Steve McGarry – Managing Director, IR Al Lord – Vice Chairman and CEO Jack Remondi – Vice Chairman and CFO Joe DePaulo – EVP and Chief Marketing Officer

Michael Taiano – Sandler O’Neill Sameer Gokhale – Keefee, Bruyette & Woods Lee Cooperman – Omega Advisors David Hochstim – Buckingham Research Daniel Kim – J.P. Morgan Brad Ball – Ladenburg Matt Snowling – FBR Capital Markets Eric Beardsley – Barclays Capital Ed Groshans – Height Jordan Heimwoods [ph]

Good morning. My name is Terry and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 fiscal 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator's Instructions) Thank you. I will now like to turn the call over to Mr. Steve McGarry. Mr. McGarry, you may begin.

Thank you, Terry. Good morning, everybody, and thank you for joining us for 2010 first quarter earnings call. With me today on the call are Al Lord, our CEO; and, Jack Remondi, our CFO. After their prepared remarks, we will open up the call for questions. But before we begin keep in mind that our discussion will contain predictions, expectations, and forward- looking statements. Actual results in the future may be materially different from those discussed here. This could be due to a variety of factors. Listeners should refer to the discussion of those factors on the company's Form 10-K and other filings with the SEC. During this conference call, we will refer to non-GAAP measures that we call our core earnings. The description of quarter earnings for full reconciliation to GAAP measures and our GAAP results can be found in the first quarter 2010 supplemental earnings disclosure. It's posted along with the earnings press release on the Investors page at salliemae.com. Thank you. And now, I'll turn the call over to Al.

Good morning, everyone. So this is our first quarter earnings call. At least as I read so far in the last several hours, we're reporting better earnings than you thought we were going to have. And frankly, they're better than we thought they were going to be. I think you also learned when Jack Remondi's finished talking with you that they're better than – our earnings are better in the first quarter. And we expect now that they'll be better in 2010 than we originally thought. This is our first opportunity to speak with you since the student loan legislation passed. As you are well aware, it's not good news for the company, and it's certainly not good news for our employees. As you might guess, emotions among the 8,500 of us are wide-ranging, mostly they've gone from mad to sad. I can assure you they're still a long way from glad. This company has been through a great deal. The company is also populated with a lot of professionals. These emotions aren't surprising. We've been in this business for 38 years. We take great pride in who we are. And long before this program was called FFELP, Sallie Mae made it work. The loss of the business is – will cause Sallie Mae to reduce its employee number by approximately 2,500 persons. We expect that will be done by the end of the year 2011. Yesterday, we announced the closing of two service centers, one in Killeen, Texas; one in Panama City, Florida. And this starts the unfortunate process of the 2,500 person reduction. There are 1,200 people in those centers and other locations informed yesterday. We expect that our run rate for operating expenses will be roughly in the billion dollar range by the end of the year…

Thanks, Al, and good morning, everyone. As Al said, I’m going to take the next few minutes to review our operating results for the quarter on both the GAAP and a quarter earnings basis. I’ll also review our funding activity, liquidity; and provide an update on our lending business; and, review the performance of our private credit portfolio. And at the end, I’ll provide an update on our outlook for the remainder of 2010. For the quarter, core earnings were $212 million or $0.39 a share. And that compares to $249 million or $0.41 a share in the prior quarter. This quarter’s results include restructuring and asset impairment charges related to the new legislation of $30 million or $0.04 a share, and debt repurchase gains of $90 million or $0.11 a share. Net interest income for the quarter was $702 million versus $429 million in the prior year period. And the net interest margin increased to 1.46% from 89 basis points in the year ago quarter. The changes in net interest income and margin were primarily due to the improvement in the CP LIBOR spread, which was five basis points in the first quarter, 47 basis points better than the year ago period, and the refinancing of our asset-backed CP facility, which has a significantly lower cost of funds. The provision for private credit loan losses in the quarter was $325 million, a decrease of $2 million from the prior quarter. And the total loan loss provision for the quarter was $359 million, compared to $365 million in the prior quarter. At March 31st, our allowance for private credit loan losses was equal to 8.2% of loans in repayment. And our allowance for both our FFELP and private credit portfolio is sized to cover an expected eight quarters of charge-offs.…

