Forward-Looking Statements

Certain statements contained in this report that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by the words or phrases "believe", "expect", "anticipate", "intend", "estimate", "may increase", "may result in", and similar expressions or future or conditional verbs such as "will", "should", "would" and "could". These forward-looking statements involve risks and uncertainties, which could cause The Student Loan Corporation's (the Company) actual results to differ materially from those the Company expects, including, but not limited to:

· the effects of legislative and regulatory changes that affect the demand for and interest rates on student loans, especially the establishment of certain fixed rates of interest on Federal Family Education Loan (FFEL) Program loans, as well as the President's 2010 budget proposal which could eliminate the FFEL Program;

· the availability and amount of loan subsidies and any effect on the Company's interest rate spreads;

· the availability of alternative financing options to students and their parents, including competitive products offered by other lenders;

· the effects of changes in accounting standards, including without limitation the Financial Accounting Standards Board's (FASB) proposed changes to Statement of Financial Accounting Standards SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125, as amended (SFAS 140) and FASB Interpretation No. 46, Consolidation of Variable Interest Entities, revised December 2003 (FIN 46(R));

· fluctuations in interest rates and between various interest rate indices, particularly the manner in which short-term rates affect the Company's funding costs, consolidation rates, the rates at which interest accrues on its loan portfolio and the demand for student loans;

· the success of the Company's strategic repositioning efforts;

· the Company's ability to obtain funding on acceptable terms, including borrowings from Citibank, N.A.(CBNA), government funding programs, securitizations and whole loan sales;

· the Company's ability to acquire or originate loans in the amounts anticipated and with interest rates that generate sufficient yields and margins;

· the adequacy of the Company's capital expenditures and of funds allocated for future capital expenditures; and

· the cost of education;

· general economic conditions, including without limitation the performance of financial markets;

· changes in prepayment rates on student loans from anticipated rates and in the quality and profitability of those loans that move into repayment status, as well as actual experience with the repayment cycle of the loan portfolio;

· actual credit losses, loan collection strategies and their impact on delinquency rates, and the adequacy of loan loss reserves;

· the performance of the Company's loan portfolio servicers, insurers and risk-sharers;

· the Company's and other servicers' ability to continue to service the loan portfolio in accordance with their contractual obligations;

· loan origination costs;

· the volume of loan consolidations;

· the success of the Company's marketing efforts, especially its electronic marketing efforts.

The following discussion should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes and the Company's 2008 Annual Report on Form 10-K.

Management's Discussion and Analysis provides the Company's perspective on its operations and its current business environment, including the following:

Business Overview - a general description of the Company's business as well as the impacts of market conditions on the business and business trends.

Business Highlights - a review of key events affecting the Company's historical and future operating results.

Critical Accounting Estimates - an overview of accounting policies that require critical judgments and estimates.

Accounting Changes and Future Application of Accounting Standards - a summary of new accounting standards.

Financial Condition - a discussion and analysis of the Company's loan portfolio, disbursement and procurement activity and allowance for loan losses.

Results of Operations - a review of the Company's results of operations for the three months ended March 31, 2009 and 2008 and discussion of the key factors impacting those results.

Liquidity and Capital Resources - an analysis of the Company's sources and uses of cash and capital obligations.

Legislation and Regulations - a discussion of legislative activities that affect the student loan industry.

Business Overview

The Company is one of the nation's leading originators of student loans offering a full array of student loan products to students and their parents. The Company was incorporated in 1992 under the laws of the State of Delaware. CBNA owns 80% of the Company's outstanding common stock and is an indirect wholly owned subsidiary of Citigroup Inc. (Citigroup). The majority of the Company's loans are originated and guaranteed under the FFEL Program, authorized by the U.S. Department of Education (the Department) under the Higher Education Act of 1965, as amended (the Higher Education Act). The Company, which has a trust agreement to originate loans through CBNA, is an originator, manager and servicer of student loans, including loans made in accordance with federally sponsored guaranteed student loan programs as well as private education loans. The Company is committed to providing exceptional service to borrowers and schools, offering competitive and innovative products with solutions that allow students and their families to finance the education of their choice. The Company also differentiates itself from its competitors by offering life of loan servicing on most loans.

