10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2010
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to

Commission file number: 001-31825

THE FIRST MARBLEHEAD CORPORATION
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	04-3295311 (I.R.S. Employer Identification No.)
The Prudential Tower 800 Boylston Street, 34th Floor Boston, Massachusetts (Address of principal executive offices)	02199-8157 (Zip Code)

Registrant's telephone number, including area code: (800) 895-4283

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.01 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer o Accelerated filer ý Non-accelerated filer o
(Do not check if a
smaller reporting company) Smaller reporting company o

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý

          The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (without admitting that any person whose shares are not included in the calculation is an affiliate) was approximately $126,367,956 based on the last reported sale price of the common stock on the New York Stock Exchange on December 31, 2009. For the purposes of the immediately preceding sentence, the term "affiliate" refers to each director, executive officer and greater than 10% stockholder of the registrant as of December 31, 2009.

          Number of shares of the registrant's common stock outstanding as of September 1, 2010: 100,760,184.

DOCUMENTS INCORPORATED BY REFERENCE

          The registrant intends to file a proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended June 30, 2010. Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, information required by Items 10, 11, 12, 13 and 14 of Part III have been omitted from this report (except for information required with respect to our executive officers and code of ethics, which is set forth under "Executive Officers of the Registrant" and "Code of Ethics" in Part I of this annual report, respectively) and are incorporated by reference to the definitive proxy statement to be filed with the Securities and Exchange Commission.

THE FIRST MARBLEHEAD CORPORATION

ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended June 30, 2010

TABLE OF CONTENTS

PART I	1
ITEM 1. BUSINESS	1
ITEM 1A. RISK FACTORS	19
ITEM 1B. UNRESOLVED STAFF COMMENTS	44
ITEM 2. PROPERTIES	44
ITEM 3. LEGAL PROCEEDINGS	44
ITEM 4. (REMOVED AND RESERVED)	44
PART II	45
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	45
ITEM 6. SELECTED FINANCIAL DATA	48
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	49
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	81
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	83
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	131
ITEM 9A. CONTROLS AND PROCEDURES	131
ITEM 9B. OTHER INFORMATION	136
PART III	136
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	136
ITEM 11. EXECUTIVE COMPENSATION	136
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	136
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	137
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	137
PART IV	137
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	137

        FIRSTMARBLEHEAD and MONOGRAM are either registered trademarks or trademarks of The First Marblehead Corporation. All other trademarks, service marks or trade names appearing in this annual report are the property of their respective owners.

        In addition to historical information, this annual report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Section 27A of the Securities Act of 1933, as amended, or the Securities Act. For this purpose, any statements contained herein regarding our strategy, future operations and products, financial performance and liquidity, future funding transactions, projected costs, future market position, prospects, plans and outlook, other than statements of historical facts, are forward-looking statements. The words "anticipates," "believes," "estimates," "expects," "intends," "may," "observe," "plans," "projects," "will," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guaranty that we actually will achieve the plans, intentions or expectations expressed or implied in our forward-looking statements, which involve risks, assumptions and uncertainties. There are a number of important factors that could cause actual results, levels of activity, performance or timing of events to differ materially from those expressed or implied in the forward-looking statements we make. These important factors include our "critical accounting estimates" described in Item 7 of Part II of this annual report, and factors including, but not limited to, those set forth under the caption "Risk

Factors" in Item 1A of Part I of this annual report. Although we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and readers should not rely on those forward-looking statements as representing our views as of any date subsequent to September 2, 2010.

PART I

Item 1.    Business

We use the terms "First Marblehead," "we," "us" and "our" in this annual report to refer to the business of The First Marblehead Corporation and its subsidiaries on a consolidated basis. We use the term "FMD" in this annual report to refer to the business of The First Marblehead Corporation on a standalone basis.

        We offer outsourcing services to national and regional financial and educational institutions for designing and implementing private education loan programs. These school-certified loan programs are designed to be marketed through educational institutions or to prospective student borrowers and their families directly and to generate portfolios intended to be held by the originating lender or financed in the capital markets. We offer a fully integrated suite of services through our Monogram product, as well as certain services on a stand alone, fee-for-service basis. In addition, we provide administrative and other services to securitization trusts that we facilitated, asset servicing to the third-party owner of certain of those securitization trusts, which we refer to as the NCSLT Trusts, as well as portfolio management services.

        Our bank subsidiary, Union Federal Savings Bank, which we refer to as Union Federal, is a federally chartered thrift that offers residential and commercial mortgage loans, and retail savings, money market and time deposit products. As a result of our ownership of Union Federal, we are a savings and loan holding company subject to regulation, supervision and examination by the U.S. Office of Thrift Supervision, or OTS. As of September 2, 2010, we are actively considering our strategic alternatives for Union Federal, including a potential sale.

        Substantially all of our financial results have been derived from services relating to private education loans, which are considered to be in a single industry segment for financial reporting purposes. For information about our financial results, see "Selected Financial Data," included in Item 6 of this annual report, and "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in Item 7 of this annual report.

General Developments

        During the fiscal years ended June 30, 2009 and June 30, 2010, which we refer to as fiscal 2009 and fiscal 2010, respectively, we implemented changes to our business model in order to address dislocations in the capital markets and the private education lending industry. Since the beginning of fiscal 2009, we have made major changes in senior management, redesigned our service offerings, significantly reduced operating expenses and taken measures to reduce the risk on our balance sheet through the sale of private education loans and the trust certificate, or Trust Certificate, of NC Residuals Owners Trust, which held our residual interests in the NCSLT Trusts. We made substantial progress in improving our financial condition and competitive position during fiscal 2010, and the first loans based on our Monogram product offering were disbursed during the first quarter of the fiscal year ending June 30, 2011, which we refer to as fiscal 2011.

        The following events occurred during fiscal 2010 which were significant to our operations:

•

During the fourth quarter of fiscal 2010, we entered into loan program agreements with SunTrust Bank and Kinecta Federal Credit Union. Pursuant to the agreements, we will perform a range of services in support of school-certified private education loan programs to be funded by these lenders, including, as applicable, loan origination, portfolio management and other services. We have invested specified amounts of capital as a credit enhancement feature for these loan programs, and we expect to generate ongoing monthly revenue through the maturity of the program loans. This revenue model is consistent with our objective of improving our cash flows and reducing our dependence on the credit and capital markets.

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•

In April 2010, we restructured the education loan warehouse facility of UFSB Private Loan SPV, LLC, or UFSB-SPV, a subsidiary of Union Federal at that time. The facility previously served as a source of interim financing for private education loan programs that had been funded by Union Federal. The restructuring involved the substitution of FMD for Union Federal as master servicer under the indenture relating to the facility, the assumption by FMD of certain potential contingent liabilities of Union Federal under the facility, subject to a cap, and the indirect contribution by FMD of $6.5 million in cash and current private education loans with an outstanding principal and interest balance of approximately $6.9 million, and a fair value of $3.1 million, to the facility. In exchange, the third-party conduit lender released Union Federal and UFSB-SPV from certain potential contingent liabilities, permitted the transfer of the membership interests of UFSB-SPV from Union Federal to a non-bank subsidiary of FMD and made certain concessions with respect to the interest rate and fees applicable to the facility. We believe that the restructuring will be viewed favorably by potential purchasers as we consider our strategic alternatives with respect to Union Federal.

•

In March 2010, the OTS terminated a supervisory agreement with FMD and an order to cease and desist with Union Federal. We refer to the supervisory agreement with the OTS as the Supervisory Agreement, and the order to cease and desist as the Order. The Supervisory Agreement required FMD, among other things, to maintain a deposit at Union Federal in the amount of $30.0 million and maintain Union Federal's regulatory capital ratios at specified levels. The Order required Union Federal, among other things, to reduce by December 31, 2009 the concentration of private education loans to Tier 1 capital (as defined in the regulations) plus allowances for loan losses below 50%.

•

During the second quarter of fiscal 2010, Union Federal sold its entire portfolio of private education loans, other than loans held by UFSB-SPV. In October 2009, Union Federal sold approximately 88% of its portfolio of private education loans held for sale, which excluded loans held by UFSB-SPV, for gross proceeds of $121.6 million. As a result of the sale, Union Federal achieved the loan concentration reduction imposed by the OTS, and FMD was refunded a deposit in the amount of $30.0 million that FMD had been required to maintain at Union Federal. In November 2009, Union Federal sold the remainder of its portfolio of private education loans held for sale, excluding loans held by UFSB-SPV, to a newly formed statutory trust owned by a subsidiary of FMD.

•

In October 2009, we received tax refunds of $176.6 million related to operating losses for fiscal 2009 and the sale of the Trust Certificate in fiscal 2009. In addition to the tax refund generated, the sale of the Trust Certificate is expected to eliminate certain future tax liabilities, which would have had a material negative effect on our financial condition and liquidity. As a result of the sale, we are no longer entitled to receive residual cash flows from the NCSLT Trusts, although we continue to have rights to previously recorded additional structural advisory fees and ongoing asset servicing fees from the NCSLT Trusts, as well as previously recorded additional structural advisory fees and residuals from certain trusts other than the NCSLT Trusts.

•

During the first quarter of fiscal 2010, we favorably resolved certain securities litigation, including dismissals of a consolidated class action lawsuit and state and federal shareholder derivative lawsuits. No compensation in any form passed directly or indirectly from any defendant to any plaintiff or any of plaintiffs' attorneys in any of these actions. In November 2009, we recouped $1.0 million in legal expenses pursuant to our directors and officers liability insurance policy.

•

Although our Monogram product offering has been designed to generate recurring revenue with less dependence on the securitization market, our future financial results and growth may continue to be affected by our inability to structure securitizations or alternative financing

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transactions involving private education loans. Conditions in the debt capital markets, generally, and the asset-backed securities, or ABS, market, specifically, rapidly deteriorated during the second quarter of fiscal 2008, and we did not complete a securitization transaction during fiscal 2009 or fiscal 2010.

        Credit performance of consumer-related loans generally, as well as the private education loans held by us and the various securitization trusts we facilitated, were adversely affected during fiscal 2009 and fiscal 2010 by general economic conditions in the United States, including increased unemployment rates. Our private education loan portfolios and those held by the NCSLT Trusts have experienced higher levels of defaults and lower levels of repayments than we originally projected. As a result, we significantly adjusted our projected performance assumptions associated with the NCSLT Trusts and the portfolio of loans held by UFSB-SPV during fiscal 2009 and fiscal 2010, including significant increases in our assumed default rates, partially offset by lower prepayment rates. The interest rate and economic and credit environments may continue to have a material negative effect on the estimated fair value of our service receivables associated with the various securitization trusts that we facilitated.

Overview

        Our business is focused on private education loan programs primarily for undergraduate and graduate students in the United States. Private education loans are funded by private sector lenders and are not guaranteed by the U.S. government. They are intended to be used by borrowers who have first utilized other sources of education funding, including government loan programs, scholarships, grants and other aid. For the 2009-2010 academic year, we believe that there was a "funding gap" in post-secondary education in the United States of approximately $133 billion between the costs of attendance and these other sources of education funding, based on information from the National Center for Education Statistics and the College Board. We believe that enrollment in post-secondary education institutions will continue to increase over the next several years, as will costs of attendance. As a result, we also believe that private education loan products will continue to be necessary for students and their families after applying personal savings and other funding sources, and exhausting all available government loan programs, scholarships, grants and other aid.

        Our clients in the past have typically been lenders that desired to supplement their existing federal education loan or other consumer lending programs with a private education loan offering. In response to legislative changes that significantly reduced the profit margins of traditional non-governmental providers of federal loans, as well as legislation that eliminated the Federal Family Education Loan Program, or FFELP, as of July 2010, many lenders have re-evaluated their business strategies related to education lending. We believe that general economic conditions, capital markets disruptions and the declining credit performance of consumer-related loans, including private education loans, have contributed to an overall reluctance by many lenders to focus on their education lending business segments. As a result, we believe that there is significant unmet demand for private education loans and generally less competition in addressing that demand. As market conditions for other consumer finance segments improve, we expect more lenders to focus on education lending and consider private education loans as part of an array of consumer lending products offered to their customers. One of our primary challenges is to convince national and regional lenders that they can address the market opportunity in a manner that meets their desired risk control and return objectives. A related challenge is to finance successfully through the capital markets loans generated through our Monogram product offering.

        The lifecycle of a private education loan, which can be over 20 years long, consists of a series of processes, many of which are highly regulated, and involves many distinct parties. As a result, the activities associated with designing, implementing, financing and administering private education loan programs are complex, resource intensive and costly. We offer specialized knowledge, experience and capabilities to assist clients in participating in the private education loan market. Our service offerings

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are intended to serve a range of potential client needs throughout the life cycle of a private education loan. For example, we can assist clients in developing all aspects of a private education loan program with our Monogram product, or we can provide tailored loan origination, portfolio management and other services to meet specific needs. Our near term financial performance and future growth depend, in large part, on our ability to successfully market our Monogram product and transition to more fee-based revenues while growing our client base.

Prior Business Model

        Prior to fiscal 2009, we did not charge separate fees for many of our services, but generally entered into agreements with clients giving us the exclusive right to securitize the private education loans that they did not intend to hold. As a result, we historically recognized substantially all of our income from structuring securitization transactions. Through the securitization process, a series of special purpose statutory trusts obtained private education loans from the originating lenders or their assignees, which relinquished to the trusts their ownership interest in the loans. The debt instruments issued by the trusts to finance the purchase of these private education loans are obligations of the trusts, not obligations of ours or the originating lenders or their assignees. For our past securitization services, we are entitled to receive previously recorded additional structural advisory fees from the trusts over time. We are also entitled to receive administrative and other fees associated with these trusts, as well as asset servicing fees and residuals associated with certain trusts.

        Historically, asset-backed securitizations had been our sole source of permanent financing for clients' private education loan programs. Conditions of the debt capital markets generally, and the ABS market specifically, rapidly deteriorated during the second quarter of fiscal 2008, and the ability to finance private education loans through securitization continued to be constrained through fiscal 2009 and, to a lesser extent, fiscal 2010. Our business has been and continues to be materially adversely impacted by these market dynamics, as we did not complete a securitization transaction during fiscal 2009 or fiscal 2010. Further, we expect the structure and pricing terms in near-term financing transactions, if any, to be less favorable than in the past.

        Our lender clients previously had the opportunity to mitigate their credit risk through a loan repayment guaranty by The Education Resources Institute, Inc., which we refer to as TERI. TERI guaranteed the private education loans held by the NCSLT Trusts, and we historically received reimbursement from TERI for outsourced loan processing services we performed on TERI's behalf. In April 2008, TERI filed a voluntary petition for relief, which we refer to as the TERI Reorganization, under Chapter 11 of the United States Bankruptcy Code, or the Bankruptcy Code. The TERI Reorganization had a material negative effect on the NCSLT Trusts' ability to realize guaranty obligations of TERI, and our ability to realize fully the cost reimbursement obligations of TERI. In April 2010, the United States Bankruptcy Court for the District of Massachusetts, or the Bankruptcy Court, held a hearing to consider confirmation of the fourth amended and restated plan of reorganization, which we refer to as the Plan of Reorganization, jointly proposed by TERI and its official committee of unsecured creditors, or the Creditors Committee. In July 2010, the Bankruptcy Court denied a motion by TERI and the Creditors Committee to modify the Plan of Reorganization and vacated earlier findings that the Plan of Reorganization met the requirements for confirmation under the Bankruptcy Code. On August 26, 2010, TERI and the Creditors Committee filed a second joint motion to modify the Plan of Reorganization, approve revised disclosure materials and approve procedures by which creditors who previously voted on the Plan of Reorganization would have the opportunity to change their vote with respect to the modified Plan of Reorganization, which we refer to as the Modified Plan of Reorganization. On August 31, 2010, the Bankruptcy Court approved the disclosure materials and solicitation procedures, subject to entry of a formal order, and the solicitation of votes on the Modified Plan of Reorganization is expected to commence on or about September 13,

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2010. As of September 2, 2010, it is unclear whether or when the Modified Plan of Reorganization will become effective.

        As a result of capital market disruptions and the TERI Reorganization, many clients elected to terminate some or all of their agreements with us, which resulted in a significant reduction in our facilitated loan volumes during fiscal 2009 and fiscal 2010 compared to prior fiscal years. We earned $320.4 million in revenues from new securitizations during fiscal 2008, but we did not earn any revenue from new securitizations in fiscal 2009 or fiscal 2010. In addition to the absence of revenue from new securitizations, our financial results for fiscal 2009 and fiscal 2010 were negatively affected by significant write-downs of the estimated fair value of our service receivables and portfolio of private education loans held for sale.