(Operator Instructions) We’ll pause for a brief moment to compile the Q&A roster. Your first question comes from the line of Michael Taiano of Sandler O’Neill. Michael Taiano – Sandler O’Neill: Hey, Good morning. Just a few questions, first on the private student loan business in terms of the origination volume. Is that – first off, is that – it seem like it’s going to come in below your initial $3.5 billion guidance earlier in the year. And then just secondly, what are you seeing in terms of the competitive dynamics in that space? And we’ve been hearing more about others getting more aggressive, such as discovering Wells Fargo. If you could, maybe just comment on that?

I’ll take the first part of it. Maybe somebody can take the competitive side. You asked before and I – if we're going to hit our $3.5 billion. At the moment it does not look that way. We would have to have a – we’d have to have a huge second and third quarter to achieve $3.5 billion. With a – and whether we're able to achieve that, it is not likely. The competitive dynamics are – I don't mean – every piece of information we have, and this is an area that we're seeking information all the time – market information all the time. Every piece of information we have is that that no one – no one is achieving market share gain, and in fact they're suffering market share losses very similar or greater to the ones where we are – I guess the word is – not achieving. Joe, you have a thought on it? Is that about right?

Yes, I think that’s right. And we checked [ph] the point of that, the market being flooded with Federal dollars under this program.

We think the longer issue is just the absence of demand. We’re seeing – there are a lot of things in the statistics here. We're also seeing young people applying at lower rates to the high cost schools, or moving across the food chain into public schools and into two-year schools, into community colleges. There’s a great deal of movement – dynamics beneath the surface that we've seen as well. If you’re trying to put your mileage [ph] together, I would put the number less than $3.5 billion, but I’m not going to tell you what number to put in it.

If you just look at the data on the dollar side of the equation and we don't have a – the department hasn't published the third quarter’s statistics yet on all factors. But in the first half of the academic year between Federal loan increases and Pell Grants is an additional $17 billion of Federal money in the system compared to the year ago period. And we strongly advocate that students take advantage of grants first – re-money first and Federal loans second. And they are doing that appropriately, and as a result private credit demand is down. Michael Taiano – Sandler O’Neill: Okay. And then just secondly, obviously I guess you've got a lot to work through the next several months to wind down some of the FFELP operations, but, you maybe give us a sense of both the timing over when you think you’ll have some more clarity in terms of how you’re going to proceed with the legacy FFELP portfolio in terms of structuring the balance sheet? Do you sell it? Do you spend it out? Do you apply for a bank holding company status? All those things? Do you think that that’ll be something that will be resolved over the next three months or so?

Al?

Quite a bit. It will be risk – but I think and certainly in the next six months, we'll – we can add a great deal of clarity to that. You’re really talking about structural change, corporate structural change. I think that’s what you’re talking about. Michael Taiano – Sandler O’Neill: Yes.

We are pursuing all the things that we've talk about it, and whether it’s spin-off sale, or retaining the company in its current form. The objective here obviously is to get our $13 stock a lot closer to what we think its real value is. And if we can achieve that by structural change, we will move forward with it. Michael Taiano – Sandler O’Neill: Okay. And then just lastly, in the updated guidance does that include any assumptions about acquisitions at this point?

It does not.

No. Michael Taiano – Sandler O’Neill: Okay. Great. Thanks.

Your next question comes from the line of Sameer Gokhale of Keefee, Bruyette & Woods. Sameer Gokhale – Keefee, Bruyette & Woods: Thank you, and good morning. Just a few questions, the first one was – as it relates to the bills in the House of the Senate on the private student loans side. Do you have an estimate for how much you think that those bills, which would make private student loans dischargeable in bankruptcy? How much of an impact that will have on your credit loss rate prospectively? We've estimated somewhere in the ball park of maybe less than 30 basis points, maybe 20 basis points or so. Is that in the ball park of how you we're thinking about it? Or could you quantify that for us?

