	2,960
Ending loans in repayment			$	3,777			$	3,078			$	3,777			$	3,078

17

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2.	Allowance for Student Loan Losses (Continued)

	Delinquencies

			June 30,
			2006								2005
			Balance				%				Balance				%
(Dollars in millions)
Loans in-school/grace/deferment(1)			$	3,305							$	3,307
Loans in forbearance(2)				299								190
Loans in repayment and percentage of each status:
	Loans current			3,353				88.8	%			2,756				89.5	%
	Loans delinquent 31-60 days(3)			176				4.7				133				4.4
	Loans delinquent 61-90 days(3)			100				2.6				69				2.2
	Loans delinquent greater than 90 days(3)			148				3.9				120				3.9
	Total Private Education Loans in repayment			3,777				100	%			3,078				100	%
Total Private Education Loans, gross				7,381								6,575
Private Education Loan unamortized discount				(296	)							(250	)
Total Private Education Loans				7,085								6,325
Private Education Loan allowance for losses				(252	)							(228	)
Private Education Loans, net			$	6,833							$	6,097
Percentage of Private Education Loans in repayment				51.2	%							46.8	%
Delinquencies as a percentage of Private Education Loans in repayment				11.2	%							10.5	%

	(1)	Loans for borrowers who still may be attending school or engaging in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation.
	(2)	Loans for borrowers who have requested extension of grace period or who have temporarily ceased making full payments due to hardship or other factors, consistent with the established loan program servicing policies and procedures.
	(3)	The period of delinquency is based on the number of days scheduled payments are contractually past due.

18

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3.	Goodwill and Acquired Intangible Assets

							As of June 30, 2006
			Average
			Amortization								Accumulated
			Period				Gross				Amortization				Net
(Dollars in millions)
Intangible assets subject to amortization:
	Customer, services, and lending relationships			12 years			$	256			$	(90	)		$	166
	Tax exempt bond funding(1)			10 years				67				(32	)			35
	Software and technology			7 years				80				(56	)			24
	Non-compete agreements			2 years				11				(9	)			2
	Total							414				(187	)			227
Intangible assets not subject to amortization:
	Trade name and trademark			Indefinite				78				—				78
Total acquired intangible assets							$	492			$	(187	)		$	305

							As of December 31, 2005
			Average
			Amortization								Accumulated
			Period				Gross				Amortization				Net
(Dollars in millions)
Intangible assets subject to amortization:
	Customer, services, and lending relationships			12 years			$	256			$	(76	)		$	180
	Tax exempt bond funding(1)			10 years				67				(25	)			42
	Software and technology			7 years				80				(51	)			29
	Non-compete agreements			2 years				11				(8	)			3
	Total							414				(160	)			254
Intangible assets not subject to amortization:
	Trade name and trademark			Indefinite				78				—				78
Total acquired intangible assets							$	492			$	(160	)		$	332

	(1)	In connection with the Company’s 2004 acquisition of Southwest Student Services Corporation, the Company assumed certain tax exempt bonds that enable the Company to earn a 9.5 percent Special Allowance Payment (“SAP”) rate on student loans funded by those bonds in these trusts. If a student loan is removed from the trust such that it is no longer funded by the bonds, it ceases earning the 9.5 percent SAP.

19

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3.	Goodwill and Acquired Intangible Assets (Continued)

		December 31,								June 30,
		2005				Adjustments				2006
(Dollars in millions)
Lending		$	410			$	(4	)		$	406
Debt Management Operations			299				7				306
Corporate and Other			64				—				64
Total		$	773			$	3			$	776

4.	Student Loan Securitization

	Securitization Activity

20

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4.	Student Loan Securitization (Continued)

		Three Months Ended June 30,
		2006																2005
						Loan																Loan
		No. of				Amount				Pre-Tax								No. of				Amount				Pre-Tax
		Transactions				Securitized				Gain				Gain %				Transactions				Securitized				Gain				Gain %
(Dollars in millions)
FFELP Stafford/ PLUS loans			—			$	—			$	—				—	%			—			$	—			$	—				—	%
Consolidation Loans			1				2,500				23				.9				2				4,011				31				.8
Private Education Loans			2				4,000				648				16.2				1				1,505				231				15.3
Total securitizations — sales			3				6,500			$	671				10.3	%			3				5,516			$	262				4.7	%
Consolidation Loans(1)			1				3,001												1				2,226
Total securitizations — financings			1				3,001												1				2,226
Total securitizations			4			$	9,501												4			$	7,742

		Six Months Ended June 30,
		2006																2005
						Loan																Loan
		No. of				Amount				Pre-Tax								No. of				Amount				Pre-Tax
		Transactions				Securitized				Gain				Gain %				Transactions				Securitized				Gain				Gain %
(Dollars in millions)
FFELP Stafford/ PLUS loans			2			$	5,004			$	17				.3	%			2			$	3,530			$	50				1.4	%
Consolidation Loans			2				5,502				36				.7				2				4,011				31				.8
Private Education Loans			2				4,000				648				16.2				1				1,505				231				15.3
Total securitizations — sales			6				14,506			$	701				4.8	%			5				9,046			$	312				3.4	%
Consolidation Loans(1)			1				3,001												1				2,226
Total securitizations — financings			1				3,001												1				2,226
Total securitizations			7			$	17,507												6			$	11,272

(1)	In certain Consolidation Loan securitization structures, the Company holds certain rights that can affect the remarketing of certain bonds such that these securitizations did not qualify as qualifying special purpose entities (“QSPEs”). Accordingly, they are accounted for on-balance sheet as variable interest entities (“VIEs”).

21

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4.	Student Loan Securitization (Continued)

		Three Months Ended June 30,
		2006												2005
										Private												Private
		FFELP				Consolidation				Education				FFELP				Consolidation				Education
		Stafford(1)				Loans				Loans				Stafford(1)				Loans				Loans
Prepayment speed (annual rate) (2)			—				6	%			4	%			—				6	%			4%
Weighted average life			—				8.5 yrs.				9.4 yrs.				—				7.9 yrs.				9.0 yrs.
Expected credit losses (% of principal securitized)			—				.27	%			4.79	%			—				—	%			4.38%
Residual cash flows discounted at (weighted average)			—				10.8	%			13.0	%			—				10.1	%			12.4%

		Six Months Ended June 30,
		2006												2005
										Private												Private
		FFELP				Consolidation				Education				FFELP				Consolidation				Education
		Stafford				Loans				Loans				Stafford				Loans				Loans
Prepayment speed (annual rate) (2)			*				6	%			4	%			**				6	%			4	%
Weighted average life			3.7 yrs.				8.3 yrs.				9.4 yrs.				4.0 yrs.				7.9 yrs.				9.0 yrs.
Expected credit losses (% of principal securitized)			.15	%			.27	%			4.79	%			—	%			—	%			4.38	%
Residual cash flows discounted at (weighted average)			12.4	%			10.6	%			13.0	%			12	%			10.1	%			12.4	%

(1)	No securitizations qualified for sale treatment in the period.
(2)	The prepayment assumptions include the impact of projected defaults. Previous disclosures for Private Education Loans excluded projected default assumptions.

	*	20 percent for 2006, 15 percent for 2007 and 10 percent thereafter.

**	20 percent for 2005, 15 percent for 2006 and 6 percent thereafter.

22

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4.	Student Loan Securitization (Continued)

	Retained Interest in Securitized Receivables

		As of June 30, 2006
		FFELP				Consolidation				Private
		Stafford and				Loan				Education
(Dollars in millions)		PLUS				Trusts(1)				Loan Trusts				Total
Fair value of Residual Interests(2)		$	773			$	524			$	1,855			$	3,152
Underlying securitized loan balance(3)			20,224				14,746				12,556				47,526
Weighted average life			2.5 yrs.				8.1 yrs.				8.4 yrs
Prepayment speed (annual rate)(4)			10%-40	% (5)			6	%			4	%
Expected credit losses (% of student loan principal)			.07	%			.07	%			4.73	%
Residual cash flows discount rate			13.0	%			11.1	%			13.1	%

		As of December 31, 2005
										Private
		FFELP Stafford				Consolidation				Education
(Dollars in millions)		and PLUS				Loan Trusts(1)				Loan Trusts				Total
Fair value of Residual Interests (2)		$	773			$	483			$	1,150			$	2,406
Underlying securitized loan balance (3)			20,372				10,272				8,946				39,590
Weighted average life			2.7 yrs.				8.0 yrs.				7.8 yrs
Prepayment speed (annual rate)(4)			10%-20	%(5)			6	%			4	%
Expected credit losses (% of student loan principal)			.14	%			.23	%			4.74	%
Residual cash flows discount rate			12.3	%			10.3	%			12.4	%

(1)	Includes $115 million and $235 million related to the fair value of the Embedded Floor Income as of June 30, 2006 and December 31, 2005, respectively. The decrease in the fair value of the Embedded Floor Income is primarily due to rising interest rates during the period.
(2)	At June 30, 2006 and December 31, 2005, the Company had unrealized gains (pre-tax) in accumulated other comprehensive income of $401 million and $370 million, respectively, that related to the Retained Interests.
(3)	In addition to student loans in off-balance sheet trusts, the Company had $41.3 billion and $40.9 billion of securitized student loans outstanding (face amount) as of June 30, 2006 and December 31, 2005, respectively, in on-balance sheet securitization trusts.
(4)	The prepayment speed assumptions include the impact of projected defaults. Previous disclosures for Private Education Loans excluded projected default assumptions.
(5)	40% for the third quarter of 2006, 30% for the fourth quarter of 2006, 15% for 2007 and 10% thereafter for June 30, 2006 valuations and 20% for 2006, 15% for 2007 and 10% thereafter for December 31, 2005 valuations.

23

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			June 30,
			2006								2005
			Balance				%				Balance				%
(Dollars in millions)
Loans in-school/grace/deferment(1)			$	6,074							$	3,308
Loans in forbearance(2)				751								400
Loans in repayment and percentage of each status:
	Loans current			5,483				95.7	%			3,749				95.5	%
	Loans delinquent 31-60 days(3)			151				2.6				96				2.4
	Loans delinquent 61-90 days(3)			50				.9				35				1.0
	Loans delinquent greater than 90 days(3)			47				.8				46				1.1
	Total off-balance sheet Private Education Loans in repayment			5,731				100	%			3,926				100	%
Total off-balance sheet Private Education Loans, gross			$	12,556							$	7,634

	(1)	Loans for borrowers who still may be attending school or engaging in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation.
	(2)	Loans for borrowers who have requested extension of grace period or who have temporarily ceased making full payments due to hardship or other factors, consistent with the established loan program servicing policies and procedures.
	(3)	The period of delinquency is based on the number of days scheduled payments are contractually past due.

24

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5.	Derivative Financial Instruments

	Summary of Derivative Financial Statement Impact

		Cash Flow								Fair Value								Trading								Total
		June 30,				December 31,				June 30,				December 31,				June 30,				December 31,				June 30,				December 31,
		2006				2005				2006				2005				2006				2005				2006				2005
(Dollars in millions)
Fair Values
Interest rate swaps		$	5			$	5			$	(737	)		$	(347	)		$	(115	)		$	(48	)		$	(847	)		$	(390	)
Floor/ Cap contracts			—				—				—				—				(141	)			(371	)			(141	)			(371	)
Futures			—				—				—				—				(1	)			(1	)			(1	)			(1	)
Equity forwards			—				—				—				—				20				67				20				67
Cross currency interest rate swaps			—				—				677				(148	)			—				—				677				(148	)
Total		$	5			$	5			$	(60	)		$	(495	)		$	(237	)		$	(353	)		$	(292	)		$	(843	)
(Dollars in billions)
Notional Values
Interest rate swaps		$	2.6			$	1.2			$	15.2			$	14.6			$	156.1			$	125.4			$	173.9			$	141.2
Floor/ Cap contracts			—				—				—				—				38.6				41.8				38.6				41.8
Futures			.1				.1				—				—				.6				.6				.7				.7
Cross currency interest rate swaps			—				—				20.1				18.6				—				—				20.1				18.6
Other(1)			—				—				—				—				2.0				2.0				2.0				2.0
Total		$	2.7			$	1.3			$	35.3			$	33.2			$	197.3			$	169.8			$	235.3			$	204.3
(Shares in millions)
Contracts
Equity forwards			—				—				—				—				45.9				42.7				45.9				42.7

(1)	“Other” consists of an embedded derivative bifurcated from the convertible debenture issuance that relates primarily to certain contingent interest and conversion features of the debt. The embedded derivative has had a de minimis fair value since inception.

25

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5.	Derivative Financial Instruments (Continued)

		Three Months Ended June 30,
		Cash Flow								Fair Value								Trading								Total
		2006				2005				2006				2005				2006				2005				2006				2005
(Dollars in millions)
Changes to accumulated other comprehensive income, net of tax
Change in fair value to cash flow hedges		$	—			$	3			$	—			$	—			$	—			$	—			$	—			$	3
Amortization of effective hedges and transition adjustment(1)			4				8				—				—				—				—				4				8
Change in accumulated other comprehensive income, net		$	4			$	11			$	—			$	—			$	—			$	—			$	4			$	11
Earnings Summary
Amortization of closed futures contracts’ gains/losses in interest expense(2)		$	(5	)		$	(11	)		$	—			$	—			$	—			$	—			$	(5	)		$	(11	)
Gains (losses) on derivative and hedging activities — Realized(3)			—				—				—				—				(41	)			(94	)			(41	)			(94	)
Gains (losses) on derivative and hedging activities — Unrealized(4)			—				—				21				—				143				(12	)			164				(12	)
Total earnings impact		$	(5	)		$	(11	)		$	21			$	—			$	102			$	(106	)		$	118			$	(117	)

		Six Months Ended June 30,
		Cash Flow								Fair Value								Trading								Total
		2006				2005				2006				2005				2006				2005				2006				2005
(Dollars in millions)
Changes to accumulated other comprehensive income, net of tax
Change in fair value to cash flow hedges		$	2			$	(13	)		$	—			$	—			$	—			$	—			$	2			$	(13	)
Amortization of effective hedges and transition adjustment(1)			7				15				—				—				—				—				7				15
Change in accumulated other comprehensive income, net		$	9			$	2			$	—			$	—			$	—			$	—			$	9			$	2
Earnings Summary
Amortization of closed futures contracts’ gains/losses in interest expense(2)		$	(11	)		$	(23	)		$	—			$	—			$	—			$	—			$	(11	)		$	(23	)
Gains (losses) on derivative and hedging activities — Realized(3)			—				—				—				—				(89	)			(216	)			(89	)			(216	)
Gains (losses) on derivative and hedging activities — Unrealized(4)			—				—				43				(12	)			82				88				125				76
Total earnings impact		$	(11	)		$	(23	)		$	43			$	(12	)		$	(7	)		$	(128	)		$	25			$	(163	)

(1)	The Company expects to amortize $7 million of after-tax net losses from accumulated other comprehensive income to earnings during the next 12 months related to closed futures contracts that were hedging the forecasted issuance of debt instruments that are outstanding as of June 30, 2006.
(2)	For futures contracts that qualify as SFAS No. 133 hedges where the hedged transaction occurs.
(3)	Includes net settlement income/expense related to trading derivatives and realized gains and losses related to derivative dispositions.
(4)	The change in the fair value of cash flow and fair value hedges represents amounts related to ineffectiveness.

26

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6.	Stockholders’ Equity

			Three Months								Six Months
			Ended June 30,								Ended June 30,
			2006				2005				2006				2005
(Shares in millions)
Common shares repurchased:
	Equity forwards			2.1				3.3				4.5				6.4
	Benefit plans(1)			.4				.3				1.3				.6
	Total shares repurchased			2.5				3.6				5.8				7.0
	Average purchase price per share		$	53.93			$	48.55			$	54.62			$	49.46
Common shares issued				1.4				1.8				4.3				3.5
Equity forward contracts:
	Outstanding at beginning of period			42.7				46.6				42.7				42.8
	New contracts			5.3				8.4				7.7				15.3
	Exercises			(2.1	)			(3.3	)			(4.5	)			(6.4	)
	Outstanding at end of period			45.9				51.7				45.9				51.7
Authority remaining at end of period to repurchase or enter into equity forwards				10.9				20.5				10.9				20.5

	(1)	Includes shares withheld from stock option exercises and vesting of performance stock to satisfy minimum statutory tax withholding obligations and shares tendered by employees to satisfy option exercise costs.