New Business Model

        Since the beginning of fiscal 2009, we have significantly refined our service offerings and added fee-for-service offerings, such as portfolio management and asset servicing. During fiscal 2010, we completed the development of our Monogram product offering, which incorporates refinements to our origination process, including an enhanced application interface, an expanded credit decisioning model and additional reporting capabilities. As of September 2, 2010 we had begun originating private education loans under our Monogram loan program agreement with SunTrust Bank, and we expect to begin originating private education loans under our Monogram loan program agreement with Kinecta Federal Credit Union by September 30, 2010.

        Our Monogram product integrates all of our service offerings, including program design, marketing support, loan origination and portfolio management. We enable lenders to offer borrowers private education loans with competitive terms and clear pricing alternatives, but which are also structured to offer product options to qualified applicants based on their credit profile. Specifically, the client can customize the range of loan terms offered to their qualified applicants, such as repayment options, repayment terms and borrower pricing.

        The product can be structured to offer lenders a "make and hold" or "make and sell" loan program. In "make and hold" loan programs, lenders finance the loans on their balance sheet and generally intend to hold the loans through scheduled repayment, prepayment or default. In "make and sell" loan programs, lenders intend to hold the loans on their balance sheet for some limited period of time before disposing of the loans in a capital markets transaction. We believe that the loans generated through our Monogram product will generally have shorter repayment periods and an increased percentage of borrowers making payments while in school, in each case when compared to loan products we previously facilitated, as well as high cosigner participation rates.

        We designed our Monogram product to generate recurring revenue with less dependence on the securitization market and third-party credit enhancements. In connection with our Monogram product, we have invested, and may continue to invest, specified amounts of capital as a credit enhancement feature to various lenders' loan programs. The amount of any contribution offered to a particular lender would be determined by the anticipated size of the lender's program, the underwriting guidelines of the program and the particular terms of our business relationship with the lender. We believe this approach may provide lenders with increased confidence that we are committed to the quality of our new proprietary scoring models and risk mitigation and pricing strategies. In connection with the two initial Monogram-based loan programs, we have provided or will provide an initial deposit toward our credit enhancement commitment and agreed to provide supplementary deposits on a quarterly basis during the terms of our loan program agreements based on the credit mix and volume of disbursed program loans and adjustments to default projections for program loans. To the extent that loan volumes decrease as a result of repayments or default experience is less than our funded amounts, we would be eligible to receive a monthly release of funds beginning in July 2014, in the case of SunTrust

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Bank, and following expiration of the term of our loan program agreement, in the case of Kinecta Federal Credit Union.

        As part of our Monogram product, we will continue to monitor the performance of loan accounts after origination and tailor risk mitigation strategies according to the performance patterns of those accounts. We have built a flexible infrastructure to support our portfolio management strategy, which requires extensive operational and data integration among the loan servicer, multiple default prevention and recovery agencies and us. Finally, we provide extensive customer service to each client, including ongoing analysis and comprehensive reporting of loan performance data.

Description of Services

        We offer the following services as part of a fully integrated suite of services through our Monogram product, or as stand-alone tailored outsourcing services for our clients:

Program Design

        Lenders face an array of choices in attempting to satisfy their strategic and financial goals, as well as the needs of their borrowers. In designing private education loan programs, the factors that lenders generally consider include:

•

borrower creditworthiness criteria, including acceptable origination risk scores, credit bureau ratings and cosigner requirements, as well as factors such as employment and income history and any past derogatory credit events;

•

borrower eligibility criteria, including enrollment status;

•

loan limits, including minimum and maximum loan amounts on both an annual and aggregate basis;

•

interest rates, including the frequency and method of adjustment;

•

amount of fees charged to the borrower, including origination, guaranty and late fees;

•

repayment terms, including maximum repayment terms, minimum monthly payment amounts, rate reduction incentive programs and deferment and forbearance options;

•

appropriate loss reserve levels to ensure repayment of defaulted principal and interest payments;

•

loan servicing, default management and collection arrangements;

•

asset financing or loan disposition alternatives; and

•

legal compliance with numerous federal laws and regulations, including but not limited to the Higher Education Opportunity Act, the Truth-in-Lending Act, or TILA, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Federal Trade Commission, or FTC, Act, the FTC Telemarketing Sales Rule and numerous state laws that replicate and, in some cases, expand upon the requirements of federal laws.

        We help clients design their private education loan programs. Our design approach begins with a standard set of pricing options, legal agreements and third-party relationships that we can then customize for our clients in order to satisfy their particular needs. Although we assist lenders in selecting the underwriting criteria to be used in their loan programs, each lender has ultimate control over, and responsibility for, the selection of their underwriting criteria, and we are obligated to comply with the lender's criteria. While we are not currently separately compensated for our loan program design services, our ability to earn revenue is dependent on service fees we earn through loan origination and subsequent loan portfolio management services that we may provide pursuant to the program design.

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Marketing Support

        In creating their loan marketing programs, institutions face choices in the channels and media available to them to reach potential borrowers, including financial aid offices, online advertising, direct mail campaigns, e-mail campaigns, telemarketing and print, radio and television advertising. Historically, we provided marketing support services to our clients on a cost-reimbursement basis because we benefited from the higher volume of loans processed as a result of these marketing efforts. As part of our Monogram product and future outsourcing arrangements with clients, we expect that marketing support services will be provided for a fee based on loan volume disbursed, depending on the level of services provided to each client. With our focus on school-certified loan programs, we also believe that financial aid offices will be an important distribution channel. In July 2010, we announced that we had expanded our national sales team to provide sales and school relationship management in support of loan programs based on our Monogram product offering.

Loan Origination

        Prospective and current students and their families confront a complicated process in applying for financial aid. Because private education loans are often used to bridge the gap between the cost of attending an educational institution and available funds, including family resources and federal and state loans and grants, many borrowers must navigate multiple application processes. In order to respond to questions about these processes from borrowers, lenders and educational institutions must either invest in an appropriate infrastructure or outsource these services. We provide online resources and a staff of customer service personnel who understand the terms of our clients' private education loan programs and the financial aid process as a whole. In addition to a customer service function, we can provide personnel to respond to requests for loan materials and loan applications.

        We have developed proprietary processing platforms, applications and infrastructure, supplemented by customized vendor solutions, for use in providing loan processing services. As part of our Monogram product and future outsourcing arrangements with clients, we expect that loan origination services will be provided for a fee based on either loan volume disbursed or applications processed, depending on the particular terms of the client's contract.

        Our systems are designed to provide applicants with consumer protection disclosures required by law and regulation, as well as information helpful for making informed decisions about private education loans. For example, our online application has been designed to give qualified applicants some ability to configure loan terms, showing the financial effects of the choices using a real-time repayment calculator. In addition, we continue to support our www.SmartBorrowing.org website, which we established to provide an education-based environment for students and parents to gather information about financing college education. We designed this website based on the principle that students should first consider scholarships, grants and federal and state aid options before seeking private education loans.

        In performing our loan origination services, we are required to comply with applicable laws and regulations in loan documentation, disclosure and processing. The lenders with which we work generally assume responsibility for compliance with federal and state laws regarding the forms of loan documentation and disclosure. We are generally responsible for populating such forms in accordance with the program guidelines. We, in turn, work with lenders to prepare lender-specific credit agreement templates. We maintain and utilize these templates, reflecting applicable legal requirements and lender preferences. We are then responsible for maintaining processes and systems that properly execute the lender's origination requirements and administer the credit agreement templates and required disclosures. We may also deliver each lender's privacy policy and prepare and deliver truth-in-lending and various state law disclosures to borrowers.

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        Our proprietary origination risk score model, which is based on borrower and cosigner attributes, as well as distribution channel variables, assigns a specific level of credit risk to the application at the time of initial credit decisioning. Once an applicant submits an application for processing, our customized third-party credit decision software can be configured for each client's specific program parameters, and analyzes, often within minutes, the submitted application. Application data are automatically sent to credit bureaus, which generate and return a credit report. The credit decision software then evaluates the applicant data and the credit report data and assigns a score to the applicant based on our risk score model. The score results in a credit decision and also governs the loan terms offered by the client, aligning product options made available to qualified applicants with their credit risk. This automated underwriting process can deliver a loan application decision, and accompanying credit agreement when applicable, within the same online session. We also enable applicants to submit applications by facsimile or mail. Applications with either incomplete information or information mismatches can be sent automatically to a credit analyst for review. We then communicate the initial determination to the applicant(s), including through e-mail, informing him or her whether the application has passed the credit check, been rejected or is in review. The applicant receives instructions for completing the loan application and funding process and is provided a website navigation link to check his or her loan status. To avoid unauthorized disclosure, access requires use of security protocols established during the application process. Simultaneously, our customer service platforms, including our automated voice response unit, online status and customer service applications are updated.

        Once a loan application is submitted and passes the credit check, and the applicant has selected his or her loan options, we generate a credit agreement, a legal contract between the applicant, cosigner, if any, and lender which contains the terms and conditions of the loan, for the applicant based on lender-specific templates. For those lenders and applicants that prefer electronic document delivery, a credit agreement and certain regulatory disclosures are created in the same online session. The credit agreement can be viewed, downloaded and electronically signed or printed by the applicant and faxed or mailed back to us. For those applicants who prefer paper documentation, we print and mail a pre-filled credit agreement to the applicant for him or her to sign and return to us by mail.

        Once we have obtained all applicant data, including the signed credit agreement, evidence of enrollment or required certifications from the school or applicant, and any required employment verification, we approve the application and disburse the loan funds on behalf of the lender, with funds made available to us by the lenders. Depending on the loan program and type of disbursement, funds are either sent to the school or to certain central disbursing agents, such as ELM Resources, which then pass the funds along to the school.

        We monitor developments in state and federal requirements for loan processing and implement changes to our systems and processes based on our analysis and input we receive from clients and industry groups. For example, we designed and made available to lenders a customer identification program in connection with their past private education loan programs that we will continue to use going forward. This identification program was designed to meet USA PATRIOT Act requirements that lenders gather identifying data, verify applicant identity and maintain records of the process. We also completed similar process improvements in the area of secure access to pending loan information, in order to comply with federal privacy and state identity theft laws. In general, contractual liability for identification of process requirements rests with the lenders and liability for properly executing such requirements rests with us.

Portfolio Management

        Once loans are disbursed, holders of the loans may outsource the management of such loans to third-party service providers, such as us. In our role as portfolio manager, we monitor the performance of portfolio vendors, including both loan servicers and collection agencies.

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        We work with approximately 22 portfolio vendors, including six loan servicers, to manage loans on behalf of our clients. The Pennsylvania Higher Education Assistance Agency, or PHEAA, services a majority of the loans we facilitate. Generally, loan servicers establish and maintain contact with borrowers whose loans are current and collection agencies establish and maintain contact with borrowers whose loans are delinquent or defaulted. As of September 2, 2010, no single collection agency services more than 20% of the loan volume that we manage.

        The duties of the portfolio vendors that we manage include, for example, preparing repayment invoices, collecting payments from borrowers, maintaining records of borrower payments, responding to questions from borrowers relating to their loans and reporting information to the loan owner. In addition, portfolio vendors may perform skip-tracing services, make collections calls and conduct other collections activities, and report borrower delinquencies or defaults to credit bureaus. If borrower payments are deferred while the borrower is in school, the portfolio vendor typically provides monthly account information and educational materials to the student and any cosigner.

        We use a multi-faceted approach to portfolio management. To maximize the return on each portfolio, we collect updated credit bureau data on each borrower and each cosigner each quarter and use it in combination with monthly performance data and experiential data to re-evaluate the risk profile of the portfolio. We assign proprietary collectibility scores that drive our portfolio management strategies by dictating the level of resources we apply to each account, including when the account is outsourced to a collection agency and which agency is used in that process. For example, certain collections agencies may specialize in early-stage delinquencies while others may specialize in the collection of defaulted loans. This process requires a highly integrated infrastructure among the loan servicers, collection agencies and us, in addition to extensive data analysis on each account as it moves through its repayment lifecycle. We believe this approach will allow us to better identify and control losses over time.

        For portfolio management services, we charge a fee generally based on aggregate principal balances of loans under management.

Loan Securitization

        Although some lenders originate loans and then hold them for the life of the loan, other lenders originate and then seek to dispose of the loans, either through a sale of whole loans or by means of a securitization. Whole loans can be purchased by other financial institutions, which may add them to an existing portfolio, or by entities that serve to warehouse the loans for some period of time, pending eventual securitization.

        In the past, we served as an intermediary between our clients and the capital markets. We formed special purpose statutory trusts, which issued notes and used the resulting proceeds to purchase private education loans from the originating lenders. The loans were used as security for repayment of the notes. Our compensation for these services was in the form of structural advisory fees, as well as a residual interest in the securitization trusts.

        Over the last three years, the conditions of the debt capital markets generally, and the ABS market specifically, have resulted in a reduction in the new issuance volume of education loan ABS. According to industry sources, new issuances in the market totaled approximately $19.7 billion for the fiscal year ended June 30, 2010. Of that total, approximately $11.5 billion were backed by federally guaranteed education loans and $8.3 billion were backed by private education loans, none of which we facilitated. The new issuance volume of both federally guaranteed and private education loan ABS totaled approximately $19.1 billion in calendar 2009 and $28.1 billion in calendar 2008.

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        Securitizations historically provided several benefits to lenders and developed into a diverse, flexible funding mechanism for the financing of private education loan pools. Securitization enabled lender clients to sell potentially otherwise illiquid assets in both the public and private securities markets, and to limit credit and interest rate risk, and enabled the reallocation or transfer of risk through the use of derivative products such as interest rate swaps or caps, a senior-subordinated liability securities structure, financial guaranty insurance for the securities issued, loan guarantees from third-party debt guarantors, the tiering of maturities of securities issued and the issuance of several different types of bonds matching projected pool repayment characteristics. Although this flexibility added to the complexity of the funding process, it also enabled the originating lender to reduce the cost of financing and recycle capital, thereby improving the economics of the loan program and improving loan terms by passing incremental savings back to the borrower. The availability of many of these structural elements for originating lenders may decline or cease to exist in the future due to economic or regulatory factors.

        Securitizations require a high level of specialized knowledge and experience regarding both the capital markets generally, and the repayment characteristics and defaults on the part of borrowers specifically. The process of issuing ABS requires compliance with state and federal securities laws, as well as coordination among originating lenders, servicers, securities rating agencies, attorneys, securities dealers, loan guarantors, structural advisors, trust management providers and auditors.

        To date, we have structured and facilitated 38 securitizations consisting entirely of private education loans involving debt issuances in the aggregate original principal amount of $17.5 billion. We have securitized loan pools using various financing structures, including both public offerings registered with the Securities and Exchange Commission, or SEC, and private placements, and have utilized various ABS, including borrowings from commercial paper conduits, London Interbank Offered Rate, or LIBOR, floating rate notes, auction-rate debt and senior-subordinated and third-party credit enhanced debt.

        We believe that our capital markets experience gives us special insight into funding options available to our clients. In addition, the extensive database provided by our private education loan repayment statistics dating back to 1986 has helped us in the past to optimize the financing of the private education loan pools our clients generated. We have used this data to estimate the default, recovery and prepayment characteristics of the different types of loans that constitute a loan pool. We believe that our experience and historical data will assist us in future discussions with rating agencies, insurance providers, underwriters and securities investors relating to financing structures and terms.

        While the recent demand for securitizations backed by private education loans has been limited, we plan to participate in future securitizations or other capital markets transactions, subject to market acceptance. If we are able to facilitate such transactions in the near-term, we expect the structure and economics of the transactions to be substantially different than our past transactions, including lower revenues and additional cash requirements on our part.

Asset Servicing

        Effective March 31, 2009, we entered into an asset services agreement with the purchaser of the Trust Certificate, pursuant to which we provide certain services to support the purchaser's ownership of the residual interests in the NCSLT Trusts, including, among others, analysis and valuation optimization services and services relating to funding strategy. In this annual report, we refer to this agreement as the Asset Services Agreement. We are entitled to certain asset servicing fees for these contractual services, although receipt of the fees is contingent upon distributions available to the owners of the residual interests of such trusts.

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Trust Administration

        As administrator of the trusts we facilitated, we perform various administrative functions, including monitoring the performance of loan servicers and third-party collection agencies. In this capacity, we confirm compliance with servicing guidelines and review default prevention and collection activities. We receive administrative fees from the trusts, ranging from 0.05% to 0.20% per year of the principal loan balance in the trust, for daily management and for the services we provide in obtaining information from the loan servicer and reporting this and other information to the parties related to the securitization.

Competition

        Although a number of competitors and potential competitors exited the private education loan industry as a result of market developments since fiscal 2008, the industry remains competitive with a number of active participants. Based on the range of services we offer, we believe that our principal competitor is SLM Corporation, also known as Sallie Mae. Our business could be adversely affected if Sallie Mae's program to market private education loans continues to grow, or if Sallie Mae or Nelnet, Inc., which currently provides fee-based origination and servicing activities for non-federally guaranteed loans, seeks to market more aggressively to third parties the full range of services or products that we offer.