Sameer, you need to stop writing about this stuff because you encourage them. I don't know the precise number. Maybe Jack knows more precise numbers. But I think the numbers are small, and your number sound pretty small. So it’s not something at least that – particularly given the structure of the lending that we do that is particularly troublesome. I think it is very troublesome for young people, ultimately, the availability of credit. But on the bad debt side and how it might affect our provision, we don’t see anything catastrophic there. Sameer Gokhale – Keefee, Bruyette & Woods: Okay. And then–

A presentation has been presented before. And I think when people look at why it exists, we’ve been able to demonstrate that making this type of change is inappropriate. When you go back to the 1970s when they actually put this legislation in place in the first place, it was designed to eliminate some abuses that were going on in the system of people – of students graduating with high debt. They're just filing for bankruptcy and walking away from their burdens. To think that the legislation should be passed to allow bankruptcy dischargeability for one type of loan, which is made to the exact same borrower in the exact same purpose as federal loans, is an argue inappropriate. And as Al said, it will very much constrict the supply of credit to students only. We are protected, I think as you pointed out, in terms of where we think some losses would be here by the fact that 85% of the new loans we’re making have co-borrowers. And clearly, it would be highly unlikely for both the parents and the borrower – and the student borrower to be filing for bankruptcy simultaneously. But it is something we’re working on and trying to educate Congress as to why they – remind them why they put this legislation in place in the first place in the 1970s. Sameer Gokhale – Keefee, Bruyette & Woods: Okay. Thank you. I mean, it does seem like Congress can pass legislation regardless of the merits. But it’s helpful to put some numbers behind it. The other question I had was in terms of the loss reserves, Jack, can you give some commentary on this? But what would you need to see before you actually start growing down those loss reserves? I mean, I don’t see any of those with an impact on the delinquency rates even though you have a year-over-year decline in the delinquency rates. But is there something specifically you're waiting for before you start to draw those down?

I think we would like to see how the balance of 2010 trends. We've been performing better than planned for the last year and a half now on terms of our forecast. And that’s obviously very encouraging. We’re still at elevated levels from where we’d like to be, particularly as a result of our non-traditional portfolio. But I think if you’ll look at our charge-off rate this quarter for loans with a co-borrower, which was 2%, that had a very, very strong number in an economy with a 10%-type unemployment rate. So we definitely see opportunities for this number to come down materially over time as the portfolio mix shifts and as – and if the economy improves, we get an even greater lift in that. Sameer Gokhale – Keefee, Bruyette & Woods: Okay. And then just my last question, in your supplement, you provided some color as to how you think the guarantor servicing and some of those key income items are expected to trend lower with the elimination of the FFELP. And you’ve talked about how you have some opportunities to maybe takeover some additional guarantor servicing. But in terms of the contingency collections business, how do you see that potentially trending now that all the loans will be made through the FDLP and you’re one of the collectors in that part of the business? Do you see that over a number of years offsetting the loss of your fee income from the guarantor servicing side and income related to the FFELP? How should we think about that and the earnings growth for the contingency collections business?

We are the largest contingency collector on both – for both guarantee agencies in the country as well as the Department of Education. We do, however, have a larger market share in the guarantor market because they frankly distribute volume to the top performers in a more concentrated fashion. We certainly hope to be able to and know that we can – if the Department of Ed took the bottom 20% of volume that they allocate to collectors and gave it to the top performing 20%, it would collect billions of dollars more each year in revenues. So I think as we continue to demonstrate our performance in that space, we will continue seeing freeze market share. But we are the largest and the best performing for both customer types there. Sameer Gokhale – Keefee, Bruyette & Woods: Thanks, Al. And thanks, Jack.

Your next question comes from the line of Lee Cooperman of Omega Advisors. Lee Cooperman – Omega Advisors: Hi, good morning. I’m on a vacation so forgive the sophomore question. Opinions are like those, as everybody has one, two or three times in the call you have mentioned that you thought the $13 did not, in any way, reflect the undervalue – underlying value of the business. But it is generally our responsibility to figure out the value. I’m curious, if you could put some hair on that number in the sense of that view as to how you approach the business between the runoff portfolio of the operating business, et cetera. And secondly, I think you had a conference about four months ago, Al was quoted as saying that, “(inaudible) earnings in ‘10, ‘11, and I think ‘12.” Without getting into specific numbers, from what you're expecting to earn in 2010, you think you have a better year in 2011, just directionally? Thank you.