								Average
Year of Maturity		Outstanding				Range of		Purchase
(Contracts in millions of shares)		Contracts				Purchase Prices		Price
2007			.8			$54.74		$	54.74
2008			7.3			54.74			54.74
2009			14.7			54.74			54.74
2010			15.0			54.74			54.74
2011			8.1			$51.86 — $53.76			53.02
			45.9					$	54.44

	Accumulated Other Comprehensive Income

27

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6.	Stockholders’ Equity (Continued)

		June 30,
		2006				2005
Net unrealized gains (losses) on investments(1)		$	375,503			$	498,118
Net unrealized gains (losses) on derivatives(2)			(3,459	)			(23,953	)
Minimum pension liability adjustment(3)			(1,840	)			(1,044	)
Total accumulated other comprehensive income		$	370,204			$	473,121

	(1)	Net of tax expense of $199,569 and $268,902 as of June 30, 2006 and 2005, respectively.
	(2)	Net of tax benefit of $1,977 and $10,952 as of June 30, 2006 and 2005, respectively.
	(3)	Net of tax benefit of $991 and $562 as of June 30, 2006 and 2005, respectively.

7.	Earnings per Common Share

28

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7.	Earnings per Common Share (Continued)

			Three Months Ended								Six Months Ended
			June 30,								June 30,
			2006				2005				2006				2005
Numerator:
Net income attributable to common stock			$	714,991			$	292,607			$	858,291			$	513,116
Adjusted for debt expense of Co-Cos, net of taxes				16,460				10,297				31,277				18,916
Adjusted for non-taxable unrealized gains on equity forwards(1)				(39,717	)			—				—				—
Net income attributable to common stock, adjusted			$	691,734			$	302,904			$	889,568			$	532,032
Denominator: (shares in thousands)
Weighted average shares used to compute basic EPS				410,957				419,497				411,811				420,206
Effect of dilutive securities:
	Dilutive effect of stock options, nonvested deferred compensation, nonvested restricted stock, restricted stock units, ESPP, and equity forwards			13,045				12,091				11,680				11,936
	Dilutive effect of Co-Cos			30,312				30,312				30,312				30,312
Dilutive potential common shares(2)				43,357				42,403				41,992				42,248
Weighted average shares used to compute diluted EPS				454,314				461,900				453,803				462,454
Net earnings per share:
Basic EPS			$	1.74			$	.70			$	2.08			$	1.22
	Dilutive effect of stock options, nonvested deferred compensation, nonvested restricted stock, restricted stock units, ESPP, and equity forwards			(.05	)			(.02	)			(.05	)			(.03	)
	Dilutive effect of Co-Cos			(.08	)			(.02	)			(.07	)			(.04	)
	Dilutive effect of non-taxable unrealized gains on equity forwards(1)			(.09	)			—				—				—
Diluted EPS			$	1.52			$	.66			$	1.96			$	1.15

(1)

SFAS No. 128, “Earnings per Share,” and the additional guidance provided by EITF Topic No. D-72, “Effect of Contracts That May Be Settled in Stock or Cash on the Computation of Diluted Earnings per Share,” require both the denominator and the numerator to be adjusted in calculating the potential impact of the Company’s equity forward contracts on diluted EPS. Under this guidance, when certain conditions are satisfied, the impact of the equity forwards is dilutive. Specifically, the impact is dilutive when: (1) the average share price is lower than the respective strike prices on the Company’s equity forward contracts,

29

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7.	Earnings per Common Share (Continued)

(2)

For the three months ended June 30, 2006 and 2005, stock options and equity forwards of approximately 8 million shares and 14 million shares, respectively, and for the six months ended June 30, 2006 and 2005, stock options and equity forwards of approximately 12 million shares and 19 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were antidilutive.

8.	Stock-Based Compensation Plans

	Stock Options

30

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8.	Stock-Based Compensation Plans (Continued)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Risk free interest rate			4.96	%			3.77	%			4.48	%			3.86	%
Expected volatility			19.86	%			21.64	%			20.64	%			22.62	%
Expected dividend rate			1.66	%			1.73	%			1.58	%			1.55	%
Expected life of the option			3 years				5 years				3 years				5 years

31

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8.	Stock-Based Compensation Plans (Continued)

						Weighted				Weighted
						Average				Average
						Exercise				Remaining
		Number of				Price per				Contractual				Aggregate
		Options				Share				Term				Intrinsic Value
Outstanding at December 31, 2005			41,484,567			$	34.52
Granted — direct options			3,999,475				55.81
Granted — replacement options			92,849				55.38
Exercised			(3,705,892	)			30.93
Canceled			(734,975	)			49.40
Outstanding at June 30, 2006			41,136,024			$	36.70				6.81 yrs			$	667 million
Exercisable at June 30, 2006			27,742,789			$	29.98				5.81 yrs			$	636 million

	Restricted Stock

32

---

 

8.	Stock-Based Compensation Plans (Continued)

						Weighted
						Average Grant
		Number of				Date Fair
		Shares				Value
Nonvested at December 31, 2005			357,444			$	44.34
Granted			163,398				55.82
Vested			(56,035	)			37.83
Canceled			(35,167	)			42.44
Nonvested at June 30, 2006			429,640			$	49.71

	Restricted Stock Units

						Weighted
						Average Grant
		Number of				Date Fair
		RSUs				Value
Outstanding at December 31, 2005			840,000			$	34.81
Granted			100,000				55.82
Vested			—				—
Canceled			—				—
Converted to common stock			(300,000	)			31.93
Outstanding at June 30, 2006			640,000			$	39.45

	Employee Stock Purchase Plan

33

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8.	Stock-Based Compensation Plans (Continued)

		Three Months Ended				Six Months Ended
		June 30, 2006				June 30, 2006
Risk free interest rate			4.98	%			4.75	%
Expected volatility			19.39	%			19.61	%
Expected dividend rate			1.90	%			1.72	%
Expected life			2 years				2 years

9.	Pension Plans

	Components of Net Periodic Pension Cost

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Service cost — benefits earned during the period		$	2,073			$	2,473			$	4,146			$	4,946
Interest cost on project benefit obligations			2,862				2,806				5,724				5,612
Expected return on plan assets			(4,069	)			(4,108	)			(8,138	)			(8,217	)
Net amortization and deferral			122				(30	)			244				(59	)
Total net periodic pension cost		$	988			$	1,141			$	1,976			$	2,282

	Employer Contributions

34

---

 

9.	Pension Plans (Continued)

10.	Contingencies

11.	Segment Reporting

35

---

 

11.	Segment Reporting (Continued)

	Lending

36

---

 

11.	Segment Reporting (Continued)

	DMO

	Corporate and Other

	Measure of Profitability

37

---

 

11.	Segment Reporting (Continued)

	Segment Results and Reconciliations to GAAP

			Three Months Ended June 30, 2006
											Corporate				Total “Core								Total
			Lending				DMO				and Other				Earnings”				Adjustments(3)				GAAP
(Dollars in millions)
Interest income:
	FFELP Stafford and Other Student Loans		$	719			$	—			$	—			$	719			$	(382	)		$	337
	Consolidation Loans			1,114				—				—				1,114				(273	)			841
	Private Education Loans			485				—				—				485				(251	)			234
	Other loans			24				—				—				24				—				24
	Cash and investments			170				—				1				171				(46	)			125
Total interest income				2,512				—				1				2,513				(952	)			1,561
Total interest expense				1,904				5				1				1,910				(706	)			1,204
Net interest income				608				(5	)			—				603				(246	)			357
Less: provisions for losses				60				—				—				60				8				68
Net interest income after provisions for losses				548				(5	)			—				543				(254	)			289
Fee income				—				90				33				123				—				123
Collections revenue				—				67				—				67				—				67
Other income				51				—				24				75				869				944
Operating expenses(1)				163				85				50				298				18				316
Income before income taxes and minority interest in net earnings of subsidiaries				436				67				7				510				597				1,107
Income tax expense(2)				161				26				2				189				193				382
Minority interest in net earnings of subsidiaries				—				1				—				1				—				1
Net income			$	275			$	40			$	5			$	320			$	404			$	724

(1)	Operating expenses for the Lending, DMO, and Corporate and Other Business segments include $8 million, $2 million, and $4 million, respectively, of stock-based compensation expense due to the implementation of SFAS No. 123(R) in the first quarter of 2006.
(2)	Income taxes are based on a percentage of net income (loss) before tax for the individual reportable segment.
(3)	“Core Earnings” adjustments to GAAP:

		Three Months Ended June 30, 2006
		Net Impact of				Net Impact of								Amortization
		Securitization				Derivative				Net Impact of				of Acquired
		Accounting				Accounting				Floor Income				Intangibles				Total
(Dollars in millions)
Net interest income		$	(236	)		$	42			$	(52	)		$	—			$	(246	)
Less: provisions for losses			8				—				—				—				8
Net interest income after provisions for losses			(244	)			42				(52	)			—				(254	)
Fee income			—				—				—				—				—
Collections revenue			—				—				—				—				—
Other income			746				123				—				—				869
Operating expenses			—				—				—				18				18
Total pre-tax “Core Earnings” adjustments to GAAP		$	502			$	165			$	(52	)		$	(18	)			597
Income tax expense																			193
Minority interest in net earnings of subsidiaries																			—
Total “Core Earnings” adjustments to GAAP																		$	404

38

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11.	Segment Reporting (Continued)

			Three Months Ended June 30, 2005
											Corporate				Total “Core								Total
			Lending				DMO				and Other				Earnings”				Adjustments(3)				GAAP
(Dollars in millions)
Interest income:
	FFELP Stafford and Other Student Loans		$	582			$	—			$	—			$	582			$	(343	)		$	239
	Consolidation Loans			667				—				—				667				(113	)			554
	Private Education Loans			247				—				—				247				(120	)			127
	Other loans			20				—				—				20				—				20
	Cash and investments			77				—				1				78				(24	)			54
Total interest income				1,593				—				1				1,594				(600	)			994
Total interest expense				1,073				4				1				1,078				(414	)			664
Net interest income				520				(4	)			—				516				(186	)			330
Less: provisions for losses				14				—				—				14				65				79
Net interest income after provisions for losses				506				(4	)			—				502				(251	)			251
Fee income				—				82				26				108				—				108
Collections revenue				—				42				—				42				—				42
Other income				36				—				29				65				297				362
Operating expenses(1)				141				67				63				271				17				288
Income (loss) before income taxes and minority interest in net earnings of subsidiaries				401				53				(8	)			446				29				475
Income tax expense (benefit)(2)				148				20				(3	)			165				11				176
Minority interest in net earnings of subsidiaries				1				1				—				2				—				2
Net income (loss)			$	252			$	32			$	(5	)		$	279			$	18			$	297

(1)	Income taxes are based on a percentage of net income (loss) before tax for the individual reportable segment.
(2)	In the first quarter of 2006, the Company changed its method for allocating certain overhead and other expenses between its business segments. Balances for the three months ending June 30, 2005 have been updated to reflect the new allocation methodology.
(3)	“Core Earnings” adjustments to GAAP:

		Three Months Ended June 30, 2005
		Net impact of				Net Impact of								Amortization
		Securitization				Derivative				Net Impact of				of Acquired
(Dollars in millions)		Accounting				Accounting				Floor Income				Intangibles				Total
Net interest income		$	(230	)		$	95			$	(51	)		$	—			$	(186	)
Less: provisions for losses			65				—				—				—				65
Net interest income after provisions for losses			(295	)			95				(51	)			—				(251	)
Fee income			—				—				—				—				—
Collections revenue			—				—				—				—				—
Other income			403				(106	)			—				—				297
Operating expenses			1				—				—				16				17
Total pre-tax “Core Earnings” adjustments to GAAP		$	107			$	(11	)		$	(51	)		$	(16	)			29
Income tax expense																			11
Minority interest in net earnings of subsidiaries																			—
Total “Core Earnings” adjustments to GAAP																		$	18

39

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11.	Segment Reporting (Continued)

			Six Months Ended June 30, 2006
											Corporate				Total “Core								Total
(Dollars in millions)			Lending				DMO				and Other				Earnings”				Adjustments(3)				GAAP
Interest income:
	FFELP Stafford and Other Student Loans		$	1,369			$	—			$	—			$	1,369			$	(734	)		$	635
	Consolidation Loans			2,142				—				—				2,142				(479	)			1,663
	Private Education Loans			914				—				—				914				(439	)			475
	Other loans			47				—				—				47				—				47
	Cash and investments			300				—				2				302				(81	)			221
Total interest income				4,772				—				2				4,774				(1,733	)			3,041
Total interest expense				3,562				11				3				3,576				(1,280	)			2,296
Net interest income				1,210				(11	)			(1	)			1,198				(453	)			745
Less: provisions for losses				135				—				—				135				(7	)			128
Net interest income after provisions for losses				1,075				(11	)			(1	)			1,063				(446	)			617
Fee income				—				182				60				242				—				242
Collections revenue				—				124				—				124				—				124
Other income				92				—				55				147				907				1,054
Operating expenses(1)				324				175				109				608				32				640
Income before income taxes and minority interest in net earnings of subsidiaries				843				120				5				968				429				1,397
Income tax expense(2)				312				44				2				358				161				519
Minority interest in net earnings of subsidiaries				—				3				—				3				—				3
Net income			$	531			$	73			$	3			$	607			$	268			$	875

(1)	Operating expenses for the Lending, DMO, and Corporate and Other Business segments include $18 million, $5 million, and $9 million, respectively, of stock-based compensation expense due to the implementation of SFAS No. 123(R) in the first quarter of 2006.
(2)	Income taxes are based on a percentage of net income (loss) before tax for the individual reportable segment.
(3)	“Core Earnings” adjustments to GAAP:

		Six Months Ended June 30, 2006
		Net Impact of				Net Impact of								Amortization
		Securitization				Derivative				Net Impact of				of Acquired
(Dollars in millions)		Accounting				Accounting				Floor Income				Intangibles				Total
Net interest income		$	(438	)		$	90			$	(105	)		$	—			$	(453	)
Less: provisions for losses			(7	)			—				—				—				(7	)
Net interest income after provisions for losses			(431	)			90				(105	)			—				(446	)
Fee income			—				—				—				—				—
Collections revenue			—				—				—				—				—
Other income			871				36				—				—				907
Operating expenses			—				—				—				32				32
Total pre-tax “Core Earnings” adjustments to GAAP		$	440			$	126			$	(105	)		$	(32	)			429
Income tax expense																			161
Minority interest in net earnings of subsidiaries																			—
Total “Core Earnings” adjustments to GAAP																		$	268

40

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11.	Segment Reporting (Continued)

			Six Months Ended June 30, 2005
											Corporate				Total “Core								Total
(Dollars in millions)			Lending				DMO				and Other				Earnings”				Adjustments(3)				GAAP
Interest income:
	FFELP Stafford and Other Student Loans		$	1,092			$	—			$	—			$	1,092			$	(663	)		$	429
	Consolidation Loans			1,248				—				—				1,248				(185	)			1,063
	Private Education Loans			474				—				—				474				(217	)			257
	Other loans			40				—				—				40				—				40
	Cash and investments			156				—				2				158				(42	)			116
Total interest income				3,010				—				2				3,012				(1,107	)			1,905
Total interest expense				1,991				8				3				2,002				(774	)			1,228
Net interest income				1,019				(8	)			(1	)			1,010				(333	)			677
Less: provisions for losses				69				—				—				69				57				126
Net interest income after provisions for losses				950				(8	)			(1	)			941				(390	)			551
Fee income				—				168				58				226				—				226
Collections revenue				—				77				—				77				—				77
Other income				72				—				61				133				450				583
Operating expenses(1)				275				132				114				521				29				550
Income before income taxes and minority interest in net earnings of subsidiaries				747				105				4				856				31				887
Income tax expense(2)				277				39				1				317				46				363
Minority interest in net earnings of subsidiaries				2				2				—				4				—				4
Net income			$	468			$	64			$	3			$	535			$	(15	)		$	520