        Other private education loan originators include JPMorgan Chase Bank, N.A., Wells Fargo & Company, Discover Financial Services and Student Loan Corporation, an 80% owned subsidiary of Citibank, N.A.

        To the extent that loan originators develop an internal capability to provide any of the services that we currently offer, demand for our services would decline. For example, a loan originator that has, or decides to develop, a portfolio management or capital markets function may not engage us for our services. Historically, lenders in the education loan market have focused their lending activities on federal loans because of the relative size of the federal loan market and because the federal government guarantees repayment of those loans. As a result of the College Cost Reduction and Access Act of 2007, which significantly reduced the profit margins of traditional non-governmental providers of federal loans, and elimination of the FFELP as of July 2010, lenders may place additional emphasis on the private education loan market or develop an internal capability to conduct the services we provide, which could result in a decline in demand for our service offerings. We believe the most significant competitive factors in terms of developing private education loan products are technical and legal competence, including in connection with the process of originating private education loans, cost, data relating to the performance of private education loans, risk analytics capabilities, capital markets experience, reliability, quality and speed of service. We differentiate ourselves from other service providers by the range of services we can provide our clients.

        Several of our current and potential competitors have longer operating histories and significantly greater financial, marketing, technical or other competitive resources, as well as greater name recognition than we do. As a result, our competitors or potential competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or may be able to devote greater resources to the promotion and sale of their services. In addition, competitors may be able to adopt more aggressive pricing policies in order to attract potential clients. We cannot assure you that we will be able to compete successfully with new or existing competitors. To remain competitive, we need to continue to invest in information technology, sales and marketing, as well as legal, compliance and product development resources.

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Proprietary Systems and Processes

        In addition to our database that tracks historical private education loan performance, we maintain advanced proprietary information processing systems. We use these information systems to analyze loan applications efficiently, expedite loan processing and enhance our other services.

        Key benefits of our information processing systems include:

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the ability to analyze and assess loan applications based on a variety of underwriting and product factors, including flexibility to adapt to different product parameters required in customized client implementations;

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a transaction/application processing system that includes automated updating of an applicant's loan status that a borrower can access online or by telephone;

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automated preparation and secure electronic delivery of loan documents, including credit agreements and certain legal disclosures;

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online certification tools enabling financial aid offices to speed loan disbursement by quickly confirming student applicants' enrollment status and financial need;

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reporting tools enabling clients to track and sort information about student applicants and borrowers, including application status and disbursement dates;

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custom built data transmission techniques designed to ensure that data are compiled, integrated and properly migrated both across our enterprise and to external third parties such as servicers, collection and placement agencies and other third-party vendors; and

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interfaces with internal accounting systems intended to ensure proper booking and tracking of loan information for our clients, as well as support for our capital markets group in its financing activities.

        We use a number of leading commercial products to secure, protect, manage and back-up data.

Intellectual Property

        We own the following federally registered trademarks: FIRSTMARBLEHEAD, ASTRIVE, MONTICELLO STUDENT LOANS, prepGATE, GATE, GATE Guaranteed Access to Education, and National Collegiate Trust. The federal registrations for these registered trademarks expire at various times between 2015 and 2019, but the registrations may be renewed for additional 10-year terms provided that we continue to use the trademarks. We have filed with the U.S. Patent and Trademark Office federal trademark applications with respect to existing or planned uses of the marks LAUREL COLLEGIATE LOANS and MONOGRAM. We filed a patent application in June 2007 relating to a method and system for administering linked loans between two parties.

Education Loan Market Seasonality

        Origination of education loans is generally subject to seasonal trends, with the volume of loan applications increasing with the approach of tuition payment dates. Historically, we have processed the greatest application volume during the summer months, as students seek to borrow money in order to pay tuition costs for the fall semester or the entire school year. We have also tended to process an increased volume of loan applications during November, December and January, as students and their families seek to borrow money to pay tuition costs for the spring semester. Historically, this seasonality of loan originations has impacted the timing and size of securitization transactions, the amount of processing fees that we earned in a particular quarter and the level of expenses incurred to market and process the higher origination activity.

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Union Federal Savings Bank

        In November 2006, we acquired Union Federal, a community savings bank located in North Providence, Rhode Island. Union Federal is a federally chartered thrift that offers residential and commercial mortgage loans, and retail savings, money market and time deposit products. Union Federal has also funded a portion of our loan product offerings in the past, although it is not doing so as of September 2, 2010. Union Federal held approximately $8.2 million of mortgage loans as of June 30, 2010. We derived approximately $3.9 million of net interest income during fiscal 2010 from Union Federal, primarily from the private education loan portfolio held by it during the first and second quarters of fiscal 2010. As a result of disruptions in the ABS market and the TERI Reorganization, we were unable to facilitate the securitization of private education loans originated by Union Federal since September 2007 through the date of our final disposition of such loans as described below.

        In October 2009, following receipt of approval from the OTS, Union Federal completed a sale of all private education loans that it directly held and that were less than 31 days delinquent. These loans had an aggregate outstanding principal and accrued interest balance of approximately $233.8 million and represented approximately 88% of the private education loans directly held by Union Federal. The sale resulted in gross proceeds of $121.6 million to Union Federal. Following the sale, the purchaser bears the risk of future performance of the loans, including risk of future default, except as otherwise set forth in the loan purchase and sale agreement. This sale did not include loans held by UFSB-SPV, a subsidiary of Union Federal at the time of sale. In November 2009, following receipt of approval from the OTS, Union Federal sold the remainder of its portfolio of private education loans held for sale, excluding loans held by UFSB-SPV, to a newly formed statutory trust owned by a subsidiary of FMD. We retained an independent third party to assess the fair value of the portfolio, which served as the basis for the sale price for the transaction. Union Federal received proceeds of $3.9 million from the sale. In April 2010, FMD transferred loans with a fair value of $3.1 million from this new subsidiary to UFSB-SPV, and FMD indirectly contributed cash of $6.5 million to UFSB-SPV in conjunction with the restructuring of the debt of UFSB-SPV under its education loan warehouse facility. As part of that transaction, we transferred ownership of UFSB-SPV from Union Federal to a non-bank subsidiary of FMD. See Note 10, "Liabilities and Unused Lines of Credit—Education Loan Warehouse Facility," in the notes to our consolidated financial statements included in Item 8 of this annual report for additional details.

        In July 2009, FMD entered into the Supervisory Agreement with the OTS, and Union Federal consented to the Order. The OTS terminated the Supervisory Agreement and the Order, each in its entirety, in March 2010. In connection with the termination of the Supervisory Agreement, our Board of Directors adopted resolutions requiring FMD to support the implementation by Union Federal of its business plan, so long as Union Federal is owned or controlled by FMD, and to notify the OTS in advance of any distributions to our stockholders in excess of $1.0 million per fiscal quarter and any incurrence or guarantee of debt in excess of $5.0 million. Following termination of the Supervisory Agreement and the Order, FMD remains subject to extensive regulation, supervision and examination by the OTS as a savings and loan holding company, and Union Federal remains subject to extensive regulation, supervision and examination by the OTS and the Federal Deposit Insurance Corporation, or FDIC. See Note 21, "Union Federal Regulatory Matters—Supervisory Agreement and Order to Cease and Desist," in the notes to our consolidated financial statements included in Item 8 of this annual report, and "Risk Factors—Risks Relating to Regulatory Matters," included in Item 1A of this annual report for additional details.

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Government Regulation

        We provide services in connection with the creation, management and disposition of private education loans, a form of consumer loan asset. This business is highly regulated at both the state and federal level, through statutes and regulations that focus upon:

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licensure and examination of industry participants;

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regulation and disclosure of consumer loan terms;

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regulation of loan origination processing; and

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licensure and general regulation of loan collection and servicing.

Failure to conform to any of these statutes or regulations may result in civil and/or criminal fines, and may affect the enforceability of the underlying consumer loan assets.

        Many states have statutes and regulations that require the licensure of small loan lenders, loan brokers, credit services organizations and loan arrangers. Some of these statutes are drafted or interpreted to cover a broad scope of activities. As of September 2, 2010, our subsidiary First Marblehead Education Resources, Inc., or FMER, has been approved for licenses in Massachusetts, New Jersey, Pennsylvania and Texas. Although we believe that our prior consultations with regulatory counsel and, in some cases state regulators, have identified all material licensing, registration and other regulatory requirements that could be applicable to us based on current laws and the manner in which we currently conduct business, we may be subject to additional state licensing, registration and other regulatory requirements in the future. In particular, certain state licenses or registrations may be required if we divest Union Federal, if we change our operations, if regulators reconsider their prior guidance or if federal or state laws or regulations are changed. Even if we are not physically present in a state, its regulators may take the position that registration or licensing is required because we provide services to borrowers located in the state by mail, telephone, the Internet or other remote means.

        Absent a change in federal law, either by judicial interpretation or legislation, including as discussed below, to the extent that our services are conducted through Union Federal, we believe it is less likely that state regulatory requirements affecting loan brokers, small lenders, credit services organizations or loan arrangers will be asserted. However, we are examining strategic alternatives for Union Federal, including a potential sale, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010, which we refer to as the Dodd-Frank Act, weakens federal pre-emption of state regulations currently enjoyed by federal savings associations and their operating subsidiaries, such as Union Federal and its operating subsidiary, FM Loan Origination Services, LLC, or FMLOS. Specifically, the Dodd-Frank Act eliminates for operating subsidiaries of federal banks the pre-emption of state licensing requirements and consumer protection laws.

        The Dodd-Frank Act also restructures the regulation of depository institutions. Under the Dodd-Frank Act, the OTS, which is currently the primary federal regulator for FMD and Union Federal, will cease to exist on July 21, 2011 unless the Secretary of the Treasury opts to delay such date for up to an additional six months. The Office of the Comptroller of the Currency, or OCC, which is currently the primary federal regulator for national banks, will become the primary federal regulator for federal thrifts, including Union Federal. The Board of Governors of the Federal Reserve System, or Federal Reserve, will supervise and regulate all savings and loan holding companies that were formerly regulated by the OTS, including FMD. Although the OCC and Federal Reserve are directed to implement existing OTS regulations, orders, resolutions, determinations and agreements for thrifts and their holding companies under the Home Owners' Loan Act, or HOLA, the transition of supervisory functions from the OTS to the OCC (with respect to Union Federal) and the Federal Reserve (with respect to FMD) could alter the supervisory approach for Union Federal and FMD. This could in turn affect the operations of FMD and Union Federal. The Dodd-Frank Act also will impose consolidated capital requirements on savings and loan holding companies, but they are not effective for five years.

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        The Dodd-Frank Act establishes the Bureau of Consumer Financial Protection, or BCFP, as an independent agency within the Federal Reserve to regulate consumer financial products, including education loans, and services offered primarily for personal, family or household purposes, with rule-making and enforcement authority over unfair, deceptive or abusive practices. These laws may directly impact our business operations, whether or not Union Federal is sold. The potential reach of the BCFP's broad new rulemaking powers and enforcement authority on the operations of financial institutions offering consumer financial products or services, including FMD, is currently unknown. In addition, the Dodd-Frank Act establishes a private education loan ombudsman within the BCFP, which would, among other things, receive, review and attempt to resolve informally complaints from private education loan borrowers. Finally, the Dodd-Frank Act requires the BCFP and the Secretary of Education, in consultation with FTC commissioners and the Attorney General, to submit a report, within two years of enactment of the Dodd-Frank Act, on a variety of information relating to the private education lending market, including private education loan lenders.

        The Dodd-Frank Act also includes several provisions that could affect our future portfolio funding transactions, if any, including "skin in the game" risk retention requirements applicable to any entity that organizes and initiates an ABS transaction, new disclosure and reporting requirements for each tranche of ABS, including new loan-level data requirements, and new disclosure requirements relating to the representations, warranties and enforcement mechanisms available to ABS investors.

        The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and the federal agencies are given significant discretion in drafting the implementing rules and regulations. Consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for many months or years.

        We will continue to review state registration and licensing requirements, and we intend to pursue registration or licensing in applicable jurisdictions where we are not currently registered or licensed if we elect to operate through an entity that does not enjoy federal pre-emption. We cannot assure you that we will be successful in obtaining additional state licenses or registrations in a timely manner, or at all. If we determine that additional state registrations or licenses are necessary, we may be required to delay or restructure our activities in a manner that will not subject us to such licensing or registration requirements.

        Compliance with state licensing requirements could involve additional costs or delays, which could have a material adverse effect on our business. Our failure to comply with these laws could lead to, among other things:

•

curtailment of our ability to continue to conduct business in the relevant jurisdiction, pending a return to compliance or processing of registration or a license application;

•

administrative enforcement actions;

•

class action lawsuits; and

•

criminal as well as civil liability.

Any of the foregoing could have a material adverse effect on our business.

        The consumer assets with which we deal are subject to the full panoply of state and federal regulation, and a defect in such assets could affect our business. Similarly, the growing complexity of regulation of loan origination and collection may affect the cost and efficiency of our operations. We have sought to minimize the risk created by consumer loan regulation in a number of ways. The securitizations that we facilitated have involved sales by financial institutions regulated by the FDIC and other parties which represented and warranted that the assets in question were originated in compliance with all applicable law and were valid, binding and enforceable in accordance with their terms. Similarly, the securitization trusts have benefited from an assignment of representations and

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warranties made by the lender and by the applicable loan servicer regarding compliance with law in the origination and servicing of loan assets. TERI may nonetheless have recourse to us to the extent that a regulatory failure in loan origination of a TERI-guaranteed loan by us breached the standards of care under the master servicing agreement formerly in effect between TERI and us.

        In August 2009, the Federal Reserve Board issued regulations to implement provisions of the Higher Education Opportunity Act, which was signed into law in August 2008. The regulations revised the number, timing, and content of disclosures required for private education loans by TILA and the Federal Reserve Board's implementing regulation for TILA, Regulation Z. Under the regulations, private education loan creditors are now required to provide disclosures about loan terms and features on or with the loan application and are also required to disclose information about federal education loan programs that may offer less costly alternatives to private education loans. Additional disclosures must be provided when the loan is approved and after loan acceptance but prior to loan disbursement. Compliance with the new regulations became mandatory in February 2010. In addition, in December 2009, the Federal Reserve Board and the FTC announced final rules to implement the risk-based pricing provisions of the Fair and Accurate Credit Transactions Act of 2003. The final rules will generally require that lenders provide disclosures to certain consumers if credit is offered to them on less favorable terms than those offered by the lender to other consumers. Compliance with the disclosure requirements is mandatory as of January 1, 2011.

        In delivering services, our operations must conform to consumer loan regulation that applies to lenders. This regulation includes, but is not limited to, compliance with TILA, the Higher Education Opportunity Act, the Fair Credit Reporting Act, the USA PATRIOT Act, the Equal Credit Opportunity Act, the Gramm Leach Bliley Act, the FTC Act, the Fair Debt Collection Practices Act and numerous state laws that replicate and expand upon the requirements of federal law. In addition, there is increasing regulation of the type of electronic loan application processing that we conduct, as well as regulation of access to and use of consumer information databases. A growing number of states are imposing disparate and costly requirements on our operations, including protections against identity theft, privacy protection and data security protection. The Fair and Accurate Credit Transactions Act of 2003 imposed significant federal law requirements on loan application processors, including requirements with respect to resolving address inconsistencies, responding to "red flags" of potential identity theft and processing identity theft notices, notices of adverse credit decisions based on credit scoring and other requirements that required both changes to automated loan processing and the creation of manual exception systems. These requirements strained, and future legislation or regulation may also strain, our systems. Failure to comply with these requirements will interfere with our ability to develop and market our new business model for processing services.

Employees

        We had 219 full-time employees at June 30, 2010, compared to 223 full-time employees as of June 30, 2009.

        We are not subject to any collective bargaining agreements, and we believe our relationships with our employees are good.

Our Corporate Information

        We were formed as a limited partnership in 1991 and were incorporated in Delaware in August 1994. Our principal executive offices are located at The Prudential Tower, 800 Boylston Street, 34^th Floor, Boston, Massachusetts 02199. The telephone number of our principal executive offices is (800) 895-4283.

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Available Information

        Our Internet address is www.firstmarblehead.com. The contents of our website are not part of this annual report on Form 10-K, and our Internet address is included in this document as an inactive textual reference only. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports available free of charge on our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC. Alternatively, reports filed with or furnished to the SEC are available from the SEC on its website, www.sec.gov, by request from the Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, or by phone at (800) SEC-0330.

Executive Officers of the Registrant

        The following table sets forth information regarding our executive officers as of September 2, 2010, including their ages as of such date.