Lee, I’m always at risk that my Alzheimer’s is checking in on me. But I don’t remember talking about 2012. Lee Cooperman – Omega Advisors: How about ’11?

Yes, okay, ’11, yes. And so the first question was a valuation question. The second question is related to earnings in 2011. Lee Cooperman – Omega Advisors: Just the direction, not a specific number.

Look, I’m just going to stick my neck back out on 2011 and say we’re going to be up. And that is really all a matter of offsetting the draconian drop in the origination income that we have from our FFELP origination business. And I’m probably not going to get much more precise on that. With respect to valuation, look, I know you, Lee, have – you guys have – and probably everybody on this call, has its own valuation methods and have done any number of just net – essentially their own version of net asset value approaches to the company. And I heard numbers, generally in the high teens. My own number, and I have my own methodologies, obviously, probably 10% to 20% higher than some of the ones I’ve seen. But the fact is, even those numbers are substantially higher than the $13 value that we have. I expected you and the rest of them – the capital markets will appropriately value our stock over a period of time. I believe that there’ve been any number of overhangs and event risks hanging over this company for the past two years, whether they are related to survival, or political survival, or just the – the play of issues that have affected this company. The fact is that many of those things have in fact – have receded and it’s time to pay a little bit of attention to the value of this company. And for us to – for us to do what it is that we can do to make our investors understand the nature of the value of the company and the nature of its earnings stream and without all the political distraction that we’ve had, I think we’re going to do a better job at that. And I know that I am personally focused on trying to get our shareholders to get a feel closer to the value of this company and the value of its cash flow. Lee Cooperman – Omega Advisors: Can just elaborate on one question? Again, just to–

I know, Lee, whenever I’m finished, it won’t be enough. But go ahead. Lee Cooperman – Omega Advisors: No, I’ll make it easy on you, so a touchy-feely kind of stuff.

All right. Thank you. Lee Cooperman – Omega Advisors: You can get to valuation by just doing the blocking and tackling, and the everyday work and working very hard. And your team has worked very hard and come through reasonably well in a difficult environment. You think there are initiatives that are likely to be undertaken in 2010 that would be different in just running the business day-to-day, restructuring things, creating vehicles that might surface value quickly? Or you think it’s going to be the blocking and tackling that’s going to get us the valuation?

Well, yes. Blocking and tackling always works and builds the foundation. I try to tell our guys if we think this company’s worth $20, the market will figure – sooner or later will come to that number. Our job is to make that number higher and not just to add to runoff value of our portfolios, and so, one – or the blocking and tackling and any number of operating initiatives that we’re trying to undertake. Second part of it, and I think what you’re really referring to is my earlier comments about what the structure looks like. And to some extent, it’s a little bit of financial engineering. I think there is any number of financial engineering opportunities. And I don’t think any of them are particular surprises. And again, with some of the distractions over, maybe not well over, but over, we can – we can focus and get on to some of that. As I tell our guys, we’ve been talking about a lot of discussions last August. And some of the same questions keep getting asked. I’d like to get them to answer now, if they get them answered soon. Lee Cooperman – Omega Advisors: Good. Thank you very much and all the best. Appreciate your hard work.

Thanks so much.

Your next question comes from the line of David Hochstim of Buckingham Research. David Hochstim – Buckingham Research: Thanks. I wonder, can you breakout or have you broken out servicing revenue from the government contract? Could you look at the income statement and tell what the change in the increase in that is over the last quarter?

We aren’t in the quarter, just over $9 million in revenue under that contract, about the same as the fourth quarter. The volume closed right now were principally coming – for loans that we’re servicing are coming from loans we sold to the Department of Ed in 2009. We will begin to service direct loans for the Department of Education this summer. And we’ll also see an increase in loan volume from loans that are sold to the department in the fall of this year. So these numbers should begin to grow rather rapidly in the latter half of 2010 and into 2011. David Hochstim – Buckingham Research: And the servicing that you purchased in the quarter, can you give us a rough idea what that might generate in revenues?