The earnings of the Company are primarily generated by the spread between the interest earned on its loan assets, (based on the 90-day Commercial Paper rate as published by the Department (CP), the prime rate, or the 91-day Treasury Bill rate) and the interest paid on its borrowings (based on London Interbank Offered Rate (LIBOR) or CP). Net interest income is the interest earned less the interest expense incurred during the period. Net interest income is impacted by, among other things: spread changes between CP, the prime rate or the 91-day Treasury Bill rate and LIBOR; legislative changes that impact FFEL Program subsidies; utilization rates of borrower benefits; and portfolio growth or contraction. The Company regularly monitors interest rates and may enter into interest rate derivative agreements on portions of its portfolio in an effort to manage its interest rate risk exposure.

The Company maintains programs to securitize certain portfolios of student loan assets. Under the Company's securitization programs, transactions qualifying as sales are off-balance sheet transactions, in which loans are removed from the Consolidated Financial Statements of the Company and sold to an independent trust, giving rise to a gain or loss on sale. The Company also enters into similar securitization transactions that do not qualify for sale treatment and accordingly, are accounted for as secured borrowings. These secured borrowings do not give rise to a gain or loss on sale.
Historically, loan securitizations and whole loan sales have contributed significantly to the Company's earnings. From year to year, the Company's earnings have been and continue to be impacted by the number, size and profitability of asset sales and securitizations. These factors vary from period to period based on market conditions and the Company's operational strategies. Due to disruptions in the asset-backed securitization markets, the Company has decreased both its number of off-balance sheet securitizations and the volume of loans securitized. In April 2008, the FASB proposed changes to Statement SFAS No. 140 that would make it more difficult for securitizations to qualify for off-balance sheet treatment. This could result in the consolidation of assets previously sold to unconsolidated securitization entities and eliminate future securitization gains. This proposed revision could be effective as early as January 2010.

The Company has historically funded its loan originations primarily through borrowings under the Omnibus Credit Agreement with CBNA and through loan securitizations. Under the Omnibus Credit Agreement, the cost of funding is negotiated on a borrowing-by-borrowing basis. Since December 2008, the Company has been utilizing funding available under the Department's Loan Participation Purchase Program (the Participation Program) established under the The Ensuring Continued Access to Student Loans Act of 2008 (ECASLA). In 2009, the Company anticipates selling eligible loans to the Department under the Loan Purchase Commitment Program (the Purchase Program) and to access additional funding through the Asset Backed Commercial Paper Conduit program (the ABCP Conduit) supported by the Department. See Business Highlights below and Liquidity and Capital Resources on page 33 for further details.

The Company's earnings are impacted by valuation changes on its subordinated residual interests (i.e., interest-only strips), servicing rights and, in certain cases, subordinated notes issued by the trusts (collectively, retained interests) from off-balance sheet securitizations. The fair value of the Company's retained interests fluctuate based on factors such as interest rate changes, prepayment and default rates and regulatory changes. Other factors that may impact earnings include loan servicing revenue and loan servicing costs, changes in applicable laws and regulations, alternative financing options available to students and their parents, and competition.

Business Highlights

During the first quarter of 2009, continued deterioration in the financial markets had negative consequences to the Company's operations. These external forces contributed to net interest margin compression driven by:

· continued divergence between the 90-day CP rate, which determines special allowance payments, and LIBOR, which is the basis of the Company's funding;

· refinancing of maturing debt at higher premiums over LIBOR; and

· the impact of regulatory changes, particularly the reductions of special allowance payments contained in the College Cost Reduction and Access Act (CCRA Act).

Net interest income of $58.1 million for the first quarter of 2009 was $23.4 million (29%) lower than the same quarter of 2008. This decrease was mainly the result of a decrease in net interest margin, offset in part by higher average loan balances. Net interest margin for the quarter was 0.84%, 52 basis points lower than the same quarter of 2008. The primary driver for this decrease in margin is the higher cost of funds resulting from the refinancing of maturing term debt with less favorable terms, resulting in higher credit premiums over LIBOR, which decreased the Company's net interest income by $43.5 million. In addition, there has been a significant divergence between the CP rate, which determines special allowance payments, and LIBOR, which is the basis of the Company's funding. This divergence between CP and LIBOR further decreased net interest income by $21.0 million.
During the twelve-month period ended March 31, 2009, the Company's managed student loan portfolio grew by $4.9 billion (13%) to $44.0 billion, reflecting the Company's continued strong origination performance and higher Stafford loan limits. The managed portfolio includes $27.3 billion of Company-owned loan assets and $16.7 billion of loans serviced on behalf of securitization trusts or other lenders. Originations for the quarter included FFEL Program Stafford and PLUS originations of $2.2 billion, a 16% increase from the same quarter of 2008. The Company also made new CitiAssist® loan commitments of $0.6 billion, which was 1% lower than the same quarter of 2008.