Name	Age		Position
Daniel Meyers		47	Chief Executive Officer, President and Chairman of the Board of Directors
Kenneth Klipper		51	Managing Director, Chief Financial Officer, Treasurer and Chief Accounting Officer
William P. Baumer		49	Managing Director and Chief Risk Officer
Seth Gelber		31	Managing Director and Chief Administrative Officer
Michael Plunkett		53	Managing Director, Loan Operations and Information Technology
Gary F. Santo, Jr.		43	Managing Director and Head of Capital Markets
Gregory M. Woods		36	Managing Director, General Counsel and Secretary

        Set forth below is certain information regarding the business experience of each of the above-named persons.

Daniel Meyers has served as our Chief Executive Officer and President and as a Director since September 2008, and as Chairman of the Board of Directors since May 2010. Mr. Meyers also served as our Chief Executive Officer and Chairman of the Board of Directors from our incorporation in 1994 to September 2005 and as our President from November 2004 to September 2005. From 1980 to 1991, Mr. Meyers was involved in arbitrage and derivatives trading at EF Hutton, Prudential Bache Securities, LF Rothschild Unterberg Towbin and Commodities Corporation, each of which were financial services firms. He began working on ABS financings in 1986. He currently serves as the Chair of the Board of the Curry School of Education Foundation at the University of Virginia and as the Chairman of the Board of Caritas Physician Network, a unit of Caritas Christi Health Care, a New England-based healthcare system. He is also currently a member of the International Institute for Strategic Studies and serves on the Board of the Forum for the Future of Higher Education. Mr. Meyers received an A.B. from Brandeis University and completed the Owner President Management Program at the Harvard Graduate School of Business Administration.

Kenneth Klipper has served as our Chief Financial Officer and a Managing Director since September 2008 and as our Treasurer and Chief Accounting Officer since November 2006. Mr. Klipper served as our Senior Vice President, Finance from March 2005 to September 2008. From January 2003 to April 2003, Mr. Klipper served as the Chief Financial Officer of Brown Co., an online brokerage firm owned by JPMorgan at the time, and as the Chief Executive Officer from April 2003 to March 2005. From May 2002 to January 2003, Mr. Klipper served as the Chief Financial Officer and Chief Operating Officer of Park Street Capital, a private equity firm. From January 2000 to April 2002, Mr. Klipper served as the Chief Financial Officer of Tucker Anthony Sutro, Inc., a publicly traded securities brokerage firm. Prior to joining Tucker Anthony, Mr. Klipper served for five years as both the Chief Financial Officer and Controller for the securities brokerage unit of Fidelity Investments, and

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he held positions with KPMG LLP, a registered public accounting firm, for 11 years. Mr. Klipper received a B.S. from the University of Richmond and is a Certified Public Accountant.

William P. Baumer has served as our Chief Risk Officer since September 2007, as a Managing Director since September 2008 and as the Chief Executive Officer of Union Federal since July 2010. Mr. Baumer served as Senior Vice President, Compliance from July 2004 to September 2007. From 2003 to June 2004, Mr. Baumer served as the Compliance Manager for the nationwide mortgage operations at Bank of America, N.A. From 2000 to 2003, Mr. Baumer was the Compliance Director-Core Banking for Fleet Boston Financial Corporation, a bank which was acquired by Bank of America, and was responsible for regulatory compliance programs in Fleet's consumer, commercial and administrative staff units. He joined Fleet in 1984 and held various leadership positions in the Compliance, Audit, Credit and Retail Banking business units. Mr. Baumer received a B.S. from Franklin Pierce College and has earned Certified Regulatory Compliance Manager, Certified Internal Auditor and Certified Anti-Money Laundering Specialist certifications.

Seth Gelber has served as our Chief Administrative Officer since March 2010 and a Managing Director since September 2008. He served as Senior Vice President, Corporate Development from August 2008 to September 2008. From October 2006 to August 2008, Mr. Gelber served as President of Sextant Holdings, LLC, a private investment firm, the sole member of which is Mr. Meyers. From 2001 to 2006, Mr. Gelber held various positions at First Marblehead in the Capital Markets and Product Strategy groups. From 1997 to 2001, Mr. Gelber served as a Legislative Assistant to Congressman Jack Quinn (NY), primarily focused on education, telecommunication and banking legislation. Mr. Gelber received a B.A. from The George Washington University.

Michael Plunkett has served as our Managing Director, Loan Operations and Information Technology since September 2008. From May 2003 to September 2008, Mr. Plunkett held various positions in our Operations, Information Technology and Program Management groups, serving most recently as a Senior Vice President. Prior to joining First Marblehead, Mr. Plunkett served over 24 years in the U.S. Navy and retired with the rank of Captain in July 2003. While in the Navy, Mr. Plunkett served in a variety of ashore and afloat positions, including serving as the primary assistant to the Deputy Chief of Naval Operations, Fleet Readiness and Logistics. Mr. Plunkett received a B.S. from Saint John Fisher College, an M.S. from the Naval Postgraduate School and an M.A. from the Naval War College.

Gary F. Santo, Jr. has served as our Head of Capital Markets since July 2010 and as a Managing Director since September 2008. From September 2008 to July 2010, Mr. Santo served as Co-Head of Capital Markets. From July 2007 to September 2008, Mr. Santo served as a Managing Director in the Structured Finance Group at Fitch, Inc., a global ratings agency. While at Fitch, Mr. Santo managed the Consumer ABS Group, which was responsible for the credit rating analysis of privately and publicly placed asset-backed securities, including those backed by student loans, credit card receivables and tobacco settlements. From January 1996 to June 2007, Mr. Santo held various positions at First Marblehead in the Capital Markets and Investors Relations groups. Mr. Santo served as a Financial Aid Officer at Mount Ida College from January 1993 to January 1996, and at Boston University from September 1991 to January 1993. Mr. Santo received a B.A. from Boston University.

Gregory M. Woods has served as a Managing Director since September 2008, as our General Counsel since August 2008 and as our Secretary since November 2006. From April 2006 to August 2008, Mr. Woods served as Senior Vice President, Corporate Law. From June 2004 to April 2006, Mr. Woods was a Junior Partner at Wilmer Cutler Pickering Hale and Dorr LLP, a law firm, and from October 1999 to May 2004, Mr. Woods was an associate at WilmerHale. While at WilmerHale, Mr. Woods practiced general corporate and securities law, with an emphasis on public equity offerings, SEC compliance and corporate governance matters. Mr. Woods received an A.B. from Brown University and a J.D. from Georgetown University.

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Code of Ethics

        We have adopted a code of conduct that applies to our employees and officers, including our principal executive officer, principal financial officer, principal accounting officer or persons serving similar functions. We have also adopted a statement of business ethics that applies to our directors. We will provide a copy of our code of conduct and statement of business ethics for our directors to any person without charge, upon written request to: Corporate Secretary, The First Marblehead Corporation, The Prudential Tower, 800 Boylston Street, 34^th Floor, Boston, Massachusetts 02199. Our code of conduct and statement of business ethics for our directors, as well as our corporate governance guidelines and the charters of the standing committees of our Board of Directors, are posted on our website at www.firstmarblehead.com under the heading "Investors—Governance," and each of these documents is available in print to any stockholder who submits a written request to our corporate secretary. If we amend our code of conduct in the future or grant a waiver under our code of conduct to an officer or anyone functioning as our principal accounting officer, we intend to post information about such amendment or waiver on our website.

Item 1A.    Risk Factors

        Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below in addition to the other information included in this annual report. If any of the following risks actually occurs, our business, financial condition or results of operations could be adversely affected, which, in turn, could have a negative impact on the price of our common stock. Although we have grouped risk factors by category, the categories are not mutually exclusive. Risks described under one category may also apply to another category, and you should carefully read the entire risk factors section, not just any one category of risk factors.

Risks Related to Our Industry, Business and Operations

Challenges exist in implementing revisions to our business model.

        During fiscal 2009 and fiscal 2010, we took several measures to adjust our business in response to economic conditions. Most significantly, we refined our service offerings and added fee-for-service offerings such as portfolio management and asset servicing. In August 2009, we completed the development of our Monogram product offering, which incorporates refinements to our origination process, including an enhanced application interface, an expanded credit decisioning model and additional reporting capabilities.

        We have limited experience with our Monogram product, which is based on a new, proprietary origination risk score model and does not contemplate a third-party guaranty. We are uncertain of the extent to which the market will accept our Monogram product, particularly in the current economic environment where there has been reluctance by many lenders to focus on education lending opportunities. As of September 2, 2010, we have signed only two loan program agreements and expect to have fully deployed the product to only two clients by September 30, 2010. Successful sales of our services, including our Monogram product, will be critical to growing and diversifying our revenues and client base in the future.

        Our Monogram product may include capital commitments on our part for credit enhancement. We have provided or agreed to provide capital commitments in connection with our two initial Monogram-based loan programs. Should additional lenders require credit enhancement from us as a condition to entering into a loan program agreement, our growth may be constrained by the level of capital available to us.

        Commercial banks have historically served as the initial funding sources for loans we facilitate and have been our principal clients. Since the first quarter of fiscal 2008, we have not facilitated take-out securitization transactions to support the long-term funding of private education loans, and commercial

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banks are facing liquidity and credit challenges from other sources, in particular mortgage, auto loan and credit card lending losses. In addition, the synergies that previously existed between federal education loan marketing and private education loan marketing have been eliminated by legislation that eliminated FFELP. As a result, many lenders have re-evaluated their business strategies related to education lending. In light of general economic conditions, capital markets disruptions and the declining credit performance of consumer-related loans, the private education loan business may generally be less attractive to commercial banks than in the past.

        In this environment, it is uncertain whether commercial banks will continue funding private education loans. Some of our former clients have exited the private education loan market completely. To the extent that commercial banks exit the private education loan market, the number of our prospective clients diminishes. One of our primary challenges is to convince national and regional lenders that they can address the market opportunity in a manner that meets their desired risk control and return objectives. A related challenge is to finance successfully loans generated through our Monogram product through capital market transactions. We cannot assure you that we will be successful in either the short-term or the long-term in meeting these challenges.

We have provided or agreed to provide credit enhancement in connection with two loan programs and plan to enter into similar arrangements in connection with future loan programs based on our Monogram product. As a result, we have capital at risk in connection with each lender's loan program. We may lose the capital we have provided as credit enhancement, and our financial results could be adversely affected.

        Historically, the loan programs that we facilitated included a third-party guaranty, pursuant to which the guarantor agreed to reimburse lenders for unpaid principal and interest on defaulted loans. Our Monogram product does not include a third-party guaranty. In connection with two loan programs based on our Monogram product, we have provided or agreed to provide credit enhancement by funding an account for each lender, which we refer to as a Participation Account, up to a specified dollar limit, which we refer to as the Participation Cap, to serve as a first-loss reserve for defaulted program loans. We provided or agreed to provide an initial deposit into the Participation Accounts and agreed to provide supplementary deposits into such accounts on a quarterly basis during the term of the loan program agreements based on disbursed program loan volume and adjustments to default projections for program loans. Although we will not be required to provide any credit enhancement in excess of the Participation Cap, we have or will have capital at risk in connection with lenders' loan programs and the amount of such capital at risk will increase quarterly. As of September 2, 2010, we have funded capital commitments in the amount of $7.4 million in support of SunTrust Bank's Monogram-based program. We could lose some or all of the amounts that we have deposited, or will deposit in the future, in the Participation Accounts depending on the performance of the portfolio of program loans. Any such loss would erode our liquidity position and damage business prospects for our Monogram product.

        Our Monogram product is based on proprietary scoring models and risk mitigation and pricing strategies that we have only recently developed. We have no experience with the actual performance of loan portfolios generated by lenders based on our Monogram product. We must closely monitor the characteristics and performance of each lender's loan portfolio in order to suggest adjustments to the lenders' programs and tailor our default prevention and recovery strategies. We have limited experience with the infrastructure that we have built for such monitoring, which requires extensive operational and data integration among the loan servicer, multiple default prevention and recovery agencies, and us. To the extent that our infrastructure is inadequate or we are otherwise unsuccessful in identifying portfolio performance characteristics and trends, or to the extent that lenders are unwilling to adjust their loan programs, our risk of losing amounts deposited in the Participation Accounts may increase.

        We may offer additional prospective clients similar credit enhancement arrangements. We expect that the amount of any such credit enhancement offered to a particular lender would be determined

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based on the particular terms of the lender's loan program, including the underwriting guidelines with respect to such program. We have finite amounts of cash available to offer to prospective clients, and there is a risk that lenders will not enter into loan program agreements with us unless we offer credit enhancement.

We will need to facilitate substantial loan volume in order to return to profitability.

        We designed our Monogram product, in part, to reduce our dependence on the securitization market in order to generate revenue. Although we expect to generate ongoing monthly revenue through the maturity of the program loans, we will need to facilitate substantial loan volumes in order to return to profitability. In addition, because the revenues that we expect to generate for Monogram-based loan programs will depend in part on the size, credit mix and actual performance of our lender clients' loan portfolios, it is difficult for us to forecast the level or timing of our revenues or income with respect to our Monogram product generally or a specific lender's Monogram-based program.

The outsourcing services market for education lending is competitive, and if we are not able to compete effectively, our revenue and results of operations may be adversely affected.

        We offer our clients and prospective clients, national and regional financial institutions and educational institutions, services in structuring and supporting their private education loan programs. The outsourcing services market in which we operate remains competitive with a number of active participants, some of which have greater financial, technical or other competitive resources, larger customer bases, greater name recognition and more established relationships with their clients than we have. As a result, our competitors or potential competitors may be better able to overcome capital markets dislocations, adapt more quickly to new or emerging technologies and changes in customer preferences, compete for skilled professionals, build upon efficiencies based on a larger volume of loan transactions, fund internal growth and compete for market share, generally, than we are.

        Based on the range of services that we offer, we believe that Sallie Mae is our principal competitor. Sallie Mae has announced that it intends to concentrate on growth of its private education loan volumes, particularly following the elimination of FFELP. Our business could be adversely affected if Sallie Mae's program to market private education loans continues to grow, or if Sallie Mae or Nelnet, Inc., which currently provides fee-based services for non-federally guaranteed loans, seeks to market more aggressively to third parties the full range of services that we offer. Other private education loan originators include JPMorgan Chase Bank, N.A., Wells Fargo & Company, Discover Financial Services and Student Loan Corporation, an 80% owned subsidiary of Citibank, N.A.

        We may face competition from loan originators, including our clients or former clients, if they choose to develop an internal capability to provide any of the services that we currently offer. For example, a loan originator that has, or decides to develop, a portfolio management or capital markets function may not choose to engage us for our services. Historically, lenders in the education loan market have focused their lending activities on federal loans because of the relative size of the federal loan market and because the federal government guarantees repayment of these loans, thereby significantly limiting the lenders' credit risk. The demand for our services could decline if lenders exit educational lending altogether or place additional emphasis on the private education loan market and offer the services we provide in response to the elimination of FFELP.

        We cannot assure you that we will be able to compete successfully with new or existing competitors. If we are not able to compete effectively, our results of operations may be adversely affected.

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The growth of our business could be adversely affected by changes in government education loan programs or expansions in the population of students eligible for loans under government education loan programs.

        We focus our business exclusively on the market for private education loans, and substantially all of our business is concentrated in products for post-secondary education. The availability and terms of loans that the government originates or guarantees affects the demand for private education loans because students and their families often rely on private education loans to bridge a gap between available funds, including family savings, grants and federal and state loans, and the costs of post-secondary education. The federal government currently places both annual and aggregate limitations on the amount of federal loans that any student can receive and determines the criteria for student eligibility. These guidelines are generally adjusted in connection with funding authorizations from the United States Congress for programs under the Higher Education Act of 1965. Recent federal legislation expands federal grant and loan assistance, which could weaken the demand for private education loans. In addition, the elimination of FFELP could result in increased competition in the market for private education loans, as well as a shift by students away from higher cost schools. Increased competition could adversely affect the volume of private education loans and future capital markets transactions, if any, that we facilitate and impede the growth of our business.

        In May 2008, the Ensuring Continued Access to Student Loans Act of 2008 was signed into law and contains provisions which might adversely impact the demand for private education loans and outsourcing services provided by us, availability and flow of funds for private education loans, and our liquidity position. Among other things, the Act:

•

permits a parent borrower under the federal Parent Loan for Undergraduate Students, or PLUS, loan program to defer repayment of a PLUS loan until six months after the student ceases to carry at least one-half the normal full-time academic workload;

•

extends eligibility for a PLUS loan to an applicant who, during the period beginning January 1, 2007 and ending December 31, 2008, has not been delinquent for more than 180 days on mortgage loan payments or medical bill payments nor more than 89 days delinquent on the repayment of any other debt, in any case, during such period; and

•

increases the loan limits for unsubsidized Stafford loans for undergraduate students.

        In August 2008, the Higher Education Opportunity Act was signed into law, which adds:

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significant restrictions to the marketing of federal and private education loans; and

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significant compliance burdens to private education loan lenders by adding new TILA disclosures, procedures and rescission rights, as well as accompanying civil penalties.

Access to alternative means of financing the costs of education may reduce demand for private education loans.