We purchased the – we purchased $1.5 billion of – or will purchase $1.5 billion of federal student loans. Some of these loans were already on our system and some were off-system. But it’s the opportunity here, and the yield that these loans will generate is certainly better than anything we’ve seen in a number of years. But I don’t have a specific number for you. David Hochstim – Buckingham Research: Based on normal fees?

Yes, that’s right. David Hochstim – Buckingham Research: Okay. And just in terms of the prospects for additional acquisitions, are you in discussions with–?

Well our view here is just that there’s nothing worse than a servicing business that’s in runoff mode. And so we think there’s only four entities that picked up servicing capacity going forward under the Department of Education. So we see a number of opportunities here. I think everyone was very much waiting for the legislation to pass before they decided what to do. We certainly had the community proposal passed as we hoped. I think their decisions would be very different. So we’ll have to wait and see what we – what will come about, but we’re very confident that we shall see some good opportunities in this space. David Hochstim – Buckingham Research: A general question, the servicing that was – or the loans that were sold to the Department of Education last year, you said a few times that you’re servicing primarily what you originated. So you didn’t really gain share on that and the other services aren’t all originating as much as you. But what happened to the originations from the entities that aren’t servicing that don't – that aren't servicing? I mean, how’s that been allocated and why didn't you end up getting more of that so far?

Part of the reason is because we originated about 45% of all loans that were put to the Department of Education, so we got a disproportionate share. The Department of Education is focused on distributing loan volume through the four entities in some smooth fashion here. So part of the reason why – we have converted loan portfolios onto our system. But we have not converted as much as others because we started with such a large number to begin with. David Hochstim – Buckingham Research: Okay. Thanks. (inaudible) other people hadn’t solved.

(Operator Instructions) Your next question comes from the line of Daniel Kim of J.P. Morgan. Daniel Kim – J.P. Morgan: Good morning, guys.

Good morning. Daniel Kim – J.P. Morgan: So just a quick question on how you see your funding strategy for private loans is going to be in the future, is it mainly a securitization market completely opening up? And what’s your opinion on that?

Today, well, for the last two years, we’ve been funding new origination growth through our bank, Sallie Mae Bank, and principally doing that with Birchwood [ph] deposits. In the first quarter of this year, we launched a retail deposit initiative targeting our 20 million-strong Sallie Mae customer base, half of which are working with us to save for college. And so we see those two as a significant source of funding for new originations long term, and we do expect and plan to securitize those assets in the capital market to provide life of loan funding. And the $1.6 billion ABS deal we did this quarter did finance – that was substantially financing loans that were held by Sallie Mae Bank. And we saw for the first time in that transaction a number of cash investors in that deal. And so we're very much optimistic that the private credit ABS market is returning with investors and both – from both the supply as well as the cost of fund base of things. You should expect to see us return to that market in a non – with a non-FFEL deal sometime in the second half of 2010. Daniel Kim – J.P. Morgan: Thank you. And second question is, of the cost there being made of 2,500 employee reduction, where is that mainly made? Is that mainly in the origination or the unknowns – general loans? And how will that affect your ability to grow your private loan portfolio in the future?

The reductions are principally as a result of the fact that activities that we perform today won’t be there tomorrow. Clearly, that starts with originations. And originations people are dealing with both customers on phone calls as well as processing applications. And that’s why you see the centers in Killeen and Panama City, unfortunately, being – bearing the brunt at the start. Over time, there're other businesses. The FFELP loan side of the equation and the guarantor servicing lying down, that’s where the job reductions will occur. We don’t expect to see job cuts taking place in our private credit because we expect that to grow. And some of the losses on the FFELP side are offset by our forecast for increased servicing under the Department of Education contract. But it’s not just becoming more efficient, it is the vast majority of jobs are being lost because the programs have been pulled away from us. Daniel Kim – J.P. Morgan: Got it. And the last question, what is the – what do you see as the run rate of the restructuring cost will be? I think you posted about $20 million. And how long do you see that going through, just this year or–?