During the first quarter of 2009, the Company obtained approximately $1.1 billion of funding through the Participation Program. The Company was also able to secure additional funding of approximately $0.5 billion through the issuance of asset-backed securities during the first quarter of 2009.

On April 15, 2009, the Company's Board of Directors declared a second quarter dividend on the Company's common stock of $0.35 per share, down from the previous quarter's dividend of $1.43. This decrease is a result of the impact of external economic conditions on the Company's results of operations.

Critical Accounting Estimates

Certain accounting estimates made by management are considered to be important to the portrayal of the Company's consolidated financial condition. Since management is required to make difficult, complex or subjective judgments and estimates, actual results could differ from those estimates. The most significant of these critical estimates and judgments are those used to account for student loan securitizations, the value of related retained interests and allowance for loan losses, which are more fully described in the Company's 2008 Annual Report on Form 10-K. See the Notes to the Consolidated Financial Statements for more information on the Company's accounting estimates.

Financial Condition

Loans

At March 31, 2009, the Company's student loan assets were comprised of FFEL Program loans, private education loans, a portfolio of loans held for sale and related deferred costs.

See Note 4 to the Consolidated Financial Statements for a presentation of the loan portfolio by program type.
Balances related to the Company's owned and managed loan portfolios are summarized below:

                                               Ending Balances
           (Dollars in millions)   March 31, 2009       December 31, 2008
           Owned loans             $        27,366     $            25,643
           Managed loans                    44,043                  42,107

Year to Date Average Balances (Dollars in millions) March 31, 2009 December 31, 2008 Owned loans $27,023 $24,316 Managed loans 43,759 39,938

Loan Disbursements and Procurement Activity

The Company makes loans through retail, direct-to-consumer and wholesale channels. The retail channel represents loan activity directed by the Company's retail sales force and is initiated primarily through the Company's relationships with schools and universities. Retail volume consists primarily of FFEL Program Stafford and PLUS loans and CitiAssist loans. Loan consolidations and other secondary market volume represent loan activity initiated outside the retail channel, through activities such as direct marketing to consumers or purchases of loans originated by other lenders and includes all loan types.
Details of the Company's origination activity are presented in the table below:

                                                         Three Months Ended
                                                              March 31,
    (Dollars in millions)                              2009               2008
    Retail:
    FFEL Program Stafford and PLUS loan
    disbursements                                  $       2,192      $      1,894
    CitiAssist loans disbursed under commitments
    to purchase (1)                                          643               649
    Total Retail                                           2,835             2,543
    Loan consolidation and other secondary
    market volume                                             30               541
    Total Originations                             $       2,865      $      3,084

(1) This amount consists of the CitiAssist loans that were disbursed by CBNA. These loans have been or will be purchased by the Company after final disbursement.

In response to the dislocation in the capital markets and federal legislation, the Company significantly reduced, and in some cases discontinued, its less profitable retail, wholesale and consolidation loan origination activities. Despite these actions, the Company's FFEL Program originations have continued to increase, primarily a result of an increase in the annual and aggregate Stafford borrowing limits, the withdrawal of many lenders from the FFEL Program and overall growth in the marketplace. CitiAssist loan disbursements were flat relative to the same period in 2008, reflecting both the increase in Stafford borrowing limits and the Company's refined underwriting standards.

In order to comply with certain legal and regulatory requirements, private education loans are originated by CBNA through an intercompany agreement. After final disbursement, the Company purchases all private education loans from CBNA. At March 31, 2009 and December 31, 2008, the private education loans disbursed and still held by CBNA were $1.5 billion and $1.0 billion, respectively.