        The demand for private education loans could weaken if student borrowers use other vehicles to bridge the gap between available funds and costs of post-secondary education. These vehicles include, among others:

•

home equity loans or other borrowings available to families to finance their education costs;

•

pre-paid tuition plans, which allow students to pay tuition at today's rates to cover tuition costs in the future;

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529 plans, which include both prepaid tuition plans and college savings plans that allow a family to save funds on a tax-advantaged basis;

•

education IRAs, now known as Coverdell Education Savings Accounts, under which a holder can make annual contributions for education savings;

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•

government education loan programs, generally; and

•

direct loans from colleges and universities.

If demand for private education loans weakens, we would experience reduced demand for our services, which could have a material adverse effect on our results of operations.

Continuation of the current economic conditions could adversely affect the private education loan industry.

        As a result of capital market dislocations that began during the second quarter of fiscal 2008, as well as the TERI Reorganization, we have not completed a securitization transaction since September 2007. In addition, high unemployment rates and the unsteady financial sector have adversely affected many consumers and borrowers throughout the country. Current borrowers may experience more trouble in repaying credit obligations, which could increase loan delinquencies and defaults and negatively affect the value of our service receivables. In addition, some consumers may find that higher education is an unnecessary investment during turbulent economic times and defer enrollment in educational institutions until the economy improves or turn to less costly forms of secondary education, thus decreasing education loan application and funding volumes. Finally, many lending institutions have been reluctant to lend and have significantly tightened their underwriting standards, and several clients and potential clients have exited the private education loan business and may or may not seek our services as the economy improves. If the adverse economic environment continues, our financial condition may deteriorate for any one of the foregoing reasons.

If our clients do not actively or successfully market and fund private education loans, our business will be adversely affected.

        We have in the past relied on, and will continue to rely in part, on our clients to market and fund private education loans to student borrowers. If our clients do not devote sufficient time and resources to their marketing efforts or are not successful in these efforts, then we may not reach the full potential of our capacity for facilitated loan volume and our business will be adversely affected.

        In addition, if loans were or are marketed by our clients in a manner that is unfair or deceptive, or if the marketing, origination or servicing violated or violates any applicable law, state unfair and deceptive practices acts could impose liability on the holder of the loan or create defenses to the enforceability of the loan. Investigations by the New York Attorney General, the Attorneys General of other states, the United States Congress or others could have a negative impact on lenders' desire to market private education loans. The Higher Education Opportunity Act creates significant additional restrictions on the marketing of private education loans.

If we fail to manage our cost reductions effectively, our business could be disrupted and our financial results could be adversely affected.

        During fiscal 2008 and fiscal 2009, we reduced headcount by over 800 employees, including departures of our former Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer, Chief Information Officer and Chief Marketing Officer. Our cost reduction initiatives have placed and will continue to place a strain on our management, systems and resources at a critical point in our business and industry. We must continue to refine our business development capabilities, our systems and processes and our access to financing sources. We must retain, train, supervise and manage our remaining employees during this period of change in our business, and our ability to retain our employees may become more difficult as we face an increasingly competitive landscape with respect to talented employees as the economy begins to re-emerge from the financial crisis.

        Based on facilitated loan volumes, we may outsource some borrower services functions in an effort to reduce costs, take advantage of technologies and effectively manage the seasonality associated with education loan volume. We rely on our vendors to provide high levels of service and support. Our

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reliance on external vendors subjects us to risks associated with inadequate or untimely service and could result in fewer loans than we would experience if we performed the service functions in-house.

        We cannot assure you that we will be able to:

•

expand our systems effectively;

•

successfully develop new products or services;

•

allocate our human resources optimally;

•

identify, hire and retain qualified employees or vendors; or

•

incorporate effectively the components of any business that we may acquire in our effort to achieve growth.

        We are dependent upon the retention and motivation of certain key employees and the loss of any such employees could adversely affect our business. In addition, our future performance will also depend upon our ability to attract skilled, new employees. If we are unable to manage our cost reductions, or if we lose key employees or are unable to attract new employees, our operations and our financial results could be adversely affected.

If competitors acquire or develop a private education loan database or advanced loan information processing systems, our business could be adversely affected.

        We own a database of historical information on private education loan performance that we use to help us enhance our proprietary origination risk score model, determine the terms of portfolio funding transactions and establish the changes in fair value of the additional structural advisory fees, asset servicing fees and residual receivables that we recognize as revenue. We also have developed a proprietary loan information processing system to enhance our application processing and loan origination capabilities. We believe that our private education loan database and loan information processing system provide us with a competitive advantage in offering our services. Third parties could create or acquire databases and systems such as ours, and TERI possesses certain historical information related to TERI-guaranteed loans. As lenders and other organizations in the private education loan market originate or service loans, they compile over time information for their own private education loan performance database. Our competitors and potential competitors may have originated or serviced a greater volume of private education loans than we have over the past two fiscal years, which may have provided them with comparatively greater borrower or loan data, particularly during the most recent economic cycle. If a third party creates or acquires a private education loan database or develops a loan information processing system, our competitive positioning, ability to attract new clients and business could be adversely affected. In addition, if TERI were to assert successfully that certain contractual restrictions on the use and sale of its historical loan data terminated in the context of the TERI Reorganization or otherwise, the competitive advantage of our loan database could diminish. As a result of the termination of our agreements with TERI in the context of the TERI Reorganization, we have lost access to continuing updates to the database of TERI-guaranteed loan performance data with regard to TERI-guaranteed loans that are neither held by securitization trusts facilitated by us nor Union Federal.

If we are unable to protect the confidentiality of our historical loan database and proprietary information systems and processes, the value of our services and technology will be adversely affected.

        We rely on trade secret laws and restrictions on disclosure to protect our historical loan database and proprietary information systems and processes. We have sought to limit TERI's rights to disclose its historical loan database in the context of the TERI Reorganization, and we have entered into confidentiality agreements with third parties and with some of our employees to maintain the confidentiality of our trade secrets and proprietary information. These methods may neither effectively

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prevent use or disclosure of our confidential or proprietary information nor provide meaningful protection for our confidential or proprietary information if there is unauthorized use or disclosure.

        We own no material patents. Accordingly, our technology, including our loan information processing systems, is not covered by patents that would preclude or inhibit competitors from entering our market. Monitoring unauthorized use of the systems and processes that we have developed is difficult, and we cannot be certain that the steps that we have taken will prevent unauthorized use of our technology. Furthermore, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our proprietary information. If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and services will be adversely affected.

The loan origination process is becoming increasingly dependent upon technological advancement, and we could lose clients and market share if we are not able to keep pace with rapid changes in technology.

        Our future success depends, in part, on our ability to process loan applications in an automated, error-free manner. The volume of loan originations that we are able to process is based, in large part, on the systems and processes we have implemented and developed. The loan origination process is becoming increasingly dependent upon technological advancement such as the ability to process loans over the Internet, accept electronic signatures and provide initial decisions instantly. Our future success also depends, in part, on our ability to develop and implement technology solutions that anticipate and keep pace with continuing changes in technology, industry standards and client preferences. We may not be successful in anticipating or responding to these developments on a timely basis. If competitors introduce products, services, systems and processes that are better than ours or that gain greater market acceptance, those that we offer or use may become obsolete or noncompetitive. In addition, if we fail to execute our clients' origination requirements or properly administer our clients' credit agreement templates or required disclosures, we could be subject to breach of contract claims and related damages. Any one of these circumstances could have a material adverse effect on our business reputation and ability to obtain and retain clients.

        We may be required to expend significant funds to develop or acquire new technologies. If we cannot offer new technologies as quickly as our competitors, we could lose clients and market share. We also could lose market share if our competitors develop more cost effective technologies than those we offer or develop.

Our business could be adversely affected if PHEAA fails to provide adequate or timely services or if our relationship with PHEAA terminates.

        As of June 30, 2010, PHEAA serviced a substantial majority of private education loans held by the securitization trusts that we administer and served as the sole loan servicer for loan programs based on our Monogram product offering. Our arrangements with PHEAA allow us to avoid the overhead investment in servicing operations, but require us to rely on PHEAA to adequately service the private education loans, including collecting payments, responding to borrower inquiries and communicating with borrowers whose loans have become delinquent. We periodically review the costs associated with establishing servicing operations to service loans. During the second quarter of fiscal 2010, we announced that we had entered into negotiations for the acquisition of a loan servicer. We were subsequently unable to agree to terms, and, as of the third quarter of fiscal 2010, negotiations with respect to the contemplated acquisition had terminated. We continue to believe, however, that ownership of a loan servicer could complement our overall strategy and reduce our reliance on an external service provider for loan servicing, which subjects us to risks associated with inadequate or untimely services, including notice of developments in prepayments, delinquencies and defaults, and usage rates for various borrower benefits or temporarily modified payment plans. A substantial increase in these rates could adversely affect our ability to access profitably the securitization markets for our

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clients' loans and the value of our additional structural advisory fees, asset servicing fees and residual receivables. If our relationship with PHEAA terminates, we would either need to expand or develop a relationship with another loan servicer, which could be time consuming and costly. In such event, our business could be adversely affected.

An interruption in or breach of our information systems, or those of third parties on which we rely, may result in lost business.

        We rely heavily upon communications and information systems to conduct our business. Our systems and operations are potentially vulnerable to damage or interruption from network failure, hardware failure, software failure, power or telecommunications failures, computer viruses and worms, penetration of our network by hackers or other unauthorized users and natural disasters. Any failure, interruption or breach in security of our information systems or the third-party information systems on which we rely could cause underwriting or other delays and could result in fewer loan applications being received, slower processing of applications and reduced efficiency in loan processing or servicing. A failure, interruption or breach in security could also result in an obligation to notify clients in a number of states that require such notification, with possible civil liability resulting from such failure, interruption or breach. Although we maintain and periodically test a business continuity and disaster recovery plan, the majority of our infrastructure and employees are concentrated in the Boston metropolitan area. An interruption in services for any reason could adversely affect our ability to activate our contingency plan if we are unable to communicate among locations or employees.

        We cannot assure you that failures, interruptions or breaches will not occur, or if they do occur that we or the third parties on whom we rely will adequately address them. The precautionary measures that we have implemented to avoid systems outages and to minimize the effects of any data or communication systems interruptions may not be adequate, and we may not have anticipated or addressed all of the potential events that could threaten or undermine our information systems. The occurrence of any failure, interruption or breach could significantly impair the reputation of our brand, diminish the attractiveness of our services and harm our business.

If we experience a data security breach and confidential customer information is disclosed, we may be subject to penalties imposed by regulators, civil actions for damages and negative publicity, which could affect our customer relationships and have a material adverse effect on our business. In addition, state and federal legislative proposals, if enacted, may impose additional requirements on us to safeguard confidential customer information, which may result in increased compliance costs.

        Data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting state and federal legislation, legislative proposals and regulatory rule-making to address data privacy and security. Consequently, we may be subject to rapidly changing and increasingly extensive requirements intended to protect the applicant and borrower information that we process in connection with the loans. Implementation of systems and procedures to address these requirements has increased our compliance costs, and these costs may increase further as new requirements emerge. If we were to experience a data security breach, or if we or the securitization trusts that we administer were to otherwise improperly disclose confidential customer or consumer information, such breach or other disclosure could generate negative publicity about us and could adversely affect our relationships with our clients, including the lenders and educational institutions with which we do business. This could have a material adverse effect on our business. In addition, such pending legislative proposals and regulations, if adopted, likely would result in substantial penalties for unauthorized disclosure of confidential consumer information. Failure to comply with those requirements could result in regulatory sanctions imposed on our client lenders and loss of business for us.

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Risks Related to Our Financial Reporting and Liquidity

If the estimates we make, or the assumptions on which we rely, in preparing our financial statements prove inaccurate, our actual results may vary materially from those reflected in our financial statements.

        As compensation for our past securitization activities, we were entitled to receive structural advisory fees and a portion of the residual interests in the securitization trusts that we facilitated. We received up-front structural advisory fees when the securitization trusts purchased the loans, and we continue to be entitled to receive additional structural advisory fees over time, based on the amount of loans outstanding in the trust over the life of the trust. As required under accounting principles generally accepted in the United States of America, or GAAP, we recognized the estimated fair value of up-front and additional structural advisory fees and residual receivables as revenue when the securitization trusts purchased the loans because receipt of our fees is not contingent on any further service requirement by us. Quarterly, we update our estimate of the fair value of our receivables, and changes to the fair value, less cash distributions, if any, are recorded as revenue (trust updates) in the period in which the change is made. We are entitled to asset servicing fees for additional services that we are contractually obligated to perform relating to the residual interests in the NCSLT Trusts. We recognize the net present value of asset servicing fees as our services are performed. The receipt of the fees is contingent, however, on distributions available to the owners of the NCSLT Trusts residuals. Quarterly, we update our assumptions with respect to the amount and timing of receipt of these fees, and record the changes in our estimates as revenue (fee updates) in the period in which the change is made.

        We have no further financial obligation with respect to our additional structural advisory fees or residuals in the securitization trusts we facilitated. However, our fees are subordinate to securities issued to investors in such securitizations, and the trusts may fail to generate any cash flow for us if the securitized assets do not generate enough cash flow to pay debt holders in full or only generate enough cash flow to pay the debt holders. Our projected cash flows from service receivables from certain securitization trusts are expected to be eliminated entirely, and our projected cash flows from other securitization trusts could be delayed, impaired or eliminated, if actual performance differs from our assumptions at June 30, 2010. As of June 30, 2010, we expected to receive additional structural advisory fees and residuals beginning five to 22 years after the date of a particular securitization transaction, consistent with our expectations at June 30, 2009.

        Because there are no quoted market prices for our service receivables or the portfolio of private education loans held by UFSB-SPV, we use discounted cash flow modeling techniques and certain assumptions to estimate fair value. Our key assumptions to estimate fair value include: discount rates; the annual rate and timing of private education loan prepayments; the trend of interest rates over the life of the loan pool, including the forward LIBOR curve, which is a projection of future LIBOR rates over time; the expected annual rate and timing of loan defaults, including the effects of various risk mitigation strategies and temporarily modified payment plans for borrowers, as well as TERI's obligation to pay default claims; expected amount and timing of recoveries of defaulted loans; the source and amount of guaranty payments made on defaulted loans; and the fees and expenses of the securitization trusts. Because our estimates rely on quantitative and qualitative factors, including historical data and macroeconomic indicators to predict prepayment and default rates, management's ability to determine which factors should be more heavily weighted in our estimates, and to accurately incorporate those factors into our loan performance assumptions, are subjective and can have a material effect on valuations.

        We adjusted our key accounting assumptions throughout fiscal 2010. During fiscal 2010, we completed initial enhancements to the financial models we employ in developing the assumptions used to estimate the fair value of our service receivables and our portfolio of private education loans held for sale. These refinements resulted in the use of higher default rates, which, when combined with higher discount rates and a downward shift in the forward LIBOR curve, resulted in decreases in the

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estimated fair value of our service receivables and loans. We benefited in fiscal 2010, however, from lower prepayment rates. The net effect of these adjustments, partially offset by fair value of accretion due to passage of time, was a net decrease of $20.5 million in the value of our additional structural advisory fee, asset servicing fee and residual receivables, and a net loss of $131.0 million in connection with realized losses and fair value adjustments to private education loans held for sale.

        In general, our adjustments during fiscal 2010 were necessary because the securitization trusts and UFSB-SPV's portfolio of private education loans held for sale performed below our range of expectations, including with regard to delinquencies and defaults. Other contributing factors included higher assumed discount rates and an overall downward shift in the forward LIBOR curve, somewhat offset by lower prepayment rates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in Item 7 of this annual report for a discussion of changes in assumptions for fiscal 2010 and fiscal 2009 under the caption "Results of Operations—Years ended June 30, 2010, June 30, 2009 and June 30, 2008," and "Executive Summary—Application of Critical Accounting Policies and Estimates" for a sensitivity analysis of the additional structural advisory fees to variations in our assumptions and estimates.

        If the actual performance of the private education loan portfolios held by some or all of the securitization trusts were to vary appreciably from the adjusted assumptions we use, we may need to adjust our key assumptions further. Such an adjustment could materially affect our earnings in the period in which our assumptions change, and the additional structural advisory fees and residuals that we receive from the trusts, and the asset servicing fees that we receive from the owner of the Trust Certificate, could be significantly less than that reflected in our current financial statements. In particular, economic, regulatory, competitive and other factors affecting default and recovery rates on loan portfolios could cause or contribute to differences between actual performance of the portfolios and our key assumptions. With regard to TERI, for purposes of estimating the fair value of our service receivables, we assumed at June 30, 2010 that the application of collateral will occur in accordance with the terms of the Plan of Reorganization, notwithstanding that neither such plan nor the Modified Plan of Reorganization had been confirmed by the Bankruptcy Court as of September 2, 2010. Finally, dislocations in the capital markets have generally resulted in increases in investors' yield requirements for ABS. If such conditions degrade, we may need to further adjust our key assumptions.