It should be – the vast majority should be this year. We booked $30 million of restructuring and impairment related charges. We would expect to incur probably something in the $45 million to $55 million range for the balance in 2010. Daniel Kim – J.P. Morgan: Great. Thank you very much.

Your next question comes from the line of Brad Ball of Ladenburg. Brad Ball – Ladenburg: The $60 new guidance for 2010 is $0.10 above what your guidance was a quarter ago. What’s the main driver of that $0.10 improvement this year. Is it related to FFELP volumes this past quarter or is it debt repurchases? What’s in there?

It’s a combination of factors. It's the debt repurchase gains that has been – being substantially higher than what we've been guided to at the beginning of the year. They have actually occurred. It is higher volume on the FFELP side of the equation and more revenue from the sale of those loans to the department later this year. And it is an improvement in the CP LIBOR spread. We’re running at 5 basis point in the first quarter, compared to what would typically be an 8-basis point to 10-basis point range under normal interest rate environments. Brad Ball – Ladenburg: Okay, so no assumed reserve reductions under provision or anything like that?

We kept our guidance there at $1.2 billion unchanged. Brad Ball – Ladenburg: Yes, got it. Now the impairment charges you just mentioned, I'm referring to the last question, are those included in the $ 60?

Yes. Brad Ball – Ladenburg: They are, those charges. Okay. And then in terms of the pace of expense reductions that you talked about, is that going to be more front-end loaded since you’ll be, I assume, making most of the layoffs this quarter?

We’re still doing – we're still doing business.

The announcement was this quarter, but the actual reductions will take place in the second half of the year. Brad Ball – Ladenburg: And so, do you think the bulk of the expense reductions would be apparent in the third quarter? I’m just trying to get a sense as to how to scale it in.

You’ll see the first half of them occur in the fourth quarter, and the balance in 2011.

Hey, Brad? Brad Ball – Ladenburg: Yes? Yes, Al.

This is tough enough. Brad Ball – Ladenburg: Yes, I know. I’m not trying to make it–

Don’t rush these terminations, all right? Brad Ball – Ladenburg: Not at all, not at all.

Thanks. Brad Ball – Ladenburg: Just a follow-up on the private loan question that came up earlier, just to clarify, so the discussion about taking away the private loan non-dischargeability has been around. I think it was a couple of years ago, or seven maybe, when it first was introduced. So it's not a new issue for you guys to think about. When you respond by saying you don’t expect a big impact on your credit, is that because all the new private loans you're making have a high proportion of co-borrowers – co-signors?

The bankruptcy issue is still in evaluation. And what we need to know is how many people would, in effect, use the ability to file for bankruptcy upon graduation, right? That's the piece we don’t know. We have been – I want to be clear, we’ve been supportive of this bankruptcy reform provided that borrowers make – have some obligation after they leave school to make payments. And we’ve said five years. And then, if there is a hardship-related issue, we would be supportive of that. But it's a little hard for us to understand how the same – the same borrowers borrowing for the same purpose in one program should be allowed to discharge when they graduate and not in another. It doesn’t make economic sense to us. It doesn’t sound fair in any way, shape, or form. And clearly, as you can see, no one's proposing dischargeability for federal loans. So we will continue to try to educate people as to what’s going on here. There's no question that if – if bankruptcy were allowed, the fact that loan – 85% of the loans we made this quarter has co-signors associated with them decreases any impact dischargeability perspective. But what it does mean is that it's going to be harder for us to make the loans to the 15% that didn’t have a co-signor, right. If we think that people with – that persons could file for bankruptcy and discharge their debt, discharge their private credit debt, it's a little hard to make a loan until you see some of the evidence as to how behaviors change. Brad Ball – Ladenburg: Got it. I appreciate that color. Thank you.

Your next question comes from the line of Matt Snowling of FBR Capital Markets. Matt Snowling – FBR Capital Markets: Yes, good morning. I guess two quick questions, one, can you update us on the pricing of this new smart option loan. I think maybe a year ago, you mentioned pricing was around (inaudible) a $1,000. Has that come down any?