(1)	Income taxes are based on a percentage of net income (loss) before tax for the individual reportable segment.
(2)	In the first quarter of 2006, the Company changed its method for allocating certain overhead and other expenses between its business segments. Balances for the six months ending June 30, 2005 have been updated to reflect the new allocation methodology.
(3)	“Core Earnings” adjustments to GAAP:

		Six Months Ended June 30, 2005
		Net Impact of				Net Impact of								Amortization
		Securitization				Derivative				Net Impact of				of Acquired
(Dollars in millions)		Accounting				Accounting				Floor Income				Intangibles				Total
Net interest income		$	(458	)		$	219			$	(94	)		$	—			$	(333	)
Less: provisions for losses			57				—				—				—				57
Net interest income after provisions for losses			(515	)			219				(94	)			—				(390	)
Fee income			—				—				—				—				—
Collections revenue			—				—				—				—				—
Other income			590				(140	)			—				—				450
Operating expenses			—				—				—				29				29
Total pre-tax “Core Earnings” adjustments to GAAP		$	75			$	79			$	(94	)		$	(29	)			31
Income tax expense																			46
Minority interest in net earnings of subsidiaries																			—
Total “Core Earnings” adjustments to GAAP																		$	(15	)

41

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11.	Segment Reporting (Continued)

	Summary of “Core Earnings” Adjustments to GAAP

			Three Months								Six Months
			Ended June 30,								Ended June 30,
(Dollars in millions)			2006				2005				2006				2005
“Core Earnings” adjustments to GAAP:
	Net impact of securitization accounting(1)		$	502			$	107			$	440			$	75
	Net impact of derivative accounting(2)			165				(11	)			126				79
	Net impact of Floor Income(3)			(52	)			(51	)			(105	)			(94	)
	Amortization of acquired intangibles(4)			(18	)			(16	)			(32	)			(29	)
	Net tax effect(5)			(193	)			(11	)			(161	)			(46	)
Total “Core Earnings” adjustments to GAAP			$	404			$	18			$	268			$	(15	)

(1)	Securitization: Under GAAP, certain securitization transactions in the Company’s Lending operating segment are accounted for as sales of assets. Under the Company’s “Core Earnings” presentation for the Lending operating segment, the Company presents all securitization transactions on a “Core Earnings” basis as long-term non-recourse financings. The upfront “gains” on sale from securitization transactions as well as ongoing “servicing and securitization revenue” presented in accordance with GAAP are excluded from “Core Earnings” net income and replaced by the interest income, provisions for loan losses, and interest expense as they are earned or incurred on the securitization loans. The Company also excludes transactions with its off-balance sheet trusts from “Core Earnings” net income as they are considered intercompany transactions on a “Core Earnings” basis.
(2)	Derivative accounting: “Core Earnings” net income excludes periodic unrealized gains and losses arising primarily in the Company’s Lending operating segment, and to a lesser degree in the Company’s Corporate and Other reportable segment, that are caused primarily by the one-sided mark-to-market derivative valuations prescribed by SFAS No. 133 on derivatives that do not qualify for “hedge treatment” under GAAP. Under the Company’s “Core Earnings” presentation, the Company recognizes the economic effect of these hedges, which generally results in any cash paid or received being recognized ratably as an expense or revenue over the hedged item’s life. “Core Earnings” net income also excludes the gain or loss on equity forward contracts that under SFAS No. 133, are required to be accounted for as derivatives and are marked-to-market through GAAP net income.
(3)	Floor Income: The timing and amount (if any) of Floor Income earned in the Company’s Lending operating segment is uncertain and in excess of expected spreads. Therefore, the Company excludes such income from “Core Earnings” net income when it is not economically hedged. The Company employs derivatives, primarily Floor Income Contracts and futures, to economically hedge Floor Income. As discussed above in “Derivative Accounting,” these derivatives do not qualify as effective accounting hedges and therefore, under GAAP, are marked-to-market through the “gains (losses) on derivative and hedging activities, net” line on the income statement with no offsetting gain or loss recorded for the economically hedged items. For “Core Earnings” net income, the Company reverses the fair value adjustments on the Floor Income Contracts and futures economically hedging Floor Income and includes the amortization of net premiums received (net of Eurodollar futures contracts’ realized gains or losses) in income.
(4)	Other items: The Company excludes goodwill impairment and amortization of acquired intangibles.
(5)	Such tax effect is based upon the Company’s “Core Earnings” effective tax rate for the year. The net tax effect results primarily from the exclusion of the permanent income tax impact of the equity forward contracts.

42

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

43

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44

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	Condensed Statements of Income

		Three Months								Increase								Six Months								Increase
		Ended June 30,								(Decrease)								Ended June 30,								(Decrease)
		2006				2005				$				%				2006				2005				$				%
Net interest income		$	357			$	330			$	27				8	%		$	745			$	677			$	68				10%
Less: provisions for losses			68				79				(11	)			(14	)			128				126				2				2
Net interest income after provisions for losses			289				251				38				15				617				551				66				12
Gains on student loan securitizations			671				262				409				156				701				312				389				125
Servicing and securitization revenue			83				150				(67	)			(45	)			182				293				(111	)			(38	)
Gains (losses) on derivative and hedging activities, net			123				(106	)			229				216				36				(140	)			176				126
Guarantor servicing fees			33				26				7				27				60				58				2				3
Debt management fees			90				82				8				10				182				168				14				8
Collections revenue			67				42				25				60				124				77				47				61
Other income			67				56				11				20				135				118				17				14
Operating expenses			316				288				28				10				640				550				90				16
Income taxes			382				176				206				117				519				363				156				43
Minority interest in net earnings of subsidiaries			1				2				(1	)			(50	)			3				4				(1	)			(25	)
Net income			724				297				427				144				875				520				355				68
Preferred stock dividends			9				4				5				125				17				7				10				143
Net income attributable to common stock		$	715			$	293			$	422				144	%		$	858			$	513			$	345				67%
Basic earnings per common share		$	1.74			$	.70			$	1.04				149	%		$	2.08			$	1.22			$	.86				70%
Diluted earnings per common share		$	1.52			$	.66			$	.86				130	%		$	1.96			$	1.15			$	.81				70%
Dividends per common share		$	.25			$	.22			$	.03				14	%		$	.47			$	.41			$	.06				15%

45

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	Condensed Balance Sheets

										Increase
										(Decrease)
		June 30,				December 31,
		2006				2005				$				%
Assets
FFELP Stafford and Other Student Loans, net		$	21,391			$	19,988			$	1,403				7	%
Consolidation Loans, net			54,055				54,859				(804	)			(1	)
Private Education Loans, net			6,833				7,757				(924	)			(12	)
Other loans, net			1,051				1,138				(87	)			(8	)
Cash and investments			6,204				4,868				1,336				27
Restricted cash and investments			3,489				3,300				189				6
Retained Interest in off-balance sheet securitized loans			3,152				2,406				746				31
Goodwill and acquired intangible assets, net			1,081				1,105				(24	)			(2	)
Other assets			4,651				3,918				733				19
Total assets		$	101,907			$	99,339			$	2,568				3	%
Liabilities and Stockholders’ Equity
Short-term borrowings		$	3,801			$	3,810			$	(9	)			—	%
Long-term borrowings			90,507				88,119				2,388				3
Other liabilities			3,230				3,609				(379	)			(11	)
Total liabilities			97,538				95,538				2,000				2
Minority interest in subsidiaries			9				9				—				—
Stockholders’ equity before treasury stock			5,238				4,364				874				20
Common stock held in treasury at cost			878				572				306				53
Total stockholders’ equity			4,360				3,792				568				15
Total liabilities and stockholders’ equity		$	101,907			$	99,339			$	2,568				3	%

46

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47

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	Taxable Equivalent Net Interest Income

			Three Months
			Ended June 30,								Increase								Six Months								Increase
			2006								(Decrease)								Ended June 30,								(Decrease)
			2006				2005				$				%				2006				2005				$				%
Interest income:
	Student loans		$	1,412			$	920			$	492				53	%		$	2,773			$	1,749			$	1,024				59	%
	Other loans			24				20				4				20				47				40				7				18
	Cash and investments			125				54				71				131				221				116				105				91
	Taxable equivalent adjustment			1				1				—				—				1				2				(1	)			(50	)
	Total taxable equivalent interest income			1,562				995				567				57				3,042				1,907				1,135				60
Interest expense				1,204				664				540				81				2,296				1,228				1,068				87
Taxable equivalent net interest income			$	358			$	331			$	27				8	%		$	746			$	679			$	67				10	%

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	Average Balance Sheets

			Three Months Ended June 30,
			2006								2005
			Balance				Rate				Balance				Rate
Average Assets
FFELP Stafford and Other Student Loans			$	20,562				6.58	%		$	20,673				4.63	%
Consolidation Loans				52,201				6.47				43,531				5.11
Private Education Loans				7,961				11.77				6,376				7.98
Other loans				1,090				8.72				1,051				7.83
Cash and investments				8,867				5.67				5,206				4.24
Total interest earning assets				90,681				6.91	%			76,837				5.20	%
Non-interest earning assets				8,648								6,627
	Total assets		$	99,329							$	83,464
Average Liabilities and Stockholders’ Equity
Short-term borrowings			$	4,393				5.07	%		$	5,308				3.63	%
Long-term borrowings				87,364				5.27				71,673				3.45
Total interest bearing liabilities				91,757				5.26	%			76,981				3.46	%
Non-interest bearing liabilities				3,501								3,309
Stockholders’ equity				4,071								3,174
	Total liabilities and stockholders’ equity		$	99,329							$	83,464
Net interest margin								1.58	%							1.73	%

			Six Months Ended June 30,
			2006								2005
			Balance				Rate				Balance				Rate
Average Assets
FFELP Stafford and Other Student Loans			$	20,045				6.39	%		$	19,604				4.42	%
Consolidation Loans				53,251				6.30				43,204				4.96
Private Education Loans				8,485				11.29				6,321				8.18
Other loans				1,131				8.42				1,074				7.74
Cash and investments				7,959				5.61				6,473				3.65
Total interest earning assets				90,871				6.75	%			76,676				5.02	%
Non-interest earning assets				8,307								6,507
	Total assets		$	99,178							$	83,183
Average Liabilities and Stockholders’ Equity
Short-term borrowings			$	4,284				4.93	%		$	4,388				3.59	%
Long-term borrowings				87,346				5.06				72,461				3.20
Total interest bearing liabilities				91,630				5.05	%			76,849				3.22	%
Non-interest bearing liabilities				3,600								3,267
Stockholders’ equity				3,948								3,067
	Total liabilities and stockholders’ equity		$	99,178							$	83,183
Net interest margin								1.65	%							1.78	%

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	Rate/ Volume Analysis

						Increase
						(Decrease)
		Taxable				Attributable to
		Equivalent				Change in
		Increase
		(Decrease)				Rate				Volume
Three months ended June 30, 2006 vs. three months ended June 30, 2005
Taxable equivalent interest income		$	567			$	386			$	181
Interest expense			540				413				127
Taxable equivalent net interest income		$	27			$	(27	)		$	54

						Increase
						(Decrease)
		Taxable				Attributable to
		Equivalent				Change in
		Increase
		(Decrease)				Rate				Volume
Six months ended June 30, 2006 vs. six months ended June 30, 2005
Taxable equivalent interest income		$	1,135			$	761			$	374
Interest expense			1,068				834				234
Taxable equivalent net interest income		$	67			$	(73	)		$	140

	•	the mix of student loans in the portfolio, with Consolidation Loans having the lowest spread and Private Education Loans having the highest spread;

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	•	the premiums paid, borrower fees charged and capitalized costs incurred to acquire student loans which impact the spread through subsequent amortization;
	•	the type and level of Borrower Benefits programs for which the student loans are eligible;
	•	the level of Floor Income and, when considering the “Core Earnings” basis student loan spread, the amount of Floor Income-eligible loans that have been hedged through Floor Income Contracts; and
	•	funding and hedging costs.

	Student Loan Spread Analysis — On-Balance Sheet

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
On-Balance Sheet
Student loan yield, before Floor Income			7.92	%			5.79	%			7.71	%			5.68	%
Gross Floor Income			.04				.32				.05				.36
Consolidation Loan Rebate Fees			(.67	)			(.63	)			(.67	)			(.65	)
Borrower Benefits			(.11	)			(.11	)			(.11	)			(.14	)
Premium and discount amortization			(.16	)			(.15	)			(.14	)			(.15	)
Student loan net yield			7.02				5.22				6.84				5.10
Student loan cost of funds			(5.27	)			(3.43	)			(5.05	)			(3.19	)
Student loan spread			1.75	%			1.79	%			1.79	%			1.91	%
Average Balances
On-balance sheet student loans		$	80,724			$	70,580			$	81,781			$	69,129

	Discussion of Student Loan Spread — Effects of Floor Income and Derivative Accounting

51

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	Discussion of Student Loan Spread — Effects of Significant Events in the Quarters Presented

	Discussion of Student Loan Spread — Other Quarter-over-Quarter Fluctuations

	Floor Income

52

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		Three Months Ended
		June 30, 2006												June 30, 2005
		Fixed				Variable								Fixed				Variable
		Borrower				Borrower								Borrower				Borrower
		Rate				Rate				Total				Rate				Rate				Total
Floor Income:
Gross Floor Income		$	8			$	—			$	8			$	56			$	—			$	56
Payments on Floor Income Contracts			(8	)			—				(8	)			(52	)			—				(52	)
Net Floor Income		$	—			$	—			$	—			$	4			$	—			$	4
Net Floor Income in basis points			—				—				—				2				—				2

		Six Months Ended
		June 30, 2006												June 30, 2005
		Fixed				Variable								Fixed				Variable
		Borrower				Borrower								Borrower				Borrower
		Rate				Rate				Total				Rate				Rate				Total
Floor Income:
Gross Floor Income		$	22			$	—			$	22			$	122			$	—			$	122
Payments on Floor Income Contracts			(22	)			—				(22	)			(112	)			—				(112	)
Net Floor Income		$	—			$	—			$	—			$	10			$	—			$	10
Net Floor Income in basis points			—				—				—				3				—				3

53

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54

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			Three Months Ended
			June 30, 2006
											Corporate
			Lending				DMO				and Other
Interest income:
	FFELP Stafford and Other Student Loans		$	719			$	—			$	—
	Consolidation Loans			1,114				—				—
	Private Education Loans			485				—				—
	Other loans			24				—				—
	Cash and investments			170				—				1
Total interest income				2,512				—				1
Total interest expense				1,904				5				1
Net interest income				608				(5	)			—
Less: provisions for losses				60				—				—
Net interest income after provisions for losses				548				(5	)			—
Fee income				—				90				33
Collections revenue				—				67				—
Other income				51				—				24
Operating expenses(1)				163				85				50
Income before income taxes and minority interest in net earnings of subsidiaries				436				67				7
Income tax expense(2)				161				26				2
Minority interest in net earnings of subsidiaries				—				1				—
“Core Earnings” net income			$	275			$	40			$	5

	(1)	Operating expenses for the Lending, DMO, and Corporate and Other business segments include $8 million, $2 million, and $4 million, respectively, of stock-based compensation expense due to the implementation of SFAS No. 123(R) in the first quarter of 2006.
	(2)	Income taxes are based on a percentage of net income before tax for the individual reportable segment.