We will be required to consolidate certain securitization trusts in our financial results after July 1, 2010, which will result in significant changes to the presentation of our financial statements and may result in increased volatility in our reported financial condition and results of operations.

        The presentation of our consolidated financial statements beginning with the first quarter of fiscal 2011 will differ significantly from the presentation included in this annual report. Historically, each of the securitization trusts created after January 31, 2003 has met the criteria to be a qualified special-purpose entity, or QSPE, as defined by Accounting Standards Codification, or ASC, 860-40, Transfers and Servicing—Transfers to Qualifying Special Purpose Entities, which we refer to as ASC 860-40. Accordingly, we did not consolidate these existing securitization trusts in our financial statements. In addition, the securitization trusts created prior to January 31, 2003 in which we hold a variable interest that could result in us being considered the primary beneficiary of such trust, have been amended in order for them to be considered QSPEs. Effective July 1, 2010, however, our historical accounting with regard to variable interest entities, including securitization trusts, changed with our adoption of Accounting Standards Update, or ASU, 2009-17, Consolidations (Topic 810)—Improvements to Financial Reporting by Enterprises Involved With Variable Interest Entities, which we refer to as ASU 2009-17.

        Effective July 1, 2010, we consolidated 14 securitization trusts that we facilitated and deconsolidated UFSB-SPV. As a result, we recorded a net increase in total assets and total liabilities of approximately $8.0 billion and $8.8 billion, respectively, and a net decrease in total stockholders' equity of approximately $800 million, comprised of an increase in FMD stockholders' equity of approximately

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$60 million recorded as an adjustment to opening retained earnings, more than offset by a non-controlling interest deficit of approximately $860 million. In addition, after July 1, 2010, our results of operations will no longer reflect securitization-related income, trust updates or administrative fees received from the 14 securitization trusts. Instead, we will recognize interest income associated with securitized loan receivables in the same line item as interest income from non-securitized assets, as well as a provision for loan losses, and we will recognize interest expense associated with debt issued by the securitization trusts to third-party investors on the same line item as other interest-bearing liabilities of FMD. We will recognize additional structural advisory fees, administrative and other fees and revenues from residuals only from variable interest entities that were not consolidated. For additional details regarding our adoption of ASU 2009-17, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Application of Critical Accounting Policies and Estimates—Consolidation," included in Item 7 of this annual report.

        ASU 2009-17 requires us to make additional judgments that are subject to change based on new facts and circumstances, and evolving interpretations and practices. Under ASU 2009-17, the determination of whether to consolidate a variable interest entity is based on whether the company is considered to be the primary beneficiary. Such determination is based on both the power to direct the activities of the entity that most significantly impact the entity's economic performance, and the obligation to absorb losses or the right to receive benefits that could be significant to the entity. The nature of these determinations, made on an entity-by-entity basis, requires a high level of subjectivity and judgment. Moreover, we are required to continuously reassess whether consolidation or deconsolidation of variable interest entities is appropriate, as opposed to the trigger-based assessment allowed under previous guidance. As a result, determinations that we make from time to time will be susceptible to change. We may be required to consolidate or deconsolidate variable interest entities on a quarterly basis, which, given the size of our variable interest entities, could result in significant changes to our reported assets and liabilities and results of operations during the quarter in which the change occurs. Any such consolidations or deconsolidations, were they to occur, could make comparisons of our financial performance between periods challenging to investors.

        In addition, our financial results for the first quarter of fiscal 2011 will reflect the adoption of new accounting policies, including policies for the determination of an allowance for loan losses and corresponding provisions and the recognition and presentation of loans and related interest income, including related amortization methods, identification of nonaccrual loans and impact of existing or future borrower payment modification programs. We have also adjusted, and may need to further adjust, elements of our information technology infrastructure in order to support our financial reporting following adoption of ASU 2009-17. We have limited experience with our new policies and infrastructure, and we may need to adjust them in the future based on our actual experience, new facts and circumstances, or evolving interpretations and practices.

Our liquidity could be adversely affected if the sale of the Trust Certificate does not result in the tax consequences that we expect.

        Effective March 31, 2009, we completed the sale of the Trust Certificate, representing our ownership interest in NC Residuals Owners Trust, in a transaction intended to improve our financial condition and liquidity. The sale of the Trust Certificate generated a cash refund for income taxes previously paid. The U.S. federal and state income tax consequences of the sale of the Trust Certificate, however, are complex and uncertain. The Internal Revenue Service, or IRS, has begun an audit of our tax returns for fiscal years 2007, 2008 and 2009. The IRS or a state taxing authority could challenge our tax positions in connection with the transactions, notwithstanding our receipt of any tax refund. If such a challenge were successful, in whole or in part, we may not keep all or a portion of any refund for taxes previously paid, or we may not eliminate our tax obligations relating to the residuals. In either case, our near-term and long-term financial condition and liquidity would be materially adversely

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affected. In addition, any investigation, audit or suit relating to the sale of the Trust Certificate, including any such proceeding brought by the IRS, could result in substantial costs.

We have guaranteed the performance of Union Federal's obligations under a loan purchase and sale agreement and assumed potential contingent liabilities of Union Federal under an indenture. We may incur substantial costs if we have to perform or assume obligations of Union Federal, which could have a material adverse effect on our liquidity or financial condition.

        In connection with Union Federal's sale of private education loans in October 2009, we delivered a performance guarantee to the purchaser of the loan portfolio. If Union Federal were to default in the performance of any of its obligations or agreements under the loan purchase and sale agreement, including its indemnification or loan repurchase obligations, we would be required to perform such obligations. As a result, we may incur substantial costs pursuant to the performance guarantee if Union Federal is unable to perform its obligations under the loan purchase and sale agreement.

        In April 2010, we entered into agreements relating to the restructuring of the education loan warehouse facility of UFSB-SPV. In connection with the restructuring, the third-party conduit lender released potential claims against Union Federal and UFSB-SPV pursuant to the indenture relating to the warehouse facility based upon events arising prior to April 16, 2010, to the extent such claims exceed $20.0 million in the aggregate. Neither Union Federal nor UFSB-SPV would have any liability until the conduit lender's aggregate losses exceed $3.5 million, at which point Union Federal and UFSB-SPV would only be liable for amounts above such amount up to the $20.0 million liability cap. Neither the liability cap nor the $3.5 million deductible would apply, however, in cases of fraud, willful misconduct, gross negligence or third-party claims by or on behalf of borrowers against the conduit lender based on loan origination errors. In addition, the release is not deemed a waiver of rights previously reserved but not exercised by the conduit lender, except as specifically released pursuant to a settlement agreement.

        We assumed any remaining contingent liability of Union Federal and its affiliates, other than UFSB-SPV, under the warehouse facility arising prior to April 16, 2010, subject to the liability cap discussed above. In addition, we assumed any contingent liability of Union Federal under the facility arising prior to April 16, 2010 based on fraud, willful misconduct, gross negligence, third-party claims by or on behalf of borrowers against the conduit lender based on loan origination errors or rights not otherwise released by the conduit lender. As a result, we may incur substantial costs in the event of a claim for damages related to the warehouse facility, which could have a material adverse affect on our liquidity or financial condition.

Changes in interest rates could affect the value of our additional structural advisory fees, asset servicing fees and residual receivables, as well as demand for private education loans and our services.

        Private education loans typically carry floating interest rates tied to prevailing short-term interest rates. Higher interest rates would increase the cost of the loan to the borrower, which in turn, could cause an increase in delinquency and default rates for outstanding education loans, as well as increased use of forbearance or temporarily modified payment plans. Other factors, such as challenging economic times, including high unemployment rates, can also lead to an increase in delinquency and default rates or such use. In addition, higher interest rates, or the perception that interest rates could increase in the future, could cause an increase in prepayments, including full or partial prepayments. If the prepayment or default rates increase for the private education loans held by us or the securitization trusts that we have facilitated, we may experience a decline in the value of our additional structural advisory fees, asset servicing fees and residual receivables, which could cause a decline in the price of our common stock and could cause future portfolio funding transactions to be less profitable for us. In addition, an increase in interest rates could reduce borrowing for education generally, which, in turn, could cause the overall demand for our services to decline.

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        LIBOR is the underlying rate for most of the trusts' assets and liabilities and changes in LIBOR can have a significant effect on the cash flows generated by each trust. Changes in the forward LIBOR curve affect the principal balances of private education loans held by the trusts, particularly as interest is capitalized during loan deferment, which affects the net interest margin that the trust generates. In addition, certain trusts have issued a tranche of ABS that bears a fixed interest rate. A decrease in the forward LIBOR curve may result in a reduced spread on the fixed interest-rate tranche, which in turn could decrease the estimated fair value of our service receivables. Significant changes to the forward LIBOR curve can also affect the estimated fair value of our additional structural advisory fees, which bear interest at the rate of LIBOR plus a spread to the extent such fees are accrued but unpaid by the trusts.

If sufficient funds to finance our business, including Union Federal, are not available to us when needed or on acceptable terms, then we may be required to delay, scale back or alter our strategy.

        We may require additional funds for our products, our operating expenses, credit enhancement for loan programs, the pursuit of regulatory approvals, acquisition opportunities and the expansion of our capabilities. Historically, we have satisfied our funding needs primarily through private education loan asset-backed securitizations. The securitization market has not been available to us and may not be available to us when needed in the future, and, if available, the terms may not be acceptable to us. We have also satisfied our funding needs through equity financings. We cannot be certain that additional public or private financing would be available in amounts or on terms acceptable to us, if at all. Although we believe that our capital resources as of June 30, 2010, which include proceeds of tax refunds under audit as of September 2, 2010, are sufficient to satisfy our operating needs for the succeeding twelve months, we cannot assure you that they will be sufficient to provide amounts that we may determine to be necessary or appropriate to contribute to prospective clients related to new programs. Insufficient funds could require us to delay, scale back or eliminate certain of our products and further scale back our expenses. In addition, our short-term financing needs are subject to regulatory capital requirements related to Union Federal. See Note 21, "Union Federal Regulatory Matters—Regulatory Capital Requirements," in the notes to our consolidated financial statements included in Item 8 of this annual report for additional details.

Risks Related to Asset-Backed Securitizations and Other Funding Sources

We have historically recognized a significant portion of our revenue and substantially all of our income from structuring securitization transactions; our financial results and future growth may continue to be adversely affected if we are unable to structure securitizations or alternative financings.

        In the past, we did not charge separate fees for many of our services, but generally entered into agreements with clients giving us the exclusive right to securitize the private education loans that they did not intend to hold. As a result, we have historically recognized a significant portion of our revenue and substantially all of our income from structuring securitization transactions. We have not completed a securitization since the first quarter of fiscal 2008, contributing to our net losses for each subsequent quarter.

        Although our Monogram product offering has been designed to generate recurring revenue with less dependence on the securitization market and third-party credit enhancement, we have limited experience with it and, as of September 2, 2010, expect to have fully deployed it to only two clients by September 30, 2010. In addition, our future financial results and growth may continue to be affected by our inability to structure securitizations or alternative financing transactions involving private education loans. In particular, such transactions may enable us to access and recycle capital previously deployed as credit enhancement for Monogram-based loan programs. If we are able to facilitate securitizations in the near-term, we expect the structure and economics of the transactions to be substantially different than our past transactions, including lower revenues and additional cash requirements on our part.

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        If we continue to be unable to access the ABS market, our revenues may continue to be adversely impacted, and we may continue to generate net losses, which would further erode our liquidity position.

Our business, financial condition, results of operations and cash flows will be adversely affected if we do not achieve widespread market acceptance of loan programs based on our Monogram product offering.

        Since the beginning of fiscal 2009, we have significantly refined our service offerings and added fee-for-service offerings, such as portfolio management and asset servicing. During fiscal 2010, we completed the development of our Monogram product offering and entered into Monogram loan program agreements with SunTrust Bank and Kinecta Federal Credit Union pursuant to which we expect to generate ongoing monthly revenue through the maturity of the program loans. Deployment of this product has been limited, however, and we will need to gain widespread market acceptance of our Monogram product in order to improve our long-term financial condition, results of operations and cash flows.

A number of factors, some of which are beyond our control, have adversely affected and may continue to adversely affect our portfolio funding activities and thereby adversely affect our results of operations.

        The success of our business may depend on our ability to structure securitizations or other funding transactions for our clients' loan portfolios. Several factors have had, and may continue to have, a material adverse effect on both our ability to structure funding transactions and the revenue we may generate for providing our structural advisory and other services, including the following:

•

persistent and prolonged disruption or volatility in the capital markets generally or in the private education loan ABS sector specifically, which could continue to restrict or delay our access to the capital markets;

•

our inability to structure and gain market acceptance for new products or services to meet new demands of ABS investors or credit facility providers;

•

continuing degradation of the credit quality or performance of the loan portfolios of the trusts we have facilitated, which could reduce or eliminate investor demand for future securitizations that we facilitate, particularly for subordinate classes of ABS, or result in material, adverse modifications in rating agency assumptions, ratings or conclusions with respect to the securitization trusts;

•

rating agency actions, including downgrades, of ABS that we facilitated in the past or any occurrence of an event of default with respect to such securities, which could reduce demand for additional securitizations that we structure;

•

developments in connection with the TERI Reorganization, including the confirmation and effectiveness of the Modified Plan of Reorganization, as it relates to the implementations of the settlements involving the NCSLT Trusts contemplated by the plan and recoveries to us in respect of our claims as a general unsecured creditor;

•

material breach of our obligations to clients, including securitization trusts and former or current lender clients;

•

the timing and size of private education loan asset-backed securitizations that other parties facilitate, or the adverse performance of, or other problems with, such securitizations, which could impact pricing or demand for our future securitizations, if any;

•

challenges to the enforceability of private education loans based on violations of federal or state consumer protection or licensing laws and related regulations, or imposition of penalties or liabilities on assignees of private education loans for violation of such laws and regulations; and

•

changes to bankruptcy laws that change the current non-dischargeable status of education-related loans, which could materially adversely affect recovery rates on defaulted loans.

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Capital markets dislocations, and the timing, size and structure of any future capital markets transactions, could greatly affect our quarterly financial results.

        Continuing dislocations in the capital markets, reductions in the valuations of our service receivables and the size, structure or economic terms of our future capital markets transactions, if any, could increase the variability of our operating results on a quarterly basis. We expect the structure and pricing terms in near-term future transactions, if any, to be less favorable than in the past.

Recent legislation will affect the terms of future securitization transactions.

        The SEC has proposed new rules governing ABS issuance that, due to the requirements for risk retention, may affect the desirability of issuing ABS as a funding strategy. In addition, the Dodd-Frank Act grants federal banking regulators substantial discretion in developing specific risk retention requirements for all types of consumer credit products and requires the SEC to establish new data requirements for all issuers, including standards for data format, asset-level or loan-level data, the nature and extent of the compensation of the broker or originator, and the amount of risk retention required by loan securitizers. The Dodd-Frank Act and its implementing regulations, once adopted, will affect the terms of future securitization transactions, if any, that we facilitate and may result in greater risk retention and less flexibility for us in structuring such transactions.

In structuring and facilitating securitizations of our clients' loans, administering securitization trusts or as holders of rights to receive residual cash flows in non-NCSLT Trusts, we may incur liabilities to transaction parties.

        We facilitated and structured a number of different special purpose trusts that have been used in securitizations to finance private education loans that our clients originated, including trusts that have issued auction rate notes. Under applicable state and federal securities laws, if investors incur losses as a result of purchasing ABS that those trusts have issued, we could be deemed responsible and could be liable to those investors for damages. If we failed to cause the trusts or other transaction parties to disclose adequately all material information regarding an investment in the ABS, if the trust made statements that were misleading in any material respect in information delivered to investors or if we breach any duties as the structuring advisor or administrator of the securitization trusts, it is possible that we could be sued and ultimately held liable to noteholders or other transaction parties. The Modified Plan of Reorganization would provide exculpation for certain of our actions as administrator of the trusts in connection with the TERI Reorganization, but the Modified Plan of Reorganization may not become effective and the exculpation may not cover all of our actions as administrator of the trusts in the TERI Reorganization. Recent investigations by state attorneys general, as well as private litigation, have focused on auction rate securities, including the marketing and trading of such securities. It is possible that we could become involved in such matters in the future. In addition, under various agreements entered into with underwriters or financial guaranty insurers of those ABS, as well as certain lenders, we are contractually bound to indemnify those persons if investors are successful in seeking to recover losses from those parties and the trusts are found to have made materially misleading statements or to have omitted material information.

        If we are liable for losses investors or other transaction parties incur in any of the securitizations that we facilitated or structured and any insurance that we may have does not cover this liability or proves to be insufficient, our results of operations or financial position could be materially adversely affected.