Yes, it is coming down, and it’s coming down as our cost of fund decreases. We've seen probably a 200-basis point improvement in our funding costs over the last six to nine months. So you can look at more – and that's basically how we're pricing. We’re not pricing it to a yield or pricing it as a margin to our funding costs. And one of the things that we are looking at also doing as credit performance in that portfolio class is becoming substantially better is tightening a little bit on the margin targets as well. Matt Snowling – FBR Capital Markets: Good. I guess another quick question. It's my understanding that the direct lending portfolio being serviced by ACS, that contract expires in August. Is that correct? And if it is, will that portfolio just fold into the Department of Ed servicing contract that you have along with the other three services?

The contract with these – the two components to the contract, Matt, one is the new originations. And that's the piece that expires in August. So for new loans made, that volume – the expectation of that no new volume will go to the old party to that contract. We certainly expect, although the department has not announced plans yet, to – that the balance of outstanding loans will eventually transfer to the four other services as well. Matt Snowling – FBR Capital Markets: And you don’t have any borrowers in that contract or the balance of existing ones?

I think it's – we're expecting that – I think the outstanding balance is somewhere around $115 billion to $120 billion outstanding. I don't know the borrower account. Matt Snowling – FBR Capital Markets: Okay. Thanks a lot.

Your next question comes from the line of Eric Beardsley of Barclays Capital. Eric Beardsley – Barclays Capital: Hi, thanks. I'm just wondering if you could provide an update on your plans for the purchased paper wind down that you're pursuing to sell or just going to wind that down internally.

We've certainly looked at opportunities to sell that portfolio from time to time. Yes, the market conditions generally don’t – don't provide a whole lot of opportunity for that. But that balance is declining rather rapidly. It’s the carrying value of purchased paper at quarter end was down to $245 million versus $459 million a year ago. And the collection results to date have been exceeding – for the first quarter had been exceeding our expectations. So at this stage in the game, it looks like a wind down versus a sale. Eric Beardsley – Barclays Capital: Okay. Great. And secondly, I just have a question on operating expenses. You guided to $1 billion as a run rate for the end of 2011, I believe. And I guess just looking at your current OpEx of $318 on a quarter basis, and if you take out the $30 million and the write downs in I guess somewhere around $288. So just comparing those numbers, it looks like a 15% reduction OpEx to slightly below we’ve been expecting. I'm just wondering if you have any updates there or clarity on that number.

How did you get that $318 million to $288 million? Eric Beardsley – Barclays Capital: You start with the $30 million in write downs in terms of impairments after the–

Oh no, no. There’s $30 million – there's $30 million, what we'll call restructuring, which includes I think $3 million of impairment. The $30 million is essentially severance estimates and probably some real estate costs, and a variety of other things. But that $30 million goes – takes you from about $345 to $315, which is – I mean I think our run rate of – at least as I look at it month-to-month and line item to line item, is about $310. Eric Beardsley – Barclays Capital: Okay. That’s great. I just wanted some clarity there.

The $250 is 20%. Actually it’s more than that. Eric Beardsley – Barclays Capital: Okay. Terrific. I just wanted to – okay. I just wanted to make sure I understood that properly. I guess on the $1.5 billion in additional portfolio that you guys are picking up, going forward, do you have a preference whether you buy whole portfolio or whether you just service them?

We would look at both opportunities as equally interesting. And obviously, it all depends on terms and conditions, and funding capabilities. But we're eager to do both. Eric Beardsley – Barclays Capital: All right. Great. Thanks so much.

Your next question comes from the line of Ed Groshans of Height. Ed Groshans – Height: Good morning Al, Jack, and Steve. I wanted to say congrats, very nice quarter in a volatile environment.

Thank you. Ed Groshans – Height: I do want to – I guess just going back to David’s questions on the servicing. I guess, can you just discuss, once we get into the SAFRA programs starting this July, what your expectations are for servicing allocation. And then, will that change a year out or two years out after people shows how well they're doing on the servicing?