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			Three Months Ended
			June 30, 2005
											Corporate
			Lending				DMO				and Other
Interest income:
	FFELP Stafford and Other Student Loans		$	582			$	—			$	—
	Consolidation Loans			667				—				—
	Private Education Loans			247				—				—
	Other loans			20				—				—
	Cash and investments			77				—				1
Total interest income				1,593				—				1
Total interest expense				1,073				4				1
Net interest income				520				(4	)			—
Less: provisions for losses				14				—				—
Net interest income after provisions for losses				506				(4	)			—
Fee income				—				82				26
Collections revenue				—				42				—
Other income				36				—				29
Operating expenses(1)				141				67				63
Income (loss) before income taxes and minority interest in net earnings of subsidiaries				401				53				(8	)
Income tax expense (benefit)(2)				148				20				(3	)
Minority interest in net earnings of subsidiaries				1				1				—
“Core Earnings” net income (loss)			$	252			$	32			$	(5	)

	(1)	In the first quarter of 2006, the Company changed its method for allocating certain overhead and other expenses between our business segments. Balances for the three months ending June 30, 2005 have been updated to reflect the new allocation methodology.
	(2)	Income taxes are based on a percentage of net income before tax for the individual reportable segment.

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			Six Months Ended
			June 30, 2006
											Corporate
			Lending				DMO				and Other
Interest income:
	FFELP Stafford and Other Student Loans		$	1,369			$	—			$	—
	Consolidation Loans			2,142				—				—
	Private Education Loans			914				—				—
	Other loans			47				—				—
	Cash and investments			300				—				2
Total interest income				4,772				—				2
Total interest expense				3,562				11				3
Net interest income				1,210				(11	)			(1	)
Less: provisions for losses				135				—				—
Net interest income after provisions for losses				1,075				(11	)			(1	)
Fee income				—				182				60
Collections revenue				—				124				—
Other income				92				—				55
Operating expenses(1)				324				175				109
Income before income taxes and minority interest in net earnings of subsidiaries				843				120				5
Income tax expense(2)				312				44				2
Minority interest in net earnings of subsidiaries				—				3				—
“Core Earnings” net income			$	531			$	73			$	3

	(1)	Operating expenses for the Lending, DMO, and Corporate and Other business segments include $18 million, $5 million, and $9 million, respectively, of stock-based compensation expense due to the implementation of SFAS No. 123(R) in the first quarter of 2006.
	(2)	Income taxes are based on a percentage of net income before tax for the individual reportable segment.

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			Six Months Ended
			June 30, 2005
											Corporate
			Lending				DMO				and Other
Interest income:
	FFELP Stafford and Other Student Loans		$	1,092			$	—			$	—
	Consolidation Loans			1,248				—				—
	Private Education Loans			474				—				—
	Other loans			40				—				—
	Cash and investments			156				—				2
Total interest income				3,010				—				2
Total interest expense				1,991				8				3
Net interest income				1,019				(8	)			(1	)
Less: provisions for losses				69				—				—
Net interest income after provisions for losses				950				(8	)			(1	)
Fee income				—				168				58
Collections revenue				—				77				—
Other income				72				—				61
Operating expenses(1)				275				132				114
Income before income taxes and minority interest in net earnings of subsidiaries				747				105				4
Income tax expense(2)				277				39				1
Minority interest in net earnings of subsidiaries				2				2				—
“Core Earnings” net income			$	468			$	64			$	3

	(1)	In the first quarter of 2006, the Company changed its method for allocating certain overhead and other expenses between our business segments. Balances for the six months ending June 30, 2005 have been updated to reflect the new allocation methodology.
	(2)	Income taxes are based on a percentage of net income before tax for the individual reportable segment.

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	Pre-tax differences between “Core Earnings” and GAAP by Business Segment

			Three Months Ended June 30,
			2006												2005
											Corporate												Corporate
			Lending				DMO				and Other				Lending				DMO				and Other
“Core Earnings” adjustments to GAAP:
	Net impact of securitization accounting		$	502			$	—			$	—			$	107			$	—			$	—
	Net impact of derivative accounting			126				—				39				(21	)			—				10
	Net impact of Floor Income			(52	)			—				—				(51	)			—				—
	Amortization of acquired intangibles			(13	)			(4	)			(1	)			(12	)			(3	)			(1	)
Total “Core Earnings” adjustments to GAAP			$	563			$	(4	)		$	38			$	23			$	(3	)		$	9

			Six Months Ended June 30,
			2006												2005
											Corporate												Corporate
			Lending				DMO				and Other				Lending				DMO				and Other
“Core Earnings” adjustments to GAAP:
	Net impact of securitization accounting		$	440			$	—			$	—			$	75			$	—			$	—
	Net impact of derivative accounting			209				—				(83	)			177				—				(98	)
	Net impact of Floor Income			(105	)			—				—				(94	)			—				—
	Amortization of acquired intangibles			(22	)			(8	)			(2	)			(21	)			(5	)			(3	)
Total “Core Earnings” adjustments to GAAP			$	522			$	(8	)		$	(85	)		$	137			$	(5	)		$	(101	)

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		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2006				2005				2006				2005
“Core Earnings” securitization adjustments:
Net interest income on securitized loans, after provisions for losses		$	(242	)		$	(295	)		$	(430	)		$	(515	)
Gains on student loan securitizations			671				262				701				312
Servicing and securitization revenue			83				150				182				293
Intercompany transactions with off-balance sheet trusts			(10	)			(10	)			(13	)			(15	)
Total “Core Earnings” securitization adjustments		$	502			$	107			$	440			$	75

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		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2006				2005				2006				2005
“Core Earnings” derivative adjustments:
Gains (losses) on derivative and hedging activities, net included in other income(1)		$	123			$	(106	)		$	36			$	(140	)
Less: Realized losses on derivative and hedging activities, net(1)			41				94				89				216
Unrealized gains (losses) on derivative and hedging activities, net(1)			164				(12	)			125				76
Other pre-SFAS No. 133 accounting adjustments			1				1				1				3
Total net impact of SFAS No. 133 derivative accounting		$	165			$	(11	)		$	126			$	79

	(1)	See “Reclassification of Realized Gains (Losses) on Derivative and Hedging Activities” below for a detailed breakdown of the components of both the realized and unrealized losses on derivative and hedging activities.

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	Reclassification of Realized Gains (Losses) on Derivative and Hedging Activities

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2006				2005				2006				2005
Reclassification of realized losses on derivative and hedging activities:
Net settlement expense on Floor Income Contracts reclassified to net interest income		$	(12	)		$	(77	)		$	(33	)		$	(165	)
Net settlement expense on interest rate swaps reclassified to net interest income			(29	)			(17	)			(56	)			(46	)
Net realized losses on closed Eurodollar futures contracts and terminated derivative contracts reclassified to other income			—				—				—				(5	)
Total reclassifications of realized losses on derivative and hedging activities			(41	)			(94	)			(89	)			(216	)
Add: Unrealized gains (losses) on derivative and hedging activities, net(1)			164				(12	)			125				76
Gains (losses) on derivative and hedging activities, net		$	123			$	(106	)		$	36			$	(140	)

	(1)	“Unrealized gains (losses) on derivative and hedging activities, net” is comprised of the following unrealized mark-to-market gains (losses):

		Three
		Months								Six Months
		Ended								Ended
		June 30,								June 30,
		2006				2005				2006				2005
Floor Income Contracts		$	88			$	(146	)		$	232			$	122
Equity forward contracts			39				10				(83	)			(98	)
Basis swaps			14				127				(68	)			67
Other			23				(3	)			44				(15	)
Total unrealized gains (losses) on derivative and hedging activities, net		$	164			$	(12	)		$	125			$	76

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		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2006				2005				2006				2005
“Core Earnings” Floor Income adjustments:
Floor Income earned on Managed loans, net of payments on Floor Income Contracts		$	—			$	6			$	—			$	17
Amortization of net premiums on Floor Income Contracts and futures in net interest income			(52	)			(57	)			(105	)			(111	)
Total “Core Earnings” Floor Income adjustments		$	(52	)		$	(51	)		$	(105	)		$	(94	)

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											%												%
											Increase												Increase
			Three Months								(Decrease)				Six Months								(Decrease)
			Ended June 30,												Ended June 30,
											2006 vs.												2006 vs.
			2006				2005				2005				2006				2005				2005
“Core Earnings” interest income:
	FFELP and Other Student Loans		$	719			$	582				24	%		$	1,369			$	1,092				25	%
	Consolidation loans			1,114				667				67				2,142				1,248				72
	Private Education Loans			485				247				96				914				474				93
	Other loans			24				20				20				47				40				18
	Cash and investments			170				77				121				300				156				92
Total “Core Earnings” interest income				2,512				1,593				58				4,772				3,010				59
Total “Core Earnings” interest expense				1,904				1,073				77				3,562				1,991				79
Net “Core Earnings” interest income				608				520				17				1,210				1,019				19
Less: provisions for losses				60				14				329				135				69				96
Net “Core Earnings” interest income after provisions for losses				548				506				8				1,075				950				13
Other income				51				36				42				92				72				28
Operating expenses(1)(2)				163				141				16				324				275				18
Income before income taxes and minority interest in net earnings of subsidiaries				436				401				9				843				747				13
Income taxes				161				148				9				312				277				13
Income before minority interest in net earnings of subsidiaries				275				253				9				531				470				13
Minority interest in net earnings of subsidiaries				—				1				(100	)			—				2				(100	)
“Core Earnings” net income			$	275			$	252				9	%		$	531			$	468				13	%

(1)	The three and six months ended June 30, 2006 operating expenses for the Lending segment include $8 million and $18 million, respectively, of stock-based compensation expense due to the implementation of SFAS No. 123(R) in the first quarter of 2006.
(2)	In the first quarter of 2006, the Company changed its method for allocating certain overhead and other expenses between our business segments. Balances for the three and six months ending June 30, 2005 have been updated to reflect the new allocation methodology.

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	Ending Balances (net of allowance for loan losses):

			June 30, 2006
			FFELP												Private
			Stafford and				Consolidation				Total				Education
			Other(1)				Loans				FFELP				Loans				Total
On-balance sheet:
	In-school		$	7,469			$	—			$	7,469			$	2,487			$	9,956
	Grace and repayment			13,512				53,264				66,776				4,894				71,670
Total on-balance sheet, gross				20,981				53,264				74,245				7,381				81,626
On-balance sheet unamortized premium/(discount)				417				801				1,218				(296	)			922
On-balance sheet allowance for losses				(7	)			(10	)			(17	)			(252	)			(269	)
Total on-balance sheet, net				21,391				54,055				75,446				6,833				82,279
Off-balance sheet:
	In-school			2,812				—				2,812				3,954				6,766
	Grace and repayment			17,412				14,746				32,158				8,602				40,760
Total off-balance sheet, gross				20,224				14,746				34,970				12,556				47,526
Off-balance sheet unamortized premium/(discount)				323				397				720				(274	)			446
Off-balance sheet allowance for losses				(12	)			(3	)			(15	)			(92	)			(107	)
Total off-balance sheet, net				20,535				15,140				35,675				12,190				47,865
Total Managed			$	41,926			$	69,195			$	111,121			$	19,023			$	130,144
% of on-balance sheet FFELP				28	%			72	%			100	%
% of Managed FFELP				38	%			62	%			100	%
% of total				32	%			53	%			85	%			15	%			100	%

			December 31, 2005
			FFELP												Private
			Stafford and				Consolidation				Total				Education
			Other(1)				Loans				FFELP				Loans				Total
On-balance sheet:
	In-school		$	6,910			$	—			$	6,910			$	3,432			$	10,342
	Grace and repayment			12,705				54,033				66,738				4,834				71,572
Total on-balance sheet, gross				19,615				54,033				73,648				8,266				81,914
On-balance sheet unamortized premium/(discount)				379				835				1,214				(305	)			909
On-balance sheet allowance for losses				(6	)			(9	)			(15	)			(204	)			(219	)
Total on-balance sheet, net				19,988				54,859				74,847				7,757				82,604
Off-balance sheet:
	In-school			2,962				—				2,962				2,540				5,502
	Grace and repayment			17,410				10,272				27,682				6,406				34,088
Total off-balance sheet, gross				20,372				10,272				30,644				8,946				39,590
Off-balance sheet unamortized premium/(discount)				306				305				611				(188	)			423
Off-balance sheet allowance for losses				(8	)			(2	)			(10	)			(78	)			(88	)
Total off-balance sheet, net				20,670				10,575				31,245				8,680				39,925
Total Managed			$	40,658			$	65,434			$	106,092			$	16,437			$	122,529
% of on-balance sheet FFELP				27	%			73	%			100	%
% of Managed FFELP				38	%			62	%			100	%
% of total				33	%			54	%			87	%			13	%			100	%

(1)	FFELP category is primarily Stafford loans, but also includes federally insured PLUS and HEAL loans.

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	Average Balances:

		Quarter Ended June 30, 2006
		FFELP												Private
		Stafford and				Consolidation				Total				Education
		Other(1)				Loans				FFELP				Loans				Total
On-balance sheet		$	20,562			$	52,201			$	72,763			$	7,961			$	80,724
Off-balance sheet			22,065				14,881				36,946				10,770				47,716
Total Managed		$	42,627			$	67,082			$	109,709			$	18,731			$	128,440
% of on-balance sheet FFELP			28	%			72	%			100	%
% of Managed FFELP			39	%			61	%			100	%
% of Total			33	%			52	%			85	%			15	%			100	%

		Quarter Ended June 30, 2005
		FFELP												Private
		Stafford and				Consolidation				Total				Education
		Other(1)				Loans				FFELP				Loans				Total
On-balance sheet		$	20,673			$	43,531			$	64,204			$	6,376			$	70,580
Off-balance sheet			26,912				9,819				36,731				7,060				43,791
Total Managed		$	47,585			$	53,350			$	100,935			$	13,436			$	114,371
% of on-balance sheet FFELP			32	%			68	%			100	%
% of Managed FFELP			47	%			53	%			100	%
% of Total			41	%			47	%			88	%			12	%			100	%

		Six Months Ended June 30, 2006
		FFELP												Private
		Stafford and				Consolidation				Total				Education
		Other(1)				Loans				FFELP				Loans				Total
On-balance sheet		$	20,045			$	53,251			$	73,296			$	8,485			$	81,781
Off-balance sheet			21,926				13,267				35,193				9,716				44,909
Total Managed		$	41,971			$	66,518			$	108,489			$	18,201			$	126,690
% of on-balance sheet FFELP			27	%			73	%			100	%
% of Managed FFELP			39	%			61	%			100	%
% of Total			33	%			53	%			86	%			14	%			100	%

		Six Months Ended June 30, 2005
		FFELP												Private
		Stafford and				Consolidation				Total				Education
		Other(1)				Loans				FFELP				Loans				Total
On-balance sheet		$	19,603			$	43,205			$	62,808			$	6,321			$	69,129
Off-balance sheet			27,578				8,661				36,239				6,607				42,846
Total Managed		$	47,181			$	51,866			$	99,047			$	12,928			$	111,975
% of on-balance sheet FFELP			31	%			69	%			100	%
% of Managed FFELP			48	%			52	%			100	%
% of Total			42	%			46	%			88	%			12	%			100	%

	(1)	FFELP category is primarily Stafford loans, but also includes federally insured PLUS and HEAL loans.

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	•	includes the net interest margin related to our off-balance sheet student loan securitization trusts. This includes any related fees or costs such as the Consolidation Loan Rebate Fees, premium/discount amortization and Borrower Benefits yield adjustments;
	•	includes the reclassification of certain derivative net settlement amounts. The net settlements on certain derivatives that do not qualify as SFAS No. 133 hedges and are recorded as part of the unrealized gain on derivative and hedging activities for GAAP purposes are reclassified to the line item on the income statement that such derivative is economically hedging for the “Core Earnings” basis presentation. For our “Core Earnings” basis student loan spread, this would primarily include: (a) reclassifying the net settlement amounts related to our written Floor Income Contracts to student loan interest income and (b) reclassifying the net settlement amounts related to certain of our basis swaps to debt interest expense;
	•	excludes unhedged Floor Income earned on the Managed student loan portfolio; and
	•	includes the amortization of upfront payments on Floor Income Contracts in student loan income that we believe are economically hedging the Floor Income.