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Risks Related to the TERI Reorganization

The Creditors Committee has challenged the enforceability of certain of the trusts' security interests, which may result in additional delay and expense, as well as a significant reduction in collateral available to the trusts.

        As a result of the automatic stay under the Bankruptcy Code, TERI ceased purchasing defaulted loans, including defaulted loans from the NCSLT Trusts, in April 2008. In June 2008, the Bankruptcy Court entered an order approving a motion by TERI to honor its guaranty agreement obligations using cash in segregated reserve accounts pledged to the NCSLT Trusts to secure TERI's guaranty obligations, which we refer to as the Pledged Accounts. Beginning in July 2008, TERI resumed paying its obligations under the guaranty agreements with respect to defaulted loans from the trusts, but only using cash in the Pledged Account established for the benefit of the specific trusts that owned the defaulted loan. As of September 2, 2010, TERI was not permitted to satisfy its guaranty obligations using funds from TERI's general reserves. Funds in the Pledged Accounts of certain trusts have been exhausted, or are expected to be exhausted in the near term, at which point such trusts will have a general unsecured claim against TERI.

        The Bankruptcy Court's June 2008 order granted parties rights to challenge the trusts' security interests in the collateral other than the Pledged Accounts. In January 2009, the Creditors Committee filed an adversary complaint in the Bankruptcy Court against the owner trustee and indenture trustee of 17 securitization trusts, and against our subsidiary First Marblehead Data Services, Inc., as administrator of such trusts. The complaint generally alleges that the security interests granted by TERI to the trusts, excluding the security interests in the Pledged Accounts, are unperfected or may otherwise be avoided under the Bankruptcy Code. In particular, the complaint alleges that the trusts do not have enforceable rights to future recoveries on defaulted loans transferred by the trusts to TERI with an aggregate principal and accrued interest balance of more than $598.0 million as of June 30, 2010, or in amounts owed or transferred by TERI to Pledged Accounts after the filing of TERI's petition for reorganization totaling more than $47.0 million as of June 30, 2010. In February 2009, pending resolution of the issues raised previously in the Creditors Committee's complaint, the trusts generally suspended the transfer of defaulted loans to TERI and generally suspended requests for default claim payments from amounts in the Pledged Accounts.

        The Plan of Reorganization included a proposed settlement of the adversary complaint, as well as other provisions that would affect the claims of the NCSLT Trusts. Upon the effective date of the Plan of Reorganization, the litigation regarding the security interests of the trusts would have been settled in accordance with the plan and dismissed with prejudice. In April 2010, all of the NCSLT Trusts voted or were deemed to vote in favor of the Plan of Reorganization, thereby electing to accept the settlement of their respective claims provided in the plan. In April 2010, the Bankruptcy Court held a hearing to consider confirmation of the Plan of Reorganization and made findings that the Plan of Reorganization met the requirements for confirmation under the Bankruptcy Code. Following such hearing, however, TERI and the Creditors Committee filed with the Bankruptcy Court a motion to modify the Plan of Reorganization. We objected to the proposed modifications, in our respective capacities as a general unsecured creditor and administrator to the trusts, and sought to have an order entered confirming the Plan of Reorganization on its original terms. In July 2010, the Bankruptcy Court denied the motion by TERI and the Creditors Committee to modify the Plan of Reorganization and vacated the earlier findings that the Plan of Reorganization met the requirements for confirmation. The Bankruptcy Court ordered TERI and the Creditors Committee to file a fifth amended plan of reorganization prior to August 27, 2010, unless they could negotiate acceptable changes to the Plan of Reorganization. On August 26, 2010, TERI and the Creditors Committee filed a second joint motion to modify the Plan of Reorganization, approve revised disclosure materials and approve procedures by which creditors who previously voted on the Plan of Reorganization would have the opportunity to change their vote with respect to the Modified Plan of Reorganization. On August 31, 2010, the Bankruptcy Court approved

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the disclosure materials and the solicitation procedures, subject to entry of a formal order, and the solicitation of votes on the Modified Plan of Reorganization is expected to commence on or about September 13, 2010. The Modified Plan of Reorganization would change the terms of the NCSLT Trusts' settlements compared to the settlements proposed in the Plan of Reorganization, including the terms of the settlement of the adversary complaint. See Note 12, "Commitments and Contingencies—TERI Reorganization," in the notes to our consolidated financial statements included in Item 8 of this annual report for additional details.

        If the Modified Plan of Reorganization, or a successor plan that provides for settlement of the adversary complaint, is not consummated and if the Creditors Committee or any other party is successful in challenging the trusts' security interests, the amount of pledged collateral available exclusively to a particular securitization trust to satisfy TERI's guaranty obligations to that trust would decrease materially. As a result, the trust's unsecured claims against TERI would increase proportionately. For example, recoveries from defaulted private education loans transferred to TERI, which have historically been used to replenish a particular trust's Pledged Account, would instead become an asset of TERI's bankruptcy estate available for distribution to other holders of claims. The settlement of the adversary complaint, in the context of the Plan of Reorganization or otherwise, could also result in a material decrease in the amount of pledged collateral available exclusively to a particular securitization trust. A challenge to the security interests could delay distributions to creditors, and a successful challenge to the security interests could decrease materially the value of our additional structural advisory fees or our asset servicing fees by decreasing the pledged collateral available exclusively to the NCSLT Trusts.

The TERI Reorganization will adversely affect our ability to facilitate the securitization of TERI-guaranteed loans, and could adversely affect our cash flows from the securitization trusts.

        In its role as guarantor, TERI agreed to reimburse lenders for unpaid principal and interest on defaulted loans. TERI had historically been the exclusive provider of borrower default guarantees for our clients' private education loans. Under the terms of our past purchase agreements with lender clients, we generally have an obligation to use our best efforts to facilitate the purchase of a client's TERI-guaranteed loans during a specified loan purchase period. The TERI Reorganization has adversely affected, and will likely continue to adversely affect, our ability to facilitate the securitization of TERI-guaranteed loans. As a result of the TERI Reorganization, no value can be ascribed to the TERI guaranty beyond a trust's Pledged Account. As a result, in structuring future securitizations of loans guaranteed or formerly guaranteed by TERI, if any, we would likely be required to reduce or eliminate our up-front structural advisory fee in order to increase the level of reserves available to the trust. In addition, it is likely that we would need to obtain additional credit enhancement for any future securitizations of such loans, the cost of which would also result in lower revenues.

        In general, the termination of the TERI guaranty in the TERI Reorganization would terminate our purchase obligations under the purchase agreements. We may be subject to claims, however, that we breached our contractual obligations under our past purchase agreements, which could adversely affect our business reputation. In addition, our financial results would be adversely affected if we were required to defend or pay damages in connection with any such claim.

        To the extent that the Pledged Account available to a particular NCSLT Trust is exhausted and loan defaults continue to occur, that NCSLT Trust would have a related claim as an unsecured creditor of TERI in the context of the TERI Reorganization. TERI's general reserves will be insufficient to satisfy fully the claims of unsecured creditors, and therefore loan defaults would have a further adverse effect on the amount or timing of cash flows that would otherwise be expected to be generated by the NCSLT Trust, which would adversely affect the value of our service receivables, including our asset servicing and additional structural advisory fees.

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Our claims against TERI will not be settled by the Modified Plan of Reorganization, and our potential recovery from TERI's bankruptcy estate on our general unsecured claim has been eroded by the costs and pace of the reorganization proceeding.

        In October 2008, we filed proofs of claim against TERI alleging rejection damages and other claims in excess of $87.0 million. These alleged general unsecured trade claims would not be settled by the Modified Plan of Reorganization, and we have not reflected any recovery from our claims against TERI in our financial statements. TERI and the Creditors Committee have stated that they believe that our claims are substantially inflated and seek damages that are not compensable under state law. The amount and validity of our claims against TERI may require litigation, which could be time-consuming and costly, to resolve, and we cannot assure you that our alleged claims would be allowed in full.

        In addition, the amount of our ultimate recovery from TERI's bankruptcy estate in respect of our claims is difficult to estimate. The compensation and other operating expenses of TERI, together with the expenses of its professional advisors and those of the Creditors Committee, during the course of the reorganization proceeding will have consumed a significant portion of TERI's unrestricted cash. Based on filings made with the Bankruptcy Court, TERI had unrestricted cash and marketable securities of $83.1 million as of April 30, 2008, but expects only $42.3 million to remain available for transfer to the liquidating trust under the Modified Plan of Reorganization, assuming such plan becomes effective on September 30, 2010. As a result, general unsecured creditors of TERI will receive a small portion of their claims in cash shortly following the effectiveness of any plan of reorganization. The larger portion of their respective claims will only be received by creditors based on the level of recoveries on defaulted loans previously transferred to TERI. Those recoveries are expected to be collected over many years, and the recovery rate will depend on the experience and skill of the party or parties managing collections with respect to such loans. Under the Modified Plan of Reorganization, reorganized TERI would manage collections with respect to the portion of such loans for which TERI is currently managing collections. As of September 2, 2010, we are managing collections on behalf of TERI with regard to the remainder of such loans. We have only agreed to continue providing such services for up to 90 days following the effective date of the Modified Plan of Reorganization. Moreover, we can provide no assurance that the plan trustee will seek to engage us following the effectiveness of any plan of reorganization or that we will be able to reach acceptable terms with such plan trustee regarding our continued services.

Risks Relating to Regulatory Matters

We will become subject to new regulations which could increase our costs of compliance and alter our business practices.

        Regulators have increased diligence and enforcement efforts and new laws and regulations have been passed or are under consideration in Congress as a result of turbulence in the financial services industry. On July 21, 2010, the President signed into law the Dodd-Frank Act. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and the federal agencies are given significant discretion in drafting the implementing rules and regulations, and consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for many months or years. In addition, many of the provisions of the Dodd-Frank Act would not apply to us if Union Federal is sold.

        The Dodd-Frank Act also restructures the regulation of depository institutions. Under the Dodd-Frank Act, the OTS, which is currently the primary federal regulator for FMD and Union Federal, will cease to exist on July 21, 2011 unless the Secretary of the Treasury opts to delay such date for up to an additional six months. The OCC, which is currently the primary federal regulator for national banks, will become the primary federal regulator for federal thrifts, including Union Federal. The Federal Reserve will supervise and regulate all savings and loan holding companies that were

36

formerly regulated by the OTS, including FMD. Although the OCC and Federal Reserve are directed to implement existing OTS regulations, orders, resolutions, determinations and agreements for thrifts and their holding companies under HOLA, the transition of supervisory functions from the OTS to the OCC (with respect to Union Federal) and the Federal Reserve (with respect to FMD) could alter the supervisory approach for Union Federal and FMD. This could in turn affect the operations of FMD and Union Federal. The Dodd-Frank Act also will impose consolidated capital requirements on savings and loan holding companies, but they are not effective for five years.

        The Dodd-Frank Act establishes the BCFP as an independent agency within the Federal Reserve to regulate consumer financial products, including education loans, and services offered primarily for personal, family or household purposes, with rule-making and enforcement authority over unfair, deceptive or abusive practices. These laws may directly impact our business operations, whether or not Union Federal is sold. The potential reach of the BCFP's broad new rulemaking powers and enforcement authority on the operations of financial institutions offering consumer financial products or services, including FMD, is currently unknown. In addition, the Dodd-Frank Act establishes a private education loan ombudsman within the BCFP, which would, among other things, receive, review and attempt to resolve informally complaints from private education loan borrowers. Finally, the Dodd-Frank Act requires the BCFP and the Secretary of Education, in consultation with FTC commissioners and the Attorney General, to submit a report, within two years of enactment of the Dodd-Frank Act, on a variety of information relating to the private education lending market, including private education loan lenders.

        The Dodd-Frank Act also includes several provisions that could affect our future portfolio funding transactions, if any, including "skin in the game" risk retention requirements applicable to any entity that organizes and initiates an ABS transaction, new disclosure and reporting requirements for each tranche of ABS, including new loan-level data requirements, and new disclosure requirements relating to the representations, warranties and enforcement mechanisms available to ABS investors. The Dodd-Frank Act may have a material impact on our operations, including through increased operating and compliance costs.

        In addition, regulators and enforcement officials are taking increasingly expansive positions with respect to whether certain products or product terms may run afoul of state and federal unfair or deceptive acts and practices laws. These and other regulatory changes could result in, among other things, increased compliance costs, more limited lending markets and alterations to our business practices, any of which could have a material adverse effect on our business operations and financial results.

We are subject to regulation as a savings and loan holding company, and Union Federal is regulated extensively.

        As a result of our acquisition of Union Federal in November 2006, we became subject to regulation as a savings and loan holding company, and our business is limited to activities that are financial or real-estate related. The OTS has certain types of enforcement authority over us, including the ability in certain circumstances to review and approve changes in management and compensation arrangements, issue additional cease-and-desist orders, force divestiture of Union Federal and impose civil and monetary penalties for violations of federal banking laws and regulations or for unsafe or unsound banking practices. Any such actions could adversely affect our reputation, liquidity or ability to execute our business plan.

        In addition, Union Federal is subject to extensive regulation, supervision and examination by the OTS and the FDIC. Such regulation covers all banking business, including activities and investments, lending practices, safeguarding deposits, capitalization, risk management policies and procedures, relationships with affiliated companies, efforts to combat money laundering, recordkeeping and conduct and qualifications of personnel. In particular, the failure to meet minimum capital requirements could

37

initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a material adverse effect on our operations and financial statements. We have in the past been required to make capital infusions to Union Federal, and regulatory authorities could require additional capital infusions or take other corrective measures in the future.

        There is a risk that we could incur additional costs in complying with regulations applicable to savings and loan holding companies and savings banks, or significant penalties if we fail to comply. Our ability to comply with all applicable laws and rules depends largely on our establishment and maintenance of a system to ensure such compliance, as well as our ability to attract and retain qualified compliance personnel. Further reductions in staffing levels could make it difficult to retain experienced personnel to maintain adequate internal controls related to regulatory matters. If severe failures in internal controls occur, regulatory authorities could impose sanctions on Union Federal or us. We could in the future be subject to additional supervisory orders to cease and desist, civil monetary penalties or other actions due to claimed noncompliance, which could have an adverse effect on our business, financial condition and operating results.

        The Dodd-Frank Act eliminates the OTS and replaces it with the OCC as the regulator of federal savings banks, such as Union Federal, and with the Federal Reserve as the regulator of savings and loan holding companies, such as FMD. There is a risk that we could incur additional costs in complying with differing interpretations of these new regulators for savings and loan holding companies and savings banks, or significant penalties if we fail to comply.

We may become subject to state registration or licensing requirements. If we determine that we are subject to the registration or licensing requirements of any jurisdiction, our compliance costs could increase significantly and other adverse consequences may result.

        Many states have statutes and regulations that require the licensure of small loan lenders, loan brokers, credit services organizations and loan arrangers. Some of these statutes are drafted or interpreted to cover a broad scope of activities. As of September 2, 2010, our subsidiary FMER has been approved for licenses in Massachusetts, New Jersey, Pennsylvania and Texas. Although we believe that our prior consultations with regulatory counsel and, in some cases state regulators, have identified all material licensing, registration and other regulatory requirements that could be applicable to us based on current laws and the manner in which we currently conduct business, we may be subject to additional state licensing, registration and other regulatory requirements in the future. In particular, certain state licenses or registrations may be required if we divest Union Federal, if we change our operations, if regulators reconsider their prior guidance or if federal or state laws or regulations are changed. In particular, the Dodd-Frank Act weakens federal pre-emption of state regulations currently enjoyed by federal savings associations and their operating subsidiaries, such as Union Federal and its operating subsidiary, FMLOS. Even if we are not physically present in a state, its regulators may take the position that registration or licensing is required because we provide services to borrowers located in the state by mail, telephone, the Internet or other remote means.

        Absent a change in federal law, either by judicial interpretation or legislation, including as discussed above, to the extent that our services are conducted through Union Federal, we believe it is less likely that state regulatory requirements affecting loan brokers, small lenders, credit services organizations or loan arrangers will be asserted. However, we are examining strategic alternatives for Union Federal, including a potential sale and, as noted above, the Dodd-Frank Act weakens federal pre-emption of state regulations currently enjoyed by federal savings and loan holding companies and their operating subsidiaries, such as Union Federal and FMLOS. Specifically, the Dodd-Frank Act eliminates for operating subsidiaries of federal banks the pre-emption of state licensing requirements. In addition, we may now be subject to state consumer protection laws in each state where we do business and those laws may be interpreted and enforced differently in different states. We will continue to review state registration and licensing requirements, and we intend to pursue registration or

38

licensing in applicable jurisdictions where we are not currently registered or licensed if we elect to operate through an entity that does not enjoy federal pre-emption. We cannot assure you that we will be successful in obtaining additional state licenses or registrations in a timely manner, or at all. If we determine that additional state registrations or licenses are necessary, we may be required to delay or restructure our activities in a manner that will not subject us to such licensing or registration requirements.