Generally, loans are not specifically purchased or originated for resale, and accordingly are recorded in the Company's portfolio. However, certain loans originated subsequent to December 5, 2008 have been originated directly into held for sale as the Company anticipates that these loans will be sold to the Department under the Purchase Program. Of the $2.2 billion of FFEL Program loans originated during the first quarter of 2009, the Company classified $1.2 billion as held for sale. Management continually assesses its future securitization and loan sale plans and may transfer loans or record loans directly into the held for sale portfolio to meet the Company's near term sale and securitization requirements.

Allowance for loan losses

The Company categorizes allowance for loan losses as FFEL Program, Insured CitiAssist, Uninsured CitiAssist Standard and Uninsured CitiAssist Custom. Uninsured CitiAssist Standard is primarily comprised of CitiAssist loans that have been approved based on standard underwriting criteria and were originated on or after January 1, 2008. Uninsured CitiAssist Custom is primarily comprised of loans made to non-traditional students or loans with less stringent underwriting standards.

The Company's allowance for loan losses at March 31, 2009 losses was significantly higher compared to the balance at March 31, 2008. This was primarily the result of increases in the allowance allocated to the Uninsured CitiAssist Custom portfolio during 2008. However, the provision for loan losses decreased by $4.2 million for the three months ended March 31, 2009 compared to the same period in 2008 as asset quality and loan charge-offs have stabilized since December 31, 2008. The Company's allowance for loan losses has increased by $1.1 million since December 31, 2008. The increase was due to an additional $3.1 million for credit deterioration, partially offset by charge-offs of $2.2 million for loans from a bankrupt proprietary school for which a separate reserve had been established in the prior year. The Company expects charge-offs will continue to increase as a result of the expected seasoning of the higher risk Uninsured CitiAssist Custom portfolio as loans transition into repayment as well as credit deterioration. The Company has discontinued almost all new Uninsured CitiAssist Custom originations. While the national unemployment rate for the civilian institutional population age 25 or over with a four-year degree or higher continues to run at approximately one-half the national overall average, the rate continues to trend upward.
An analysis of the allowance for loan losses and its components is presented in the table below:

                                                Three Months Ended March 31,
      (Dollars in thousands)                      2009                 2008
      Balance at beginning of period
      FFEL Program                           $       14,445       $       12,312
      Insured CitiAssist                              8,512                3,214
      Uninsured CitiAssist Standard                  11,891                    -
      Uninsured CitiAssist Custom                    75,481               26,589
                                             $      110,329       $       42,115
      Provision for loan losses
      FFEL Program                           $        3,371       $        4,205
      Insured CitiAssist                              3,858                3,484
      Uninsured CitiAssist Standard                   3,082                1,161
      Uninsured CitiAssist Custom                    10,831               16,462
                                             $       21,142       $       25,312
      Charge offs
      FFEL Program                           $       (2,973 )     $       (3,276 )
      Insured CitiAssist                             (2,420 )             (1,367 )
      Uninsured CitiAssist Standard                    (636 )                  -
      Uninsured CitiAssist Custom                   (16,896 )            (10,107 )
                                             $      (22,925 )     $      (14,750 )
      Recoveries
      FFEL Program                           $            -       $            -
      Insured CitiAssist                                  -                    -
      Uninsured CitiAssist Standard                       -                    -
      Uninsured CitiAssist Custom                     2,831                2,075
                                             $        2,831       $        2,075

      Balance at end of period
      FFEL Program                           $       14,843       $       13,241
      Insured CitiAssist                              9,950                5,331
      Uninsured CitiAssist Standard                  14,337                1,161
      Uninsured CitiAssist Custom Programs           72,247               35,019
                                             $      111,377       $       54,752

The Company's best estimate for the allowance for loan losses includes all losses at each reporting period that are both probable and estimable. However, no assurance can be provided that the allowance for loan losses will be adequate to cover all losses that may in fact be realized in the future, or that a higher level of provision for loan losses will not be required. The Company's total allowance for loan losses is available to absorb probable credit losses inherent to all of the Company's owned loans.
Private Education Loans

The Company's private education loan portfolio is not guaranteed by the federal government. Although private education loans do not carry a federal government guarantee, the Company purchased private insurance on 74% of the outstanding balances of these loans through United Guaranty Commercial Insurance Company of North Carolina and New Hampshire Insurance Company (UGCIC/NHIC), and on 2% of the outstanding balances of these loans through Arrowood Indemnity Company (Arrowood). UGCIC/NHIC are subsidiaries of American International Group (AIG). Arrowood is a wholly owned subsidiary of Arrowpoint Capital Corporation (Arrowpoint).