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		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
“Core earnings” basis student loan yield			8.04	%			5.92	%			7.82	%			5.79	%
Consolidation Loan Rebate Fees			(.54	)			(.48	)			(.54	)			(.48	)
Borrower Benefits			(.07	)			(.04	)			(.07	)			(.07	)
Premium and discount amortization			(.19	)			(.16	)			(.17	)			(.17	)
“Core earnings” basis student loan net yield			7.24				5.24				7.04				5.07
“Core earnings” basis student loan cost of funds			(5.38	)			(3.50	)			(5.18	)			(3.30	)
“Core earnings” basis student loan spread			1.86	%			1.74	%			1.86	%			1.77	%
Average Balances
On-balance sheet student loans		$	80,724			$	70,580			$	81,781			$	69,129
Off-balance sheet student loans			47,716				43,791				44,909				42,846
Managed student loans		$	128,440			$	114,371			$	126,690			$	111,975

	Discussion of “Core Earnings” Basis Student Loan Spread — Effects of Significant Events in the Quarters Presented

	Discussion of “Core Earnings” Basis Student Loan Spread — Other Quarter-over Quarter Fluctuations

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	Floor Income — Managed Basis

			June 30, 2006												June 30, 2005
			Fixed				Variable								Fixed				Variable
			Borrower				Borrower								Borrower				Borrower
			Rate				Rate				Total				Rate				Rate				Total
(Dollars in billions)
Student loans eligible to earn Floor Income:
	On-balance sheet student loans		$	52.5			$	19.7			$	72.2			$	43.3			$	16.8			$	60.1
	Off-balance sheet student loans			14.7				19.8				34.5				10.9				22.5				33.4
Managed student loans eligible to earn Floor Income				67.2				39.5				106.7				54.2				39.3				93.5
Less: notional amount of Floor Income Contracts				(24.5	)			—				(24.5	)			(26.2	)			—				(26.2	)
Net Managed student loans eligible to earn Floor Income			$	42.7			$	39.5			$	82.2			$	28.0			$	39.3			$	67.3
Net Managed student loans earning Floor Income			$	—			$	—			$	—			$	1.8			$	—			$	1.8

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		July 1, 2006 to
		December 31, 2006				2007				2008				2009				2010
(Dollars in billions)
Average balance of Consolidation Loans whose Floor Income is economically hedged (Managed Basis)		$	25			$	16			$	15			$	10			$	2

	Activity in the Allowance for Private Education Loan Losses

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			Activity in Allowance for Private Education Loan Losses
			On-Balance Sheet								Off-Balance Sheet								Managed Basis
			Three Months Ended								Three Months Ended								Three Months Ended
			June 30,				June 30,				June 30,				June 30,				June 30,				June 30,
			2006				2005				2006				2005				2006				2005
Allowance at beginning of period			$	232			$	191			$	91			$	150			$	323			$	341
	Provision for Private Education Loan losses			62				36				(7	)			(4	)			55				32
	Change in estimate			—				40				—				(60	)			—				(20	)
Total provision				62				76				(7	)			(64	)			55				12
	Charge-offs			(36	)			(38	)			(4	)			(1	)			(40	)			(39	)
	Recoveries			6				5				—				—				6				5
	Net charge-offs			(30	)			(33	)			(4	)			(1	)			(34	)			(34	)
Balance before securitization of Private Education Loans				264				234				80				85				344				319
Reduction for securitization of Private Education Loans				(12	)			(6	)			12				6				—				—
Allowance at end of period			$	252			$	228			$	92			$	91			$	344			$	319
Net charge-offs as a percentage of average loans in repayment (annualized)				3.13	%			4.33	%			.32	%			.13	%			1.52	%			2.04	%
Allowance as a percentage of the ending total loan balance				3.55	%			3.61	%			.75	%			1.21	%			1.78	%			2.31	%
Allowance as a percentage of ending loans in repayment				6.66	%			7.41	%			1.61	%			2.32	%			3.62	%			4.56	%
Average coverage of net charge-offs (annualized)				2.09				1.73				5.63				19.64				2.52				2.34
Average total loans			$	7,961			$	6,376			$	10,770			$	7,060			$	18,731			$	13,436
Ending total loans			$	7,085			$	6,325			$	12,282			$	7,493			$	19,367			$	13,818
Average loans in repayment			$	3,838			$	3,042			$	5,163			$	3,655			$	9,001			$	6,697
Ending loans in repayment			$	3,777			$	3,078			$	5,731			$	3,926			$	9,508			$	7,004

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			Activity in Allowance for Private Education Loan Losses
			On-Balance Sheet								Off-Balance Sheet								Managed Basis
			Six Months Ended								Six Months Ended								Six Months Ended
			June 30,				June 30,				June 30,				June 30,				June 30,				June 30,
			2006				2005				2006				2005				2006				2005
Allowance at beginning of period			$	204			$	172			$	78			$	143			$	282			$	315
	Provision for Private Education Loan losses			116				79				6				4				122				83
	Change in estimate			—				40				—				(60	)			—				(20	)
Total provision				116				119				6				(56	)			122				63
	Charge-offs			(69	)			(66	)			(4	)			(2	)			(73	)			(68	)
	Recoveries			13				9				—				—				13				9
	Net charge-offs			(56	)			(57	)			(4	)			(2	)			(60	)			(59	)
Balance before securitization of Private Education Loans				264				234				80				85				344				319
Reduction for securitization of Private Education Loans				(12	)			(6	)			12				6				—				—
Allowance at end of period			$	252			$	228			$	92			$	91			$	344			$	319
Net charge-offs as a percentage of average loans in repayment (annualized)				3.05	%			3.86	%			.16	%			.14	%			1.37	%			1.81	%
Allowance as a percentage of the ending total loan balance				3.55	%			3.61	%			.75	%			1.21	%			1.78	%			2.31	%
Allowance as a percentage of ending loans in repayment				6.66	%			7.41	%			1.61	%			2.32	%			3.62	%			4.56	%
Average coverage of net charge-offs (annualized)				2.22				2.00				11.01				18.32				2.82				2.68
Average total loans			$	8,485			$	6,321			$	9,716			$	6,607			$	18,201			$	12,928
Ending total loans			$	7,085			$	6,325			$	12,282			$	7,493			$	19,367			$	13,818
Average loans in repayment			$	3,720			$	2,960			$	5,191			$	3,639			$	8,911			$	6,599
Ending loans in repayment			$	3,777			$	3,078			$	5,731			$	3,926			$	9,508			$	7,004

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	Delinquencies

			On-Balance Sheet Private Education
			Loan Delinquencies
			June 30, 2006								June 30, 2005
			Balance				%				Balance				%
Loans in-school/grace/deferment(1)			$	3,305							$	3,307
Loans in forbearance(2)				299								190
Loans in repayment and percentage of each status:
	Loans current			3,353				88.8	%			2,756				89.5	%
	Loans delinquent 31-60 days(3)			176				4.7				133				4.4
	Loans delinquent 61-90 days(3)			100				2.6				69				2.2
	Loans delinquent greater than 90 days(3)			148				3.9				120				3.9
	Total Private Education Loans in repayment			3,777				100	%			3,078				100	%
Total Private Education Loans, gross				7,381								6,575
Private Education Loan unamortized discount				(296	)							(250	)
Total Private Education Loans				7,085								6,325
Private Education Loan allowance for losses				(252	)							(228	)
Private Education Loans, net			$	6,833							$	6,097
Percentage of Private Education Loans in repayment				51.2	%							46.8	%
Delinquencies as a percentage of Private Education Loans in repayment				11.2	%							10.5	%

	(1)	Loans for borrowers who still may be attending school or engaging in other permitted educational activities and are not yet required to make payments on the loans, e.g., residency periods for medical students or a grace period for bar exam preparation.
	(2)	Loans for borrowers who have requested extension of grace period or who have temporarily ceased making full payments due to hardship or other factors, consistent with the established loan program servicing policies and procedures.
	(3)	The period of delinquency is based on the number of days scheduled payments are contractually past due.

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			Off-Balance Sheet Private Education
			Loan Delinquencies
			June 30, 2006								June 30, 2005
			Balance				%				Balance				%
Loans in-school/grace/deferment(1)			$	6,074							$	3,308
Loans in forbearance(2)				751								400
Loans in repayment and percentage of each status:
	Loans current			5,483				95.7	%			3,749				95.5	%
	Loans delinquent 31-60 days(3)			151				2.6				96				2.4
	Loans delinquent 61-90 days(3)			50				.9				35				1.0
	Loans delinquent greater than 90 days(3)			47				.8				46				1.1
	Total Private Education Loans in repayment			5,731				100	%			3,926				100	%
Total Private Education Loans, gross				12,556								7,634
Private Education Loan unamortized discount				(274	)							(141	)
Total Private Education Loans				12,282								7,493
Private Education Loan allowance for losses				(92	)							(91	)
Private Education Loans, net			$	12,190							$	7,402
Percentage of Private Education Loans in repayment				45.6	%							51.4	%
Delinquencies as a percentage of Private Education Loans in repayment				4.3	%							4.5	%

	(1)	Loans for borrowers who still may be attending school or engaging in other permitted educational activities and are not yet required to make payments on the loans, e.g., residency periods for medical students or a grace period for bar exam preparation.
	(2)	Loans for borrowers who have requested extension of grace period or who have temporarily ceased making full payments due to hardship or other factors, consistent with the established loan program servicing policies and procedures.
	(3)	The period of delinquency is based on the number of days scheduled payments are contractually past due.

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			Managed Private Education
			Loan Delinquencies
			June 30, 2006								June 30, 2005
			Balance				%				Balance				%
Loans in-school/grace/deferment(1)			$	9,379							$	6,615
Loans in forbearance(2)				1,050								590
Loans in repayment and percentage of each status:
	Loans current			8,836				92.9	%			6,505				92.9	%
	Loans delinquent 31-60 days(3)			327				3.4				229				3.2
	Loans delinquent 61-90 days(3)			150				1.6				104				1.5
	Loans delinquent greater than 90 days(3)			195				2.1				166				2.4
	Total Private Education Loans in repayment			9,508				100	%			7,004				100	%
Total Private Education Loans, gross				19,937								14,209
Private Education Loan unamortized discount				(570	)							(391	)
Total Private Education Loans				19,367								13,818
Private Education Loan allowance for losses				(344	)							(319	)
Private Education Loans, net			$	19,023							$	13,499
Percentage of Private Education Loans in repayment				47.7	%							49.3	%
Delinquencies as a percentage of Private Education Loans in repayment				7.1	%							7.1	%

	(1)	Loans for borrowers who still may be attending school or engaging in other permitted educational activities and are not yet required to make payments on the loans, e.g., residency periods for medical students or a grace period for bar exam preparation.
	(2)	Loans for borrowers who have requested extension of grace period or who have temporarily ceased making full payments due to hardship or other factors, consistent with the established loan program servicing policies and procedures.
	(3)	The period of delinquency is based on the number of days scheduled payments are contractually past due.

	Forbearance — Managed Basis Private Education Loans

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		Months Since Entering Repayment
										More than				After
		1 to 24				25 to 48				48				June 30,
		Months				Months				Months				2006(1)				Total
June 30, 2006
Loans in-school/grace/deferment		$	—			$	—			$	—			$	9,379			$	9,379
Loans in forbearance			776				194				80				—				1,050
Loans in repayment — current			5,184				2,024				1,628				—				8,836
Loans in repayment — delinquent 31-60 days			180				87				60				—				327
Loans in repayment — delinquent 61-90 days			90				37				23				—				150
Loans in repayment — delinquent greater than 90 days			101				60				34				—				195
Total		$	6,331			$	2,402			$	1,825			$	9,379				19,937
Unamortized discount																			(570	)
Allowance for loan losses																			(344	)
Total Managed Private Education Loans, net																		$	19,023
Loans in forbearance as a percentage of loans in repayment and forbearance			12.3	%			8.1	%			4.4	%			—	%			9.9	%

	(1)	Includes all loans in-school/grace/deferment.

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		Months Since Entering Repayment
										More than				After
		1 to 24				25 to 48				48				June 30,
		Months				Months				Months				2005(1)				Total
June 30, 2005
Loans in-school/grace/deferment		$	—			$	—			$	—			$	6,615			$	6,615
Loans in forbearance			437				106				47				—				590
Loans in repayment — current			3,728				1,515				1,262				—				6,505
Loans in repayment — delinquent 31-60 days			120				65				44				—				229
Loans in repayment — delinquent 61-90 days			57				30				17				—				104
Loans in repayment — delinquent greater than 90 days			80				55				31				—				166
Total		$	4,422			$	1,771			$	1,401			$	6,615				14,209
Unamortized discount																			(391	)
Allowance for loan losses																			(319	)
Total Managed Private Education Loans, net																		$	13,499
Loans in forbearance as a percentage of loans in repayment and forbearance			9.9	%			6.0	%			3.4	%			—	%			7.8	%

	(1)	Includes all loans in-school/grace/deferment.

		June 30, 2006								June 30, 2005
		Forbearance				% of				Forbearance				% of
		Balance				Total				Balance				Total
Cumulative number of months borrower has used forbearance
Up to 12 months		$	753				72	%		$	426				72	%
13 to 24 months			214				20				117				20
25 to 36 months			57				5				32				5
More than 36 months			26				3				15				3
Total		$	1,050				100	%		$	590				100	%

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	Total on-balance sheet loan net charge-offs

		Three Months								Six Months
		Ended								Ended
		June 30,								June 30,
		2006				2005				2006				2005
Private Education Loans		$	30			$	33			$	56			$	57
FFELP Stafford and Other Student Loans			1				1				2				2
Mortgage and consumer loans			1				1				2				2
Total on-balance sheet loan net charge-offs		$	32			$	35			$	60			$	61

	Total Managed loan net charge-offs

		Three Months								Six Months
		Ended								Ended
		June 30,								June 30,
		2006				2005				2006				2005
Private Education Loans		$	34			$	34			$	60			$	59
FFELP Stafford and Other Student Loans			1				1				2				2
Mortgage and consumer loans			1				1				2				2
Total Managed loan net charge-offs		$	36			$	36			$	64			$	63

		Three Months Ended																Six Months Ended
		June 30, 2006								June 30, 2005								June 30, 2006								June 30, 2005
		Volume				Rate				Volume				Rate				Volume				Rate				Volume				Rate
Student loan premiums paid:
Sallie Mae brands		$	1,671				.77	%		$	991				.26	%		$	4,975				.59	%		$	3,294				.28	%
Lender partners			4,225				1.64				4,701				1.61				7,817				1.80				8,043				1.70
Total Preferred Channel			5,896				1.39				5,692				1.38				12,792				1.33				11,337				1.29
Other purchases(1)			493				4.23				641				3.66				668				3.64				1,146				3.47
Subtotal base purchases			6,389				1.61				6,333				1.61				13,460				1.45				12,483				1.49
Consolidations			853				3.37				926				2.79				1,750				2.66				1,839				2.38
Total		$	7,242				1.82	%		$	7,259				1.76	%		$	15,210				1.58	%		$	14,322				1.60	%

	(1)	Primarily includes spot purchases, other commitment clients, and subsidiary acquisitions.