        Compliance with state licensing requirements could involve additional costs, which could have a material adverse effect on our business. Our failure to comply with these laws could lead to, among other things:

•

curtailment of our ability to continue to conduct business in the relevant jurisdiction, pending a return to compliance or processing of registration or a license application;

•

administrative enforcement actions;

•

class action lawsuits;

•

the assertion of legal defenses delaying or otherwise affecting the enforcement of loans; and

•

criminal as well as civil liability.

Any of the foregoing could have a material adverse effect on our business.

We may be exposed to liability for failures of third parties with which we do business to comply with the registration, licensing and other requirements that apply to them.

        Third parties with which we do, or have done, business, including federal and state chartered financial institutions, non-bank loan marketers, as well as TERI, are subject to registration, licensing and extensive governmental regulations, including TILA and other consumer protection laws and regulations. For example, some of the third-party marketers with which we have done or may do business may be subject to state registration or licensing requirements and laws and regulations, including those relating to small loans, loan brokers, credit services organizations and loan arrangers. As a result of the activities that we conduct or may conduct for our clients, it may be asserted that we have some responsibility for compliance by third parties with which we do business with the laws and regulations applicable to them, whether on contractual or other grounds. If it is determined that we have failed to comply with our obligations with respect to these third parties, we could be subject to civil or criminal liability. Even if we bear no legal liability for the actions of these third parties, the imposition of licensing and registration requirements on them, or any sanctions against them for conducting business without a license or registration, may reduce the volume of loans we process from them in the future.

Failure to comply with consumer protection laws could subject us to civil and criminal penalties or litigation, including class actions, and have a material adverse effect on our business.

        The federal government and state governments regulate extensively the financial institutions and other entities that originate loans in the private education loan market. These regulations include bankruptcy, tax, usury, disclosure, credit reporting, identity theft, privacy, fraud and abuse and other laws to protect borrowers. Changes in consumer protection laws or related regulations, or in the prevailing interpretations thereof, may expose us to litigation, result in greater compliance costs, constrain the marketing of private education loans, adversely affect the collection of balances due on the loan assets held by securitization trusts or otherwise adversely affect our business. We could incur substantial additional expense complying with these requirements and may be required to create new processes and information systems. Moreover, changes in the consumer protection laws and related regulations, or in the prevailing interpretations thereof, could invalidate or call into question the legality of certain of our services and business practices.

39

        The risk of noncompliance with regulatory requirements by our lender clients and their marketing partners has been highlighted by state and federal investigations into education loan marketing practices, particularly the payment of marketing fees directly to schools in exchange for loan referrals. State and federal regulatory authorities have sought information from some of our former clients and us regarding the loan programs we coordinated, and it is possible that some marketing or underwriting practices associated with the programs we coordinated and assets we securitized will be challenged as a result of such investigations. In August 2007, we announced that, as part of the New York Attorney General's ongoing investigation of several lending, educational and nonprofit institutions, we had received a subpoena for information regarding our role in the education loan industry. During fiscal 2008, we worked with the New York Attorney General's office regarding the investigation, and we have not received any further requests for information since May 2008.

        The regulatory actions described above have also prompted state and federal legislation that will affect our operations. In August 2009, the Federal Reserve Board issued regulations to implement provisions of the Higher Education Opportunity Act. The regulations revised the number, timing, and content of disclosures required for private education loans by TILA and the Federal Reserve Board's implementing regulation for TILA, Regulation Z. Under the regulations, private education loan creditors are now required to provide disclosures about loan terms and features on or with the loan application and are also required to disclose information about federal education loan programs that may offer less costly alternatives to private education loans. Additional disclosures must be provided when the loan is approved and after loan acceptance but prior to loan disbursement. Compliance with the new regulations became mandatory in February 2010. In addition, in December 2009, the Federal Reserve Board and the FTC announced final rules to implement the risk-based pricing provisions of the Fair and Accurate Credit Transactions Act of 2003. The final rules will generally require that lenders provide disclosures to certain consumers if credit is offered to them on less favorable terms than those offered by the lender to other consumers. Compliance with the disclosure requirements is mandatory as of January 1, 2011.

        Violations of the laws or regulations governing our operations, or the operations of our clients, could result in the imposition of civil or criminal penalties, the cancellation of our contracts to provide services or our exclusion from participating in education loan programs. These penalties or exclusions, were they to occur, would negatively impair our business reputation and ability to operate our business. In addition, the loan assets held by securitization trusts that we have structured could be adversely impacted by violation of tax or consumer protection laws. In such event, the value of our residual interests or asset servicing fees could also be adversely impacted. In some cases, such violations may render the loan assets unenforceable.

A recent Supreme Court decision, and recent legislative proposals, could affect the non-dischargeability of private education loans in bankruptcy.

        Under current law, private education loans can be discharged in bankruptcy only upon a court finding of "undue hardship" if the borrower were required to continue to make loan payments. The bankruptcy court must hear evidence and make a finding of "undue hardship" in order to discharge the debtor's private education loans. In March 2010, the United States Supreme Court upheld a bankruptcy confirmation order which discharged a debtor's private education loans without a finding of "undue hardship" by the bankruptcy court. Specifically, the debtor's proposed plan, which the bankruptcy court ultimately approved, included a discharge of the debtor's private education loans; however, the bankruptcy court never heard evidence or made a finding of "undue hardship." As a result of the Supreme Court's decision, it may be advisable for us, in performing collections management for the securitization trusts and our clients, to review certain bankruptcy filings that we do not currently review to determine if plans include a discharge of private education loans without the necessary adversary

40

proceeding and a finding of "undue hardship." Such additional review could increase our costs and the complexity of our operations.

        In April 2010, legislation was introduced in both the U.S. Senate and the U.S. House of Representatives that would generally end the bankruptcy exemption from dischargeability for all private education loans. If enacted as initially proposed, both bills would apply retroactively to loans already made, and would not require the borrower to make any payments before seeking discharge in bankruptcy. If enacted, these bills could adversely affect the performance of the securitization trusts and the key assumptions we used, including recovery assumptions, to estimate the fair value of our additional structural advisory fees. In addition, these bills, if enacted, may restrict the availability of capital to fund private education loans and may increase loan pricing to borrowers to compensate for the additional risk of bankruptcy discharge, which could adversely affect the competitiveness of our Monogram product and our ability to engage lenders to fund loans based on our Monogram product offering.

        In July 2009, legislation was introduced in the U.S. Senate that would allow private education loan borrowers to "swap" their private loan debt for federal unsubsidized Stafford or graduate/professional PLUS debt to the extent that previous Stafford or PLUS loans, as applicable, to such borrowers had not exceeded the aggregate limits established by federal law for such loans. Private education loans made between July 1, 1994 and July 1, 2010 would be eligible for such a swap. Borrowers could not be more than 90 days delinquent on their private education loans in order to qualify. In April 2010, similar debt-swap legislation was introduced in the U.S. House of Representatives. If either bill is enacted, borrowers with loans in the securitization trusts could exchange their private education loans for federal Stafford, PLUS, and/or Direct Consolidation loans. Accordingly, the bill could adversely affect the performance of the securitization trusts and the key assumptions that we have used to estimate the fair value of our additional structural advisory fees.

Recent litigation has sought to re-characterize certain loan marketers and other originators as lenders; if litigation on similar theories were successful against us or any third-party marketer we have worked with in the past, the loans that we facilitate would be subject to individual state consumer protection laws.

        All of the lenders with which we work are federally-insured banks and credit unions and, therefore, in most cases, are able to charge the interest rates, fees and other charges available to the most favored lender in their home state. In addition, our lender clients or prospective lender clients may be chartered by the federal government and enjoy pre-emption from enforcement of state consumer protection laws. In providing our private education loan services to our clients, we do not act as a lender, guarantor or loan servicer, and the terms of the loans that we facilitate are regulated in accordance with the laws and regulations applicable to the lenders.

        The association between marketers of high-interest "payday" loans, tax-return anticipation loans, or subprime credit cards, and online payment services, on the one hand, and banks, on the other hand, has come under recent scrutiny. Recent litigation asserts that loan marketers use lenders with a bank charter that authorizes the lender to charge the most favored interest rate available in the lender's home state in order to evade usury and interest rate caps, and other consumer protection laws imposed by the states where they do business. Such litigation has sought, successfully in some instances, to re-characterize the loan marketer as the lender for purposes of state consumer protection law restrictions. Similar civil actions have been brought in the context of gift cards. Moreover, federal banking regulators and the Federal Trade Commission have undertaken enforcement actions challenging the activities of certain loan marketers and their bank partners, particularly in the context of subprime credit cards. We believe that our activities, and the activities of third parties whose marketing on behalf of lenders has been coordinated by us, are distinguishable from the activities involved in these cases.

41

        Additional state consumer protection laws would be applicable to the loans we facilitate if we, or any third-party loan marketer engaged by us or a bank whose loans we facilitate, were re-characterized as a lender, and the loans (or the provisions governing interest rates, fees and other charges) could be unenforceable unless we or a third-party loan marketer had the requisite licenses or other authority to make such loans. In addition, we could be subject to claims by consumers, as well as enforcement actions by regulators. Even if we were not required to cease doing business with residents of certain states or to change our business practices to comply with applicable laws and regulations, we could be required to register or obtain licenses or regulatory approvals that could impose a substantial cost to us. As of September 2, 2010, there have been no actions taken or threatened against us on the theory that we have engaged in unauthorized lending; however, if such actions occurred, they could have a material adverse effect on our business.

Risks Relating to Ownership of Our Common Stock

The price of our common stock may be volatile.

        The trading price of our common stock may fluctuate substantially, depending on many factors, some of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose part or all of your investment in your shares of our common stock. Those factors that could cause fluctuations include, but are not limited to, the following:

•

the success of our Monogram product offering or our fee-for-service offerings;

•

announcement by us, our competitors or our potential competitors of acquisitions, new products or services, significant contracts, commercial relationships or capital markets activities;

•

actual or anticipated changes in our earnings or fluctuations in our operating results or in the expectations of securities analysts, including as a result of the timing, size or structure of any portfolio funding transactions;

•

difficulties we may encounter in structuring securitizations or alternative financings, including continued disruptions in the private education loan ABS market or demand for securities offered by trusts that we facilitate, or the loss of opportunities to structure securitization transactions;

•

any variance between the actual performance of the securitization trusts and the key assumptions that we have used to estimate the fair value of our additional structural advisory fees, asset servicing fees, residual receivables and private education loans held for sale, including among others, discount, net default and prepayment rates;

•

general economic conditions and trends, including unemployment rates and economic pressure on consumer asset classes such as private education loans;

•

developments in the TERI Reorganization, including consummation of the Plan of Reorganization and resolution of the challenges to the trusts' security interests in collateral securing TERI's guaranty obligations;

•

legislative initiatives affecting federal or private education loans, including initiatives relating to bankruptcy dischargeability and the federal budget and regulations implementing the Dodd-Frank Act;

•

changes in demand for our product and service offerings or in the education finance marketplace generally;

•

negative publicity about the private education loan market generally or us specifically;

•

regulatory developments or sanctions directed at Union Federal or us;

•

adverse rating agency actions with respect to the securitization trusts that we facilitated;

42

•

adoption of ASU 2009-17 and its effects on our reported financial condition and results of operations;

•

price and volume fluctuations in the overall stock market and volatility in the ABS market, from time to time;

•

significant volatility in the market price and trading volume of financial services and process outsourcing companies;

•

major catastrophic events;

•

purchases or sales of large blocks of our common stock or other strategic investments involving us; or

•

departures or long-term unavailability of key personnel, including our Chief Executive Officer, who we believe has unique insights and experience at this point of change in our business and the private education loan industry.

        In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been brought against that company. We have in the past been the target of securities litigation. Any future litigation could result in substantial costs and divert management's attention and resources from our business.

Insiders have substantial control over us and could limit your ability to influence the outcome of key transactions, including a change of control.

        Our directors and executive officers, and entities affiliated with them, owned approximately 22% of the outstanding shares of our common stock as of June 30, 2010, excluding shares issuable upon vesting of outstanding restricted stock units, shares issuable upon exercise of outstanding vested and unvested stock options and shares of preferred stock held by affiliates of GS Capital Partners, or GSCP, convertible into 8,846,733 additional shares of our common stock. Affiliates of GSCP have agreed not to convert shares of preferred stock if, after giving effect to any such conversion, they and their affiliates would own more than 9.9% of our outstanding shares of common stock. Approximately 5,138,803 additional shares of common stock could be issued to affiliates of GSCP upon conversion of shares of preferred stock before they and their affiliates would own more than 9.9% of our outstanding shares of common stock. These stockholders, if acting together, could substantially influence matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other extraordinary transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. The concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

Some provisions in our restated certificate of incorporation and amended and restated by-laws may deter third-parties from acquiring us.

        Our restated certificate of incorporation and amended and restated by-laws contain provisions that may make the acquisition of our company more difficult without the approval of our Board of Directors, including the following:

•

only our Board of Directors, our Chairman of the Board or our President may call special meetings of our stockholders;

•

our stockholders may take action only at a meeting of our stockholders and not by written consent;

43

•

we have authorized undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

•

our directors may be removed only for cause by the affirmative vote of a majority of the directors present at a meeting duly held at which a quorum is present, or by the holders of 75% of the votes that all stockholders would be entitled to cast in the election of directors; and

•

we impose advance notice requirements for stockholder proposals.

        These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire.

Section 203 of the Delaware General Corporation Law may delay, defer or prevent a change in control that our stockholders might consider to be in their best interests.

        We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits "business combinations" between a Delaware corporation and an "interested stockholder," which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation's voting stock, for a three-year period following the date that such stockholder became an interested stockholder. Section 203 could have the effect of delaying, deferring or preventing a change in control that our stockholders might consider to be in their best interests.

Item 1B.    Unresolved Staff Comments

        None.

Item 2.    Properties

        We lease buildings for our executive offices and operations. Our headquarters are located in Boston, Massachusetts, and we have additional offices in Medford, Massachusetts and North Providence, Rhode Island. The following table summarizes information as of September 2, 2010 with respect to the principal facilities that we lease:

Location	Principal activities	Area (sq. feet)		Lease expiration date
Boston, MA (Boylston Street)	Headquarters		51,972		2014
Medford, MA	Loan processing		153,156		2012
North Providence, RI	Union Federal		13,064		2011

        In addition, we have leased 135,719 square feet of office space in Boston, Massachusetts pursuant to a lease with a term expiring in 2014. As of September 2, 2010, we do not occupy such office space, of which we have subleased 89,799 square feet.

        We do not anticipate significant difficulty in obtaining lease renewals or alternate space as needed. As of September 2, 2010, we were in discussions to amend the lease relating to our Medford, Massachusetts location to, among other things, reduce the rented space by approximately 60,000 square feet by April 1, 2011 and extend the term of the lease to March 31, 2017.

Item 3.    Legal Proceedings

        We are involved from time to time in routine legal proceedings occurring in the ordinary course of business. In the opinion of management, there are no matters outstanding that would have a material adverse impact to our operations or financial condition.

Item 4.    (Removed and Reserved).

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information and Holders

        Our common stock is listed on the New York Stock Exchange under the trading symbol FMD. The following table sets forth the high and low sales prices of our common stock, as reported by the New York Stock Exchange of our common stock, for each quarterly period within our two most recent fiscal years. We did not declare dividends on our common stock in fiscal 2010 or fiscal 2009.

	High		Low
Fiscal 2010
First Quarter	$	2.93	$	1.65
Second Quarter		2.44		1.85
Third Quarter		3.21		2.07
Fourth Quarter		4.08		2.35
Fiscal 2009
First Quarter	$	5.14	$	1.65
Second Quarter		2.85		0.58
Third Quarter		1.68		0.71
Fourth Quarter		2.71		1.23

        Computershare Trust Company, N.A. is the transfer agent and registrar for our common stock. As of the close of business on September 1, 2010, we had 78 holders of record of our common stock. This number does not include stockholders for whom shares are held in "street" or nominee name.

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Performance Graph

        The following graph compares the cumulative five-year total return attained by stockholders on our common stock relative to the cumulative total returns of the Dow Jones U.S. index and the Dow Jones U.S. Financial Services index. The graph tracks the performance of a $100 investment in our common stock and in each of the indices (with the reinvestment of all dividends) from June 30, 2005 to June 30, 2010.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Among The First Marblehead Corporation, the Dow Jones U.S. Index
and the Dow Jones U.S. Financial Services Index

              © 2010 Dow Jones & Co. All rights reserved.

*

$100 invested on June 30, 2005 in stock or index, including reinvestment of dividends.

        The information included under the heading "Performance Graph" is "furnished" and not "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed to be "soliciting material" subject to Regulation 14A or incorporated by reference in any filing under the Securities Act or the Exchange Act.

Dividends

        We did not declare any dividends during fiscal 2010 or fiscal 2