I think our – Jack commented a little bit about this and suggested that we would like – we would love for the Department of Education, in its allocation endeavors, to allocate on the basis of merit. And we hope they’ll do that. We expect though, that they're going to allocate proportions probably more related to the respective size of the entities that they're servicing. And I think our expectations are that there might be a maximum allocation in the range of about 40%.

That is the contract terms. That's correct. But they have not – to answer the question, the department has not spelled out exactly how they planned to allocate. They have measurements or categories that they will measure against one another. But they don’t say if you are in the top category, you get X percent better. Ed Groshans – Height: Okay. But roughly, if we target like 40% maybe two years out that would be a good place to look?

Forty percent is the maximum under the contract as it exists. Could the department waive that? Yes. But I think that will be the high end, obviously. Ed Groshans – Height: But if I understand you’re servicing platform relative to most of your peers, the – you should excel and be closer to 40% than not.

We certainly expect to get more than 25% share. I just think – what do you guys – I mean to be right at the top of the contract, I just think it's a high expectation. That's all. Ed Groshans – Height: Okay. All right. Fair enough, Jack. Thank you. Then the other thing and just following up on the bankruptcy and when the dischargeability comes in, can you just – right now, when you look at – when you get a bankruptcy notice on either – FFELP doesn't matter, so. But if you get bankruptcy in those and the private loans, whether it's on balance sheet or off balance sheet, can you just walk us through how you account for that? And then, would that change if dischargeability can enter fruition?

Yes, it would change. I mean today, the loans – the loan basically goes into a forbearance-type status as it awaits the outcome of the bankruptcy process. Once the bankruptcy is lifted, then the loan goes back into repayments. If the loan were discharged, obviously, the loan would – would be reduced or – proportionally or some – whatever the bankruptcy decision happens to be. Now remember, at a co-signed loan, if one party files for bankruptcy, the balance of the loan is not impacted nor the obligation of the other party. Ed Groshans – Height: Right. So those currently – if I just – if I understand this. If there's a loan on balance sheet, you just put in the forbearance when you get a bankruptcy notice, and then continue to work it out as opposed to charging off the balance.

You go into a stay while the bankruptcy process is – takes place. And then after the bankruptcy process is resolved, the loan goes back into repayment. Ed Groshans – Height: And is that for the pools?

Yes. Ed Groshans – Height: It's the same for the pools. Okay. Great. Thank you very much.

Yes. You're welcome.

Your next question comes from the line of Jordan Heimwoods [ph].

Hi, guys. Thanks for taking my call.

Sure, Jordan.

Two questions, the three portfolios that you bought for $1.5 billion, what was the premium or discount you made for that?

We're not prepared to talk about that at this point.

Can you say if there was a premium or discount?

No. No, there was not a premium.

There was not a premium. Okay. Okay, second question is the – the servicing contract, do you have any estimate range of what margins will be on that on either a pre-tax or EBITDA?

We're also not – probably not ready to talk about that margin yet. I think that's something to come in the next – in the next couple of quarters.

Well what's the servicing margin on your current business? How about that question?

Well today, on our current business, we obviously aren't in our servicing cost – I mean, it depends on what your revenue metric is, right? We earn it through net interest income. And so we're earning 90 basis points yield on our FFELP portfolio from which we have to pay servicing costs. And our servicing cost is clearly not 90 basis points or anything close to it. Under the Department of Ed contract, it's a little bit different. What we have said today and we'll repeat is that this contract is profitable. It's attractive on a margin basis. And we think we have the scale to – and efficiencies to improve on that over time. We are larger than the three other services combined and expect to benefit as a result of that scale process.

What's your current margin on third party servicing today? And I realize the FFELP business would be less profitable.

It varies with – the business there is very small to date. But the margins are significantly into the double digits.

Okay, so somewhere between 10 and 20?

Yes.

Okay. Thank you very much.

I'll tell you, aren't you? Thanks, Jordan.

Ladies and gentlemen, we ended the allotted time for questions. Are there any closing remarks?

No, Terry. That concludes our call. Thank you, everybody, for joining us this morning. And if you have any follow-up questions, please contact myself, Steve McGarry, or Jill Fishman [ph] in the IR department. Thank you.

This concludes today's conference. Once again, thank you for your participation. You may now disconnect.