78

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		Three Months Ended
		June 30, 2006
		FFELP				Private				Total
Preferred Channel		$	4,380			$	1,516			$	5,896
Other commitment clients			88				1				89
Spot purchases			404				—				404
Consolidations from third parties			845				8				853
Acquisitions from off-balance sheet securitized trusts, primarily consolidations			2,107				16				2,123
Capitalized interest, premiums and discounts			376				29				405
Total on-balance sheet student loan acquisitions			8,200				1,570				9,770
Consolidations to SLM Corporation from off-balance sheet securitized trusts			(2,107	)			(16	)			(2,123	)
Capitalized interest, premiums and discounts — off-balance sheet securitized trusts			179				108				287
Total Managed student loan acquisitions		$	6,272			$	1,662			$	7,934

		Three Months Ended
		June 30, 2005
		FFELP				Private				Total
Preferred Channel		$	4,463			$	1,229			$	5,692
Other commitment clients			161				—				161
Spot purchases			480				—				480
Consolidations from third parties			926				—				926
Acquisitions from off-balance sheet securitized trusts, primarily consolidations			2,421				—				2,421
Capitalized interest, premiums and discounts			331				(10	)			321
Total on-balance sheet student loan acquisitions			8,782				1,219				10,001
Consolidations to SLM Corporation from off-balance sheet securitized trusts			(2,421	)			—				(2,421	)
Capitalized interest, premiums and discounts — off-balance sheet securitized trusts			146				60				206
Total Managed student loan acquisitions		$	6,507			$	1,279			$	7,786

79

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		Six Months Ended
		June 30, 2006
		FFELP				Private				Total
Preferred Channel		$	9,411			$	3,381			$	12,792
Other commitment clients			202				3				205
Spot purchases			463				—				463
Consolidations from third parties			1,741				9				1,750
Acquisitions from off-balance sheet securitized trusts, primarily consolidations			3,436				16				3,452
Capitalized interest, premiums and discounts			722				52				774
Total on-balance sheet student loan acquisitions			15,975				3,461				19,436
Consolidations to SLM Corporation from off-balance sheet securitized trusts			(3,436	)			(16	)			(3,452	)
Capitalized interest, premiums and discounts — off-balance sheet securitized trusts			324				177				501
Total Managed student loan acquisitions		$	12,863			$	3,622			$	16,485

		Six Months Ended
		June 30, 2005
		FFELP				Private				Total
Preferred Channel		$	8,774			$	2,563			$	11,337
Other commitment clients			247				—				247
Spot purchases			899				—				899
Consolidations from third parties			1,839				—				1,839
Acquisitions from off-balance sheet securitized trusts, primarily consolidations			4,248				—				4,248
Capitalized interest, premiums and discounts			671				(16	)			655
Total on-balance sheet student loan acquisitions			16,678				2,547				19,225
Consolidations to SLM Corporation from off-balance sheet securitized trusts			(4,248	)			—				(4,248	)
Capitalized interest, premiums and discounts — off-balance sheet securitized trusts			255				103				358
Total Managed student loan acquisitions		$	12,685			$	2,650			$	15,335

80

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		June 30,				December 31,
		2006				2005
FFELP Stafford and Other Student Loans, net		$	21,391			$	19,988
Consolidation Loans, net			54,055				54,859
Private Education Loans, net			6,833				7,757
Other loans, net			1,051				1,138
Investments(1)			9,540				7,748
Retained Interest in off-balance sheet securitized loans			3,152				2,406
Other(2)			4,188				3,576
Total assets		$	100,210			$	97,472

(1)	Investments include cash and cash equivalents, investments, restricted cash and investments, leveraged leases, and municipal bonds.
(2)	Other assets include accrued interest receivable, goodwill and acquired intangible assets and other non-interest earning assets.

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2006				2005				2006				2005
Preferred Channel Originations — Type of Loan
Stafford		$	1,877			$	1,739			$	6,303			$	5,912
PLUS			229				223				1,231				1,184
Total FFELP			2,106				1,962				7,534				7,096
Private Education Loans			1,070				812				3,255				2,440
Total		$	3,176			$	2,774			$	10,789			$	9,536
Preferred Channel Originations — Source
Internally marketed brands		$	1,757			$	1,083			$	5,312			$	3,439
Lender partners			1,419				1,691				5,477				6,097
Total		$	3,176			$	2,774			$	10,789			$	9,536

81

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	Student Loan Activity

			On-Balance Sheet
			Three Months Ended June 30, 2006
			FFELP												Total
			Stafford												Private				Total On-
			and				Consolidation				Total				Education				Balance Sheet
			Other(1)				Loans				FFELP				Loans				Portfolio
Beginning balance			$	18,883			$	53,451			$	72,334			$	9,311			$	81,645
	Acquisitions			4,821				426				5,247				1,547				6,794
	Incremental consolidations from third parties			—				845				845				8				853
	Consolidations to third parties			(386	)			(835	)			(1,221	)			(4	)			(1,225	)
Net acquisitions				4,435				436				4,871				1,551				6,422
Internal consolidations				(1,588	)			3,474				1,886				20				1,906
New securitizations				—				(2,532	)			(2,532	)			(3,729	)			(6,261	)
Repayments/claims/resales/other				(339	)			(774	)			(1,113	)			(320	)			(1,433	)
Ending balance			$	21,391			$	54,055			$	75,446			$	6,833			$	82,279

			Off-Balance Sheet
			Three Months Ended June 30, 2006
			FFELP												Total
			Stafford												Private				Total Off-
			and				Consolidation				Total				Education				Balance Sheet
			Other(1)				Loans				FFELP				Loans				Portfolio
Beginning balance			$	23,457			$	13,211			$	36,668			$	8,557			$	45,225
	Acquisitions			120				60				180				107				287
	Incremental consolidations from third parties			—				—				—				—				—
	Consolidations to third parties			(436	)			(278	)			(714	)			(5	)			(719	)
Net acquisitions				(316	)			(218	)			(534	)			102				(432	)
Internal consolidations				(1,711	)			(175	)			(1,886	)			(20	)			(1,906	)
New securitizations				—				2,532				2,532				3,729				6,261
Repayments/claims/resales/other				(895	)			(210	)			(1,105	)			(178	)			(1,283	)
Ending balance			$	20,535			$	15,140			$	35,675			$	12,190			$	47,865

			Managed Portfolio
			Three Months Ended June 30, 2006
			FFELP												Total
			Stafford												Private				Total
			and				Consolidation				Total				Education				Managed
			Other(1)				Loans				FFELP				Loans				Basis Portfolio
Beginning balance			$	42,340			$	66,662			$	109,002			$	17,868			$	126,870
	Acquisitions			4,941				486				5,427				1,654				7,081
	Incremental consolidations from third parties			—				845				845				8				853
	Consolidations to third parties			(822	)			(1,113	)			(1,935	)			(9	)			(1,944	)
Net acquisitions				4,119				218				4,337				1,653				5,990
Internal consolidations				(3,299	)			3,299				—				—				—
New securitizations				—				—				—				—				—
Repayments/claims/resales/other				(1,234	)			(984	)			(2,218	)			(498	)			(2,716	)
Ending balance			$	41,926			$	69,195			$	111,121			$	19,023			$	130,144

	(1)	FFELP category is primarily Stafford loans and also includes PLUS and HEAL loans.

82

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			On-Balance Sheet
			Three Months Ended June 30, 2005
			FFELP												Total
			Stafford												Private				Total On-
			and				Consolidation				Total				Education				Balance Sheet
			Other(1)				Loans				FFELP				Loans				Portfolio
Beginning balance			$	18,933			$	44,446			$	63,379			$	6,527			$	69,906
	Acquisitions			5,188				251				5,439				1,215				6,654
	Incremental consolidations from third parties			—				926				926				—				926
	Consolidations to third parties			(182	)			(165	)			(347	)			(2	)			(349	)
Net acquisitions				5,006				1,012				6,018				1,213				7,231
Internal consolidations				(1,335	)			3,653				2,318				—				2,318
New securitizations				—				(4,045	)			(4,045	)			(1,407	)			(5,452	)
Repayments/claims/resales/other				(511	)			(425	)			(936	)			(236	)			(1,172	)
Ending balance			$	22,093			$	44,641			$	66,734			$	6,097			$	72,831

			Off-Balance Sheet
			Three Months Ended June 30, 2005
			FFELP												Total
			Stafford												Private				Total Off-
			and				Consolidation				Total				Education				Balance Sheet
			Other(1)				Loans				FFELP				Loans				Portfolio
Beginning balance			$	28,392			$	7,410			$	35,802			$	5,991			$	41,793
	Acquisitions			97				49				146				60				206
	Incremental consolidations from third parties			—				—				—				—				—
	Consolidations to third parties			(326	)			(64	)			(390	)			(4	)			(394	)
Net acquisitions				(229	)			(15	)			(244	)			56				(188	)
Internal consolidations				(2,318	)			—				(2,318	)			—				(2,318	)
New securitizations				—				4,045				4,045				1,407				5,452
Repayments/claims/resales/other				(812	)			(206	)			(1,018	)			(52	)			(1,070	)
Ending balance			$	25,033			$	11,234			$	36,267			$	7,402			$	43,669

			Managed Portfolio
			Three Months Ended June 30, 2005
			FFELP												Total
			Stafford												Private				Total
			and				Consolidation				Total				Education				Managed
			Other(1)				Loans				FFELP				Loans				Basis Portfolio
Beginning balance			$	47,325			$	51,856			$	99,181			$	12,518			$	111,699
	Acquisitions			5,285				300				5,585				1,275				6,860
	Incremental consolidations from third parties			—				926				926				—				926
	Consolidations to third parties			(508	)			(229	)			(737	)			(6	)			(743	)
Net acquisitions				4,777				997				5,774				1,269				7,043
Internal consolidations				(3,653	)			3,653				—				—				—
New securitizations				—				—				—				—				—
Repayments/claims/resales/other				(1,323	)			(631	)			(1,954	)			(288	)			(2,242	)
Ending balance			$	47,126			$	55,875			$	103,001			$	13,499			$	116,500

(1)	FFELP category is primarily Stafford loans and also includes PLUS and HEAL loans.

83

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			On-Balance Sheet
			Six Months Ended June 30, 2006
			FFELP												Total
			Stafford												Private				Total On-
			and				Consolidation				Total				Education				Balance Sheet
			Other(1)				Loans				FFELP				Loans				Portfolio
Beginning balance			$	19,988			$	54,859			$	74,847			$	7,757			$	82,604
	Acquisitions			10,095				701				10,796				3,439				14,235
	Incremental consolidations from third parties			—				1,741				1,741				9				1,750
	Consolidations to third parties			(693	)			(1,407	)			(2,100	)			(8	)			(2,108	)
Net acquisitions				9,402				1,035				10,437				3,440				13,877
Internal consolidations				(2,372	)			5,097				2,725				20				2,745
New securitizations				(5,034	)			(5,571	)			(10,605	)			(3,729	)			(14,334	)
Repayments/claims/resales/other				(593	)			(1,365	)			(1,958	)			(655	)			(2,613	)
Ending balance			$	21,391			$	54,055			$	75,446			$	6,833			$	82,279

			Off-Balance Sheet
			Six Months Ended June 30, 2006
			FFELP												Total
			Stafford												Private				Total Off-
			and				Consolidation				Total				Education				Balance Sheet
			Other(1)				Loans				FFELP				Loans				Portfolio
Beginning balance			$	20,670			$	10,575			$	31,245			$	8,680			$	39,925
	Acquisitions			208				118				326				174				500
	Incremental consolidations from third parties			—				—				—				—				—
	Consolidations to third parties			(864	)			(456	)			(1,320	)			(10	)			(1,330	)
Net acquisitions				(656	)			(338	)			(994	)			164				(830	)
Internal consolidations				(2,452	)			(273	)			(2,725	)			(20	)			(2,745	)
New securitizations				5,034				5,571				10,605				3,729				14,334
Repayments/claims/resales/other				(2,061	)			(395	)			(2,456	)			(363	)			(2,819	)
Ending balance			$	20,535			$	15,140			$	35,675			$	12,190			$	47,865

			Managed Portfolio
			Six Months Ended June 30, 2006
			FFELP												Total
			Stafford												Private				Total
			and				Consolidation				Total				Education				Managed
			Other(1)				Loans				FFELP				Loans				Basis Portfolio
Beginning balance			$	40,658			$	65,434			$	106,092			$	16,437			$	122,529
	Acquisitions			10,303				819				11,122				3,613				14,735
	Incremental consolidations from third parties			—				1,741				1,741				9				1,750
	Consolidations to third parties			(1,557	)			(1,863	)			(3,420	)			(18	)			(3,438	)
Net acquisitions				8,746				697				9,443				3,604				13,047
Internal consolidations				(4,824	)			4,824				—				—				—
New securitizations				—				—				—				—				—
Repayments/claims/resales/other				(2,654	)			(1,760	)			(4,414	)			(1,018	)			(5,432	)
Ending balance			$	41,926			$	69,195			$	111,121			$	19,023			$	130,144

	(1)	FFELP category is primarily Stafford loans and also includes PLUS and HEAL loans.

84

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			On-Balance Sheet
			Six Months Ended June 30, 2005
			FFELP												Total
			Stafford												Private				Total On-
			and				Consolidation				Total				Education				Balance Sheet
			Other(1)				Loans				FFELP				Loans				Portfolio
Beginning balance			$	18,965			$	41,596			$	60,561			$	5,420			$	65,981
	Acquisitions			10,027				567				10,594				2,544				13,138
	Incremental consolidations from third parties			—				1,839				1,839				—				1,839
	Consolidations to third parties			(332	)			(249	)			(581	)			(4	)			(585	)
Net acquisitions				9,695				2,157				11,852				2,540				14,392
Internal consolidations				(2,052	)			5,849				3,797				(1	)			3,796
New securitizations				(3,542	)			(4,044	)			(7,586	)			(1,407	)			(8,993	)
Repayments/claims/resales/other				(973	)			(917	)			(1,890	)			(455	)			(2,345	)
Ending balance			$	22,093			$	44,641			$	66,734			$	6,097			$	72,831

			Off-Balance Sheet
			Six Months Ended June 30, 2005
			FFELP												Total
			Stafford												Private				Total Off-
			and				Consolidation				Total				Education				Balance Sheet
			Other(1)				Loans				FFELP				Loans				Portfolio
Beginning balance			$	27,825			$	7,570			$	35,395			$	6,062			$	41,457
	Acquisitions			162				90				252				106				358
	Incremental consolidations from third parties			—				—				—				—				—
	Consolidations to third parties			(642	)			(91	)			(733	)			(8	)			(741	)
Net acquisitions				(480	)			(1	)			(481	)			98				(383	)
Internal consolidations				(3,789	)			(8	)			(3,797	)			—				(3,797	)
New securitizations				3,542				4,044				7,586				1,407				8,993
Repayments/claims/resales/other				(2,065	)			(371	)			(2,436	)			(165	)			(2,601	)
Ending balance			$	25,033			$	11,234			$	36,267			$	7,402			$	43,669

			Managed Portfolio
			Six Months Ended June 30, 2005
			FFELP												Total
			Stafford												Private				Total
			and				Consolidation				Total				Education				Managed
			Other(1)				Loans				FFELP				Loans				Basis Portfolio
Beginning balance			$	46,790			$	49,166			$	95,956			$	11,482			$	107,438
	Acquisitions			10,189				657				10,846				2,650				13,496
	Incremental consolidations from third parties			—				1,839				1,839				—				1,839
	Consolidations to third parties			(974	)			(340	)			(1,314	)			(12	)			(1,326	)
Net acquisitions				9,215				2,156				11,371				2,638				14,009
Internal consolidations				(5,841	)			5,841				—				(1	)			(1	)
New securitizations				—				—				—				—				—
Repayments/claims/resales/other				(3,038	)			(1,288	)			(4,326	)			(620	)			(4,946	)
Ending balance			$	47,126			$	55,875			$	103,001			$	13,499			$	116,500

(1)	FFELP category is primarily Stafford loans and also includes PLUS and HEAL loans.