These insurance providers insure the Company against a portion of losses arising from borrower loan default, bankruptcy or death. Under the Arrowood program, private education loans submitted for default claim are generally subject to a risk-sharing deductible of 5% of the outstanding principal and accrued interest balances. Under the UGCIC/NHIC program, default claims are generally subject to risk-sharing deductibles between 10% and 20% of the outstanding principal and accrued interest balances.

Since 2003, UGCIC/NHIC has insured the Company for maximum portfolio losses ranging from 12.5% to 13.5%. The Company is exposed to 100% of losses that exceed these thresholds. While these losses are not currently forecast to exceed these thresholds, if deterioration in market conditions continues, losses could be higher than expected. For loans insured during 2005 and 2006, the insurance premium is calculated under an experience-rated plan, which may require additional premium payments of up to $58.2 million in order to maintain insurance coverage for these loans if the loss limits exceed the established parameters. No payments are currently expected to be made in 2009. The Company ceased insuring new CitiAssist Standard loans in January 2008.

At March 31, 2009, NHIC was rated A+/ Negative by Standard & Poor's and Aa3/Negative by Moody's. On March 2, 2009, NHIC's Standard & Poor's rating outlook was revised from Watch Negative to Negative. Moody's has not changed its rating for NHIC since May 22, 2008. UGCIC is not rated by Standard & Poor's. On February 24, 2009, Moody's withdrew its rating of both UGCIC and its parent citing business reasons which Moody's defines as reasons unrelated to bankruptcy, reorganization status or adequacy of information. Previously, UGCIC was rated a Baa2. These negative factors are somewhat mitigated by AIG's explicit support agreements with UGCIC. AIG has no legal obligations to the Company. Since September 2008, the US Treasury and the Federal Reserve have continued to provide extraordinary external support to AIG in light of its status as a systemically important financial institution. Both NHIC and UGCIC continue to make claim payments as agreed. Any failure of AIG, or sale of UGCIC/NHIC, could have an adverse impact on the Company's financial condition and results of operations as it relates to the Company's UGCIC/NHIC insured loan portfolio.

Information on private education loans, including delinquency and insurance coverage, is shown in the table below:

                                                     March 31, 2009                                                   December 31, 2008
                                               Uninsured         Uninsured                                       Uninsured         Uninsured
(Dollars in thousands)          Insured         Standard           Custom          Total          Insured         Standard           Custom          Total

Total private education
loans                         $ 4,542,484     $    484,534       $  899,553     $ 5,926,571     $ 4,541,439     $    409,686       $  910,420     $ 5,861,545

Private education loans in
repayment                       2,250,303          212,250          588,494       3,051,047       2,183,558          181,384          587,634       2,952,576

Private education loans in
forbearance                       311,153           35,804           57,444         404,401         213,479           26,402           40,265         280,146

Percent of private
education loans that are
delinquent 30 - 89 days               2.6 %            1.2 %            5.1 %           3.0 %           2.3 %            1.0 %            4.2 %           2.6 %

Percent of private
education loans that are
delinquent 90 days or more            2.2 %            0.5 %            1.9 %           2.0 %           1.6 %            0.1 %            1.2 %           1.4 %

Allowance for loan losses     $     9,950     $     14,337       $   72,247     $    96,534     $     8,512     $     11,891       $   75,481     $    95,884

Private education loans
covered by risk-sharing
agreements with schools                 -                -          465,644         465,644               -                -          474,481         474,481

Year to date average of
private education loans in
repayment                       2,219,856          198,379          587,671       3,005,906       1,639,070          103,025          494,416       2,236,511

Year to date average of
private education loans in
repayment and forbearance       2,482,019          227,490          637,393       3,346,902       1,840,280          116,403          528,241       2,484,924

Year to date net credit
losses as a percentage of
average loans in repayment            0.1 %            0.3 %            2.4 %           0.6 %           0.5 %            0.2 %            9.8 %           2.6 %

Year to date net credit
losses as a percentage of
. . .