Presentation to the Montana Board of Regents

1. Presentation to the Montana Board of Regents September 2008

2. Significant Events for Montana Students in FY 08 • Montana AY 08-09 students benefit from increased grant funds and lower interest rates on Stafford student loans • Lower Montana borrower benefits for post-October 1, 2007 loans • Consolidation loans for FFELP borrowers available only through Direct Loan program

3. Other Industry-wide Significant Events in FY 08 Lender and guarantor returns lowered for post-October 1, 2007 FFELP loans Auction bond markets “frozen” Liquidity crunch impacts student loan providers

4. Montana Higher Education Student Assistance Corporation (MHESAC) FY 08 Results and FY 09 Business Plans

5. MHESAC FY 08 FFELP Loan Volume • MHESAC and its Montana lending partners provided more than $211.8 million in capital for Montana FFELP student loans in FY 08 • Stafford - $122.8million – 16,711 borrowers • PLUS - $14.2 million – 1,955 borrowers • Consolidation – $75.8 million – 2,528 borrowers

6. MHESAC Portfolio Growth

7. Breakdown of MHESACPortfolio at June 30, 2008 All of these loans are guaranteed to at least 97% if a student defaults on their payments.

8. MHESAC FY 08 Borrower Benefits MHESAC delivered $4,371,387 in borrower benefits to 41,558 Montana borrowers in FY 08.

9. MHESAC Current Information • Auction bond market disruption increased MHESAC’s borrowing costs by more than $19.7 million in FY 08 • MHESAC’s borrowing costs have improved and financings now have positive cash flow • MHESAC financings have a $30 million reserve fund • MHESAC has more than $250 million available for making or purchasing AY 08-09, AY 09-10 and AY 07-08 Montana loans • FY 08-09 borrower benefits are currently a .25% interest rate reduction for ACH.

10. MHESAC Major FY 09 Focuses Provide and acquire AY 08-09 FFELP Stafford, PLUS and PLUS Grad Loans using the 2007 VRDO Acquire remaining AY 07-08 Montana FFELP loans made by Montana lenders Prepare to provide and acquire AY 09-10 Montana FFELP loans Restructure/refinance existing MHESAC auction financings

11. MHESAC Major Focuses - FY 09 (cont.) Provide Montana borrower benefits for AY 08-09 loans Provide borrower benefits to existing Montana borrowers Work with officials on MHESAC’s relationship to the state Acquire non-Montana loans currently owned by MSLF if the markets improve

12. MHESAC Expected Performance – FY09 Projected AY 08-09 Montana Loans Expected to be Originated by MHESAC and Montana Lending Partners - $80-100 million Projected Montana Loan Acquisitions in FY 08-09 - $99.7 million Projected FY 09 Net Cash from Operations - $4,638,422 Projected FY 09 Net Income - $270,657 Projected Montana Borrower Benefits FY 09 – $1.1 million

13. FY 08 Results and FY 09 Business Plans

14. SAF’s Business • SAF manages > $2.0 billion in assets • SAF services > $3.99 billion in FFELP student loans for more than 40 lenders • MLSF (a limited liability corporation of which SAF is the sole member) currently owns $222 million in non-Montana FFELP loans 14

15. Increase in SAF Serviced Portfolio The following graph shows the increase in serviced portfolio size over the last four fiscal years.

16. Breakdown of SAF Serviced Portfolio at June 30, 2008

17. SAF FY 08 Public Benefits Delivered

18. SAF Current Information • SAF is analyzing the possibility of servicing loans for lenders using the Secretary of Education Participation Program for AY 08-09 loans • MSLF incurred a major margin call. MSLF line borrowing costs likely to rise significantly. MLSF looking to swap loans for other lenders Montana FFELP loans.

19. Expected SAF Performance - FYE 09 Loan serviced portfolio expected to be$3.75 - $4.0 billion $2.93 million in FY 09 public benefit programs expected to be delivered $1.21 million in Access Grants $474k in other grants $1.24 million in outreach programs

20. SAF Public Benefit Programs - FY 09

21. Key SAF Business Focus - FYE 09 Provide on-going grant and outreach services to Montanan’s Manage MHESAC’s day-to-day affairs, financing, loan acquisition and loan origination business Service MHESAC, Montana lenders and existing national lenders FFELP student loan portfolios Obtain additional national FFELP servicing clients Work with Congress on re-defining federal student loans in the future Explore alternative business lines

22. What Does the Future Hold?

23. MHESAC FFELP Loans AY 09-10 • If market returns to normal, MHESAC will consider a financing • MHESAC expects to have between $50-60 million of funds available from its 07 VRDO financing for AY 09-10 loans. Additionally, MHESAC currently has more than $100 million in its recycling accounts that could be available for AY 09-10 loans. • If necessary, MHESAC could consider sale of AY 08-09 loans to the Secretary of Education in order to generate funds for Montana AY 09-10 loans

24. What’s Next – MHESAC? When will liquidity crunch improve to allow financing of Montana FFELP loans? When will liquidity crunch improve so as to allow restructuring of MHESAC balance sheet? How will future federal student loan programs be structured? How will Montana 2009 legislature impact student loans in general and MHESAC specifically?

25. What’s Next - SAF? When will liquidity crunch improve to allow financing of non-Montana loans owned by MSLF? Will MSLF line of credit be foreclosed? How will future federal student loan programs be structured? What FFELP loan servicing opportunities exist? Do alternative student related business activities exist? 25

26. Comments, Suggestions, Discussion and Questions