85

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		Three Months								Six Months
		Ended								Ended
		June 30,								June 30,
		2006				2005				2006				2005
Late fees		$	26			$	24			$	51			$	44
Gains on sales of mortgages and other loan fees			4				4				7				8
Other			21				8				34				20
Total other income, net		$	51			$	36			$	92			$	72

		Three Months								Six Months
		Ended								Ended
		June 30,								June 30,
		2006				2005				2006				2005
Sales and originations		$	79			$	77			$	163			$	144
Servicing and information technology			52				47				102				96
Corporate overhead			32				17				59				35
Total operating expenses		$	163			$	141			$	324			$	275

86

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		Three Months								% Increase				Six Months								% Increase
		Ended June 30,								(Decrease)				Ended June 30,								(Decrease)
										2006 vs.												2006 vs.
		2006				2005				2005				2006				2005				2005
Total interest income		$	—			$	—				—	%		$	—			$	—				—	%
Total interest expense			5				4				25				11				8				38
Net interest income			(5	)			(4	)			(25	)			(11	)			(8	)			(38	)
Less provisions for losses			—				—				—				—				—				—
Net interest income after provisions for losses			(5	)			(4	)			(25	)			(11	)			(8	)			(38	)
Fee income			90				82				10				182				168				8
Collections revenue			67				42				60				124				77				61
Total other income			157				124				27				306				245				25
Operating expenses(1)(2)			85				67				27				175				132				33
Income before income taxes and minority interest in net earnings of subsidiaries			67				53				26				120				105				14
Income taxes			26				20				30				44				39				13
Income before minority interest in net earnings of subsidiaries			41				33				24				76				66				15
Minority interest in net earnings of subsidiaries			1				1				—				3				2				50
“Core Earnings” net income		$	40			$	32				25	%		$	73			$	64				14	%

(1)	The three and six months ended June 30, 2006 operating expenses for the DMO segment include $2 million and $5 million, respectively, of stock-based compensation expense due to the implementation of SFAS No. 123(R) in the first quarter of 2006.
(2)	In the first quarter of 2006, the Company changed its method for allocating certain overhead and other expenses between our business segments. Balances for the three and six months ending June 30, 2005 have been updated to reflect the new allocation methodology.

			Three Months								Six Months
			Ended June 30,								Ended June 30,
			2006				2005				2006				2005
Purchased paper collections revenue			$	67			$	42			$	124			$	78
Contingency:
	Student loans			69				63				139				129
	Other			9				9				19				18
Total contingency				78				72				158				147
Other				12				10				24				20
Total			$	157			$	124			$	306			$	245
USA Funds(1)			$	46			$	43			$	92			$	89
% of total DMO revenue				29	%			35	%			30	%			36	%

(1)	United Student Aid Funds, Inc. (“USA Funds”)

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		Three Months								Six Months
		Ended								Ended
		June 30,								June 30,
		2006				2005				2006				2005
Face value of purchases		$	461			$	444			$	992			$	1,416
Purchase price			41				41				75				65
% of face value purchased			8.9	%			9.2	%			7.6	%			4.6	%
Gross Cash Collections (“GCC”)		$	93			$	61			$	182			$	118
Collections revenue			54				42				103				77
% of GCC			58	%			69	%			56	%			66	%
Carrying value of purchases		$	152			$	79			$	152			$	79

		Three Months				Six Months
		Ended				Ended
		June 30, 2006				June 30, 2006
Face value of purchases		$	191			$	323
Collections revenue			13				21
Collateral value of purchases			212				362
Purchase price			160				273
% of collateral value			76	%			76	%
Carrying value of purchases		$	453			$	453

			June 30,				December 31,
			2006				2005
Contingency:
	Contingency — Student loans		$	7,174			$	7,205
	Contingency — Other			2,594				2,178
Total			$	9,768			$	9,383

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		Three Months												Six Months
		Ended								% Increase				Ended								% Increase
		June 30,								(Decrease)				June 30,								(Decrease)
		2006				2005				2006 vs. 2005				2006				2005				2006 vs. 2005
Total interest income		$	1			$	1				—	%		$	2			$	2				—	%
Total interest expense			1				1				—				3				3				—
Net interest income			—				—				—				(1	)			(1	)			—
Less provisions for losses			—				—				—				—				—				—
Net interest income after provisions for losses			—				—				—				(1	)			(1	)			—
Fee income			33				26				27				60				58				3
Other income			24				29				(17	)			55				61				(10	)
Total revenue			57				55				4				115				119				(3	)
Operating expenses(1)(2)			50				63				(21	)			109				114				(4	)
Income (loss) before income taxes			7				(8	)			188				5				4				25
Income tax expense (benefit)			2				(3	)			167				2				1				100
“Core Earnings” net income (loss)		$	5			$	(5	)			200	%		$	3			$	3				—	%

(1)	For the three and six months ended June 30, 2006, operating expenses for the Corporate and Other Business segment include $4 million and $9 million, respectively, of stock-based compensation expense due to the implementation of SFAS No. 123(R) in the first quarter of 2006.
(2)	In the first quarter of 2006, the Company changed its method for allocating certain overhead and other expenses between our business segments. Balances for the three and six months ending June 30, 2005 have been updated to reflect the new allocation methodology.

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		Three Months								Six Months
		Ended								Ended
		June 30,								June 30,
		2006				2005				2006				2005
Guarantor servicing fees		$	33			$	26			$	60			$	58
Loan servicing fees			7				12				15				25
Other income			17				17				40				36
Total fee and other income		$	57			$	55			$	115			$	119

		Three Months								Six Months
		Ended								Ended
		June 30,								June 30,
		2006				2005				2006				2005
Operating expenses		$	30			$	37			$	68			$	71
Corporate overhead			20				26				41				43
Total operating expenses		$	50			$	63			$	109			$	114

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			June 30, 2006				December 31, 2005
			Available Capacity				Available Capacity
Sources of primary liquidity:
	Unrestricted cash and liquid investments		$	5,376			$	3,928
	Commercial paper and bank lines of credit			5,500				5,500
	ABCP borrowing capacity			23				41
Total sources of primary liquidity				10,899				9,469
Sources of stand-by liquidity:
	Unencumbered FFELP student loans			24,741				24,530
Total sources of primary and stand-by liquidity			$	35,640			$	33,999

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	Ending Balances

		As of June 30,
		2006												2005
		Ending Balance												Ending Balance
										Total												Total
		Short				Long				Managed				Short				Long				Managed
		Term				Term				Basis				Term				Term				Basis
Unsecured borrowings		$	3,739			$	39,170			$	42,909			$	4,262			$	32,234			$	36,496
Indentured trusts (on-balance sheet)			62				3,201				3,263				418				3,991				4,409
Securitizations (on-balance sheet)			—				48,212				48,212				—				38,076				38,076
Securitizations (off-balance sheet)			—				52,357				52,357				—				47,524				47,524
Total		$	3,801			$	142,940			$	146,741			$	4,680			$	121,825			$	126,505

	Average Balances

		Three Months Ended June 30,																Six Months Ended June 30,
		2006								2005								2006								2005
		Average				Average				Average				Average				Average				Average				Average				Average
		Balance				Rate				Balance				Rate				Balance				Rate				Balance				Rate
Unsecured borrowings		$	42,520				5.42	%		$	36,422				3.67	%		$	42,048				5.24	%		$	35,447				3.49	%
Indentured trusts (on-balance sheet)			3,325				4.52				4,450				3.43				3,352				4.36				5,662				3.06
Securitizations (on-balance sheet)			45,912				5.33				36,108				3.38				46,229				5.10				35,740				3.16
Securitizations (off-balance sheet)			51,143				5.39				46,600				3.46				48,033				5.21				45,420				3.30
Total		$	142,900				5.36	%		$	123,580				3.50	%		$	139,662				5.16	%		$	122,269				3.30	%

S&P

Moody’s

Fitch

Short-term unsecured debt

A-1

P-1

F1+

Long-term unsecured debt

A

A2

A+

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		Debt Issued for								Debt Issued for
		the Three Months								the Six Months								Outstanding at
		Ended June 30,								Ended June 30,								June 30,
		2006				2005				2006				2005				2006				2005
Convertible debentures		$	—			$	—			$	—			$	—			$	1,995			$	1,990
Retail notes			110				246				267				579				3,869				3,409
Foreign currency denominated notes(1)			1,052				857				1,475				1,000				10,261				5,782
Extendible notes			999				500				999				500				5,246				4,747
Global notes (Institutional)			871				—				1,945				1,184				19,737				17,906
Medium-term notes (Institutional)			—				—				—				—				1,800				2,630
Total		$	3,032			$	1,603			$	4,686			$	3,263			$	42,908			$	36,464

(1)	All foreign currency denominated notes are swapped back to U.S. dollars.

	Contingently Convertible Debentures

						Six Months								Three Months Ended
		Three Months				Ended				Year Ended
		Ended				June 30,				December 31,				December 31,				September 30,				June 30,				March 31,
(In thousands)		June 30, 2006				2006				2005				2005				2005				2005				2005
CSE impact of Co-Cos (shares)			30,312				30,312				30,312				30,312				30,312				30,312				30,312
Co-Cos after-tax interest expense		$	16,460			$	31,277			$	44,572			$	13,685			$	11,971			$	10,297			$	8,619

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			Three Months Ended								Six Months Ended
			June 30,								June 30,
			2006				2005				2006				2005
Numerator:
Net income attributable to common stock			$	714,991			$	292,607			$	858,291			$	513,116
Adjusted for debt expense of Co-Cos, net of taxes				16,460				10,297				31,277				18,916
Adjusted for non-taxable unrealized gains on equity forwards(1)				(39,717	)			—				—				—
Net income attributable to common stock, adjusted			$	691,734			$	302,904			$	889,568			$	532,032
Denominator: (shares in thousands)
Weighted average shares used to compute basic EPS				410,957				419,497				411,811				420,206
Effect of dilutive securities:
	Dilutive effect of stock options, nonvested deferred compensation, nonvested restricted stock, restricted stock units, ESPP, and equity forwards			13,045				12,091				11,680				11,936
	Dilutive effect of Co-Cos			30,312				30,312				30,312				30,312
Dilutive potential common shares(2)				43,357				42,403				41,992				42,248
Weighted average shares used to compute diluted EPS				454,314				461,900				453,803				462,454
Net earnings per share:
Basic EPS			$	1.74			$	.70			$	2.08			$	1.22
	Dilutive effect of stock options, nonvested deferred compensation, nonvested restricted stock, restricted stock units, ESPP, and equity forwards			(.05	)			(.02	)			(.05	)			(.03	)
	Dilutive effect of Co-Cos			(.08	)			(.02	)			(.07	)			(.04	)
	Dilutive effect of non-taxable unrealized gains on equity forwards(1)			(.09	)			—				—				—
Diluted EPS			$	1.52			$	.66			$	1.96			$	1.15

	(1)	SFAS No. 128, “Earnings per Share,” and the additional guidance provided by EITF Topic No. D-72, “Effect of Contracts That May Be Settled in Stock or Cash on the Computation of Diluted Earnings per Share,” require both the denominator and the numerator to be adjusted in calculating the potential impact of the Company’s equity forward contracts on diluted EPS. Under this guidance, when certain conditions are satisfied, the impact of the equity forwards is dilutive. Specifically, the impact is dilutive when: (1) the average share price is lower than the respective strike prices on our equity forward contracts, and (2) we recognized a gain on derivative and hedging activities related to our equity forward contracts. These conditions occurred during the three months ended June 30, 2006. At the time of our second quarter 2006 press release (the “Press Release”) filed on Form 8-K on July 20, 2006, we adjusted only the denominator in calculating the effects of our equity forward contracts. The diluted EPS of $1.52 in the table above reflects the effects of adjusting both the numerator and denominator and corrects the information previously reported in our Press Release. This guidance does not affect our net

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		income for the quarter and does not require us to adjust our diluted EPS for the six months ended June 30, 2006 or any prior period.
	(2)	For the three months ended June 30, 2006 and 2005, stock options and equity forwards of approximately 8 million shares and 14 million shares, respectively, and for the six months ended June 30, 2006 and 2005, stock options and equity forwards of approximately 12 million shares and 19 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were antidilutive.

	Securitization Program

		Three Months Ended June 30,
		2006																2005
		No. of				Loan Amount				Pre-Tax								No. of				Loan Amount				Pre-Tax
		Transactions				Securitized				Gain				Gain %				Transactions				Securitized				Gain				Gain %
FFELP Stafford/ PLUS loans			—			$	—			$	—				—	%			—			$	—			$	—				—	%
Consolidation Loans			1				2,500				23				.9				2				4,011				31				.8
Private Education Loans			2				4,000				648				16.2				1				1,505				231				15.3
Total securitizations — sales			3				6,500			$	671				10.3	%			3				5,516			$	262				4.7	%
Consolidation Loans(1)			1				3,001												1				2,226
Total securitizations — financings			1				3,001												1				2,226
Total securitizations			4			$	9,501												4			$	7,742

		Six Months Ended June 30,
		2006																2005
		No. of				Loan Amount				Pre-Tax								No. of				Loan Amount				Pre-Tax
		Transactions				Securitized				Gain				Gain %				Transactions				Securitized				Gain				Gain %
FFELP Stafford/ PLUS loans			2			$	5,004			$	17				.3	%			2			$	3,530			$	50				1.4	%
Consolidation Loans			2				5,502				36				.7				2				4,011				31				.8
Private Education Loans			2				4,000				648				16.2				1				1,505				231				15.3
Total securitizations — sales			6				14,506			$	701				4.8	%			5				9,046			$	312				3.4	%
Consolidation Loans(1)			1				3,001												1				2,226
Total securitizations — financings			1				3,001												1				2,226
Total securitizations			7			$	17,507												6			$	11,272

	(1)	In certain Consolidation Loan securitization structures, the Company holds certain rights that can affect the remarketing of certain bonds such that these securitizations did not qualify as qualifying special purpose entities (“QSPEs”). Accordingly, they are accounted for on-balance sheet as variable interest entities (“VIEs”).

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	Retained Interest in Securitized Receivables

		As of June 30, 2006
		FFELP								Private
		Stafford and				Consolidation				Education
		PLUS				Loan Trusts(1)				Loan Trusts				Total
Fair value of Residual Interests(2)		$	773			$	524			$	1,855			$	3,152
Underlying securitized loan balance(3)			20,224				14,746				12,556				47,526
Weighted average life			2.5 yrs.				8.1 yrs.				8.4 yrs.
Prepayment speed (annual rate)(4)			10%-40	% (5)			6	%			4	%
Expected credit losses (% of student loan principal)			.07%				.07	%			4.73	%
Residual cash flows discount rate			13.0%				11.1	%			13.1	%

		As of December 31, 2005
		FFELP								Private
		Stafford and				Consolidation				Education
		PLUS				Loan Trusts(1)				Loan Trusts				Total
Fair value of Residual Interests(2)		$	773			$	483			$	1,150			$	2,406
Underlying securitized loan balance (3)			20,372				10,272				8,946				39,590
Weighted average life			2.7 yrs.				8.0 yrs.				7.8 yrs.
Prepayment speed (annual rate)(4)			10%-20	% (5)			6	%			4	%
Expected credit losses (% of student loan principal)			.14%				.23	%			4.74	%
Residual cash flows discount rate			12.3%				10.3	%			12.4	%

(1)	Includes $115 million and $235 million related to the fair value of the Embedded Floor Income as of June 30, 2006 and December 31, 2005, respectively. The decrease in the fair value of the Embedded Floor Income is primarily due to rising interest rates during the period.
(2)	At June 30, 2006 and December 31, 2005, the Company had unrealized gains (pre-tax) in accumulated other comprehensive income of $401 million and $370 million, respectively, that related to the Retained Interests.
(3)	In addition to student loans in off-balance sheet trusts, the Company had $41.3 billion and $40.9 billion of securitized student loans outstanding (face amount) as of June 30, 2006 and December 31, 2005, respectively, in on-balance sheet securitization trusts.
(4)	The prepayment speed assumptions include the impact of projected defaults. Previous disclosures for Private Education Loans excluded projected default assumptions.
(5)	40% for the third quarter of 2006, 30% for the fourth quarter of 2006, 15% for 2007 and 10% thereafter for June 30, 2006 valuations and 20% for 2006, 15% for 2007 and 10% thereafter for December 31, 2005 valuations.

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	Servicing and Securitization Revenue

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Servicing revenue		$	88			$	86			$	168			$	171
Securitization revenue, before Embedded Floor Income and impairment			84				72				153				135
Servicing and securitization revenue, before Embedded Floor Income and impairment			172				158				321				306
Embedded Floor Income			4				24				10				50
Less: Floor Income previously recognized in gain calculation			(2	)			(17	)			(6	)			(39	)
Net Embedded Floor Income			2				7				4				11
Servicing and securitization revenue, before impairment			174				165				325				317
Retained Interest impairment			(91	)			(15	)			(143	)			(24	)
Total servicing and securitization revenue		$	83			$	150			$	182			$	293
Average off-balance sheet student loans		$	47,716			$	43,791			$	44,909			$	42,846
Average balance of Retained Interest		$	3,004			$	2,576			$	2,754			$	2,448
Servicing and securitization revenue as a percentage of the average balance of off-balance sheet student loans (annualized)			.70	%			1.37	%			.82	%			1.38	%

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	Asset and Liability Funding Gap

	GAAP Basis

		Frequency of												Funding
Index		Variable Resets				Assets				Funding(1)				Gap
(Dollars in billions)
3 month Commercial paper			daily			$	63.4			$	—			$	63.4
3 month Treasury bill			weekly				7.9				.3				7.6
Prime			annual				.6				—				.6
Prime			quarterly				1.2				—				1.2
Prime			monthly				5.1				—				5.1
PLUS Index			annual				2.6				—				2.6
3-month LIBOR			daily				—				—				—
3-month LIBOR			quarterly				1.6				78.1				(76.5	)
1-month LIBOR			monthly				.1				2.5				(2.4	)
CMT/ CPI index			monthly/quarterly				—				3.5				(3.5	)
Non discreet reset(2)			monthly				—				7.8				(7.8	)
Non discreet reset(3)			daily/weekly				7.8				—				7.8
Fixed Rate(4)							11.6				9.7				1.9
Total						$	101.9			$	101.9			$	—

	(1)	Includes all derivatives that qualify as hedges under SFAS No. 133.
	(2)	Consists of asset-backed commercial paper and auction rate securities, which are discount note type instruments that generally roll over monthly.
	(3)	Includes restricted and non-restricted cash equivalents and other overnight type instruments.
	(4)	Includes receivables/payables, other assets (including Retained Interest), other liabilities and stockholders’ equity (excluding Series B Preferred Stock).

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	Managed Basis

		Frequency of
		Variable												Funding
Index		Resets				Assets				Funding(1)				Gap
(Dollars in billions)
3 month Commercial paper			daily			$	89.4			$	16.2			$	73.2
3 month Treasury bill			weekly				15.8				17.2				(1.4	)
Prime			annual				1.0				—				1.0
Prime			quarterly				7.4				5.5				1.9
Prime			monthly				10.3				9.7				.6
PLUS Index			annual				4.6				5.8				(1.2	)
3-month LIBOR			daily				—				72.3				(72.3	)
3-month LIBOR			quarterly				1.5				8.2				(6.7	)
1-month LIBOR			monthly				.1				1.5				(1.4	)
Non discreet reset(2)			monthly				—				8.2				(8.2	)
Non discreet reset(3)			daily/weekly				12.8				—				12.8
Fixed Rate(4)							9.8				8.1				1.7
Total						$	152.7			$	152.7			$	—

	(1)	Includes all derivatives that management considers economic hedges of interest rate risk and reflects how we internally manage our interest rate exposure.
	(2)	Consists of asset-backed commercial paper and auction rate securities, which are discount note type instruments that generally roll over monthly.
	(3)	Includes restricted and non-restricted cash equivalents and other overnight type instruments.
	(4)	Includes receivables/payables, other assets, other liabilities and stockholders’ equity (excluding Series B Preferred Stock).

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	Interest Rate Gap Analysis

		Interest Rate Sensitivity Period
						3 Months
		3 Months				to				6 Months				1 to 2				2 to 5				Over 5
		or Less				6 Months				to 1 Year				Years				Years				Years
Assets
Student loans		$	81,373			$	626			$	213			$	6			$	58			$	3
Other loans			140				51				101				10				3				746
Cash and investments, including restricted			8,041				70				62				586				682				253
Other assets			2,567				90				180				395				647				5,004
Total assets			92,121				837				556				997				1,390				6,006
Liabilities and Stockholders’ Equity
Short-term borrowings			2,072				516				1,213				—				—				—
Long-term borrowings			65,125				268				—				1,384				11,426				12,304
Other liabilities			1,711				—				—				—				—				1,519
Minority interest in subsidiaries			—				—				—				—				—				9
Stockholders’ equity			—				—				—				—				—				4,360
Total liabilities and stockholders’ equity			68,908				784				1,213				1,384				11,426				18,192
Period gap before adjustments			23,213				53				(657	)			(387	)			(10,036	)			(12,186	)
Adjustments for Derivatives and Other Financial Instruments
Interest rate swaps			(23,075	)			83				(59	)			477				10,390				12,184
Total derivatives and other financial instruments			(23,075	)			83				(59	)			477				10,390				12,184
Period gap		$	138			$	136			$	(716	)		$	90			$	354			$	(2	)
Cumulative gap		$	138			$	274			$	(442	)		$	(352	)		$	2			$	—
Ratio of cumulative gap to total assets			.1	%			.3	%			(.4	)%			(.3	)%			—	%			—	%

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	Weighted Average Life

		On-Balance				Off-Balance
(Averages in Years)		Sheet				Sheet				Managed
Earning assets
Student loans			9.7				5.5				9.5
Other loans			7.7				—				7.7
Cash and investments			.7				.1				.5
Total earning assets			8.8				5.0				8.6
Borrowings
Short-term borrowings			.5				—				.5
Long-term borrowings			6.9				5.5				6.4
Total borrowings			6.7				5.5				6.3

			Three Months								Six Months
			Ended June 30,								Ended June 30,
			2006				2005				2006				2005
(Shares in millions)
Common shares repurchased:
	Equity forwards			2.1				3.3				4.5				6.4
	Benefit plans(1)			.4				.3				1.3				.6
	Total shares repurchased			2.5				3.6				5.8				7.0
	Average purchase price per share		$	53.93			$	48.55			$	54.62			$	49.46
Common shares issued				1.4				1.8				4.3				3.5
Equity forward contracts:
	Outstanding at beginning of period			42.7				46.6				42.7				42.8
	New contracts			5.3				8.4				7.7				15.3
	Exercises			(2.1	)			(3.3	)			(4.5	)			(6.4	)
	Outstanding at end of period			45.9				51.7				45.9				51.7
Authority remaining at end of period to repurchase or enter into equity forwards				10.9				20.5				10.9				20.5

(1)	Includes shares withheld from stock option exercises and vesting of performance stock to satisfy minimum statutory tax withholding obligations and shares tendered by employees to satisfy option exercise costs.

102

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Year of Maturity		Outstanding				Range of		Average
(Contracts in millions of shares)		Contracts				Purchase Prices		Purchase Price
2007			.8			$54.74		$	54.74
2008			7.3			54.74			54.74
2009			14.7			54.74			54.74
2010			15.0			54.74			54.74
2011			8.1			$51.86-$53.76			53.02
			45.9					$	54.44

	•	Lenders rebate Floor Income on new loans after April 1, 2006.
	•	Borrower origination fees are gradually reduced to zero in FFELP by 2010, and to one percent in Direct Loan program by 2010.
	•	Collection of one percent FFELP guaranty fee is mandated for all guarantors, including those with voluntary flexible agreements, but can be paid on behalf of the borrower by lenders or guarantors.
	•	Lender reinsurance is reduced to 99 percent with Exceptional Performer designation for claims filed after July 1, 2006, and 97 percent without designation on loans disbursed after July 1, 2006.
	•	“Super 2-Step” and in-school consolidation loopholes will be closed as of July 1, 2006.

103

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	•	Recycling of 9.5 percent loans is prohibited for loan holders with more than $100 million in 9.5 percent loans, as of date of enactment, and other 9.5 percent reforms enacted in 2004 are made permanent.
	•	The limitation on SAP for PLUS loans made after January 1, 2000 is repealed, effective April 1, 2006.
	•	Certain loan limits are increased effective July 1, 2007. For undergraduate students, loan limits are raised for first-year students, from $2,625 to $3,500, and for second-year students, from $3,500 to $4,500. These increases allow students to borrow more over the first four years (from $17,125 to $19,000); the cumulative graduate limit was left unchanged at $23,000. Annual loan limits for unsubsidized Stafford loans are increased from $10,000 to $12,000 for graduate students and from $5,000 to $7,000 for graduate students getting a State teaching certificate or credential and professional coursework (see also “APPENDIX A, FEDERAL FAMILY EDUCATION LOANS PROGRAM — Stafford Loan Program — Loan Limits” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005).
	•	A moratorium on new schools-as-lender is created after April 1, 2006, and additional requirements are created for schools continuing to participate in this program.
	•	Graduate students become eligible to take out PLUS loans.
	•	Compensation for guarantor collections via loan consolidation is reduced from a maximum of 18.5 percent to 10 percent, along with a cap on the proportion of collection via consolidations. Requirements for collections via loan rehabilitations are made somewhat easier.
	•	New grant programs are available for Pell-eligible students.

104

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Item 3.	Quantitative and Qualitative Disclosures about Market Risk

	Interest Rate Sensitivity Analysis

		Three Months Ended June 30,
		2006																2005
		Interest Rates:																Interest Rates:
		Change from								Change from								Change from								Change from
		Increase of								Increase of								Increase of								Increase of
		100 Basis								300 Basis								100 Basis								300 Basis
		Points								Points								Points								Points
		$				%				$				%				$				%				$				%
(Dollars in millions, except per share amounts)
Effect on Earnings
Increase/(decrease) in pre-tax net income before unrealized gains (losses) on derivative and hedging activities		$	(2	)			—	%		$	(9	)			(1	)%		$	6				1	%		$	10				2	%
Unrealized gains (losses) on derivative and hedging activities			101				61				157				96				348				2,973				669				5,712
Increase in net income before taxes		$	99				9	%		$	148				13	%		$	354				74	%		$	679				143	%
Increase in diluted earnings per common share		$	.15				9	%		$	.23				14	%		$	.50				75	%		$	.96				145	%

		Six Months Ended June 30,
		2006																2005
		Interest Rates:																Interest Rates:
		Change from								Change from								Change from								Change from
		Increase of								Increase of								Increase of								Increase of
		100 Basis								300 Basis								100 Basis								300 Basis
		Points								Points								Points								Points
		$				%				$				%				$				%				$				%
(Dollars in millions, except per share amounts)
Effect on Earnings
Increase/(decrease) in pre-tax net income before unrealized gains (losses) on derivative and hedging activities		$	(7	)			(1	)%		$	(27	)			(2	)%		$	13				2	%		$	29				4	%
Unrealized gains (losses) on derivative and hedging activities			101				80				157				126				348				455				669				874
Increase in net income before taxes		$	94				7	%		$	130				9	%		$	361				41	%		$	698				79	%
Increase in diluted earnings per common share		$	.145				7	%		$	.221				11	%		$	.51				45	%		$	1.01				87	%

105

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			At June 30, 2006
							Interest Rates:
							Change from								Change from
							Increase of								Increase of
							100 Basis								300 Basis
							Points								Points
			Fair Value				$				%				$				%
(Dollars in millions)
Effect on Fair Values
Assets
	Total FFELP student loans		$	77,363			$	(118	)			—	%		$	(203	)			—	%
	Private Education Loans			8,335				—				—				—				—
	Other earning assets			10,769				(46	)			—				(132	)			(1	)
	Other assets			8,883				(300	)			(3	)			(410	)			(5	)
	Total assets		$	105,350			$	(464	)			—	%		$	(745	)			(1	)%
Liabilities
	Interest bearing liabilities		$	94,467			$	(1,432	)			(2	)%		$	(3,580	)			(4	)%
	Other liabilities			3,229				1,007				31				2,876				89
	Total liabilities		$	97,696			$	(425	)			—	%		$	(704	)			(1	)%

			At December 31, 2005
							Interest Rates:
							Change from								Change from
							Increase of								Increase of
							100 Basis								300 Basis
							Points								Points
			Fair Value				$				%				$				%
(Dollars in millions)
Effect on Fair Values
Assets
	Total FFELP student loans		$	76,492			$	(215	)			—	%		$	(385	)			(1	)%
	Private Education Loans			9,189				—				—				—				—
	Other earning assets			9,344				(57	)			(1	)			(164	)			(2	)
	Other assets			7,429				(292	)			(4	)			(377	)			(5	)
	Total assets		$	102,454			$	(564	)			(1	)%		$	(926	)			(1	)%
Liabilities
	Interest bearing liabilities		$	92,026			$	(1,437	)			(2	)%		$	(3,612	)			(4	)%
	Other liabilities			3,609				975				27				2,863				79
	Total liabilities		$	95,635			$	(462	)			—	%		$	(749	)			(1	)%

106

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Item 4.	Controls and Procedures

107

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Item 1.	Legal Proceedings

Item 1A.	Risk Factors

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

108

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														Maximum Number
										Total Number of				of Shares That
										Shares Purchased				May Yet Be
		Total Number				Average Price				as Part of Publicly				Purchased Under
		of Shares				Paid per				Announced Plans				the Plans or
		Purchased(1)				Share				or Programs				Programs(2)
(Common shares in millions)
Period:
April 1 - April 30, 2006			2.1			$	54.70				2.1				13.2
May 1 - May 31, 2006			.4				49.25				—				10.9
June 1 - June 30, 2006			—				—				—				10.9
Total second quarter			2.5			$	53.93				2.1

	(1)	The total number of shares purchased includes: i) shares purchased under the stock repurchase program discussed above, and ii) shares purchased in connection with the exercise of stock options and vesting of performance stock to satisfy minimum statutory tax withholding obligations and shares tendered by employees to satisfy option exercise costs (which combined totaled .4 million shares for the second quarter of 2006).
	(2)	Reduced by outstanding equity forward contracts.

Item 3.	Defaults Upon Senior Securities

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

		Number of Shares
		Votes For				Votes Withheld
Ann Torre Bates			363,780,517				2,481,411
Charles L. Daley			356,206,952				10,054,976
William M. Diefenderfer, III			363,713,812				2,548,116
Thomas J. Fitzpatrick			356,393,788				9,868,140
Diane Suitt Gilleland			356,335,359				9,926,569
Earl A. Goode			363,817,037				2,444,891
Ronald F. Hunt			330,148,606				36,113,322
Benjamin J. Lambert, III			356,331,661				9,930,267
Albert L. Lord			356,248,185				10,013,743
Barry A. Munitz			363,689,275				2,572,653
A. Alexander Porter, Jr.			356,265,780				9,996,148
Wolfgang Schoellkopf			363,601,920				2,660,008
Steven L. Shapiro			356,345,578				9,916,350
Barry L. Williams			359,247,674				7,014,254

109

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Number of Shares
Votes For				Votes Against				Abstain
	363,594,771				471,061			2,196,096

Item 5.	Other Information

Item 6.	Exhibits

	31	.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32	.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

110

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	SLM CORPORATION
	(Registrant)

	By:	/s/ C.E. Andrews

	C.E. Andrews
	Executive Vice President and
	Chief Financial Officer
	(Principal Accounting Officer and
	Duly Authorized Officer)

111

 

	1. I have reviewed this quarterly report on Form 10-Q of SLM Corporation;
	2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
	3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
	4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Thomas J. Fitzpatrick
	Thomas J. Fitzpatrick
	Chief Executive Officer

 

	1. I have reviewed this quarterly report on Form 10-Q of SLM Corporation;
	2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
	3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
	4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ C.E. Andrews
	C.E. Andrews
	Chief Financial Officer

 

	(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
	(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	/s/ Thomas J. Fitzpatrick
	Thomas J. Fitzpatrick
	Chief Executive Officer

 

	(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
	(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	/s/ C.E. Andrews
	C.E. Andrews
	Chief Financial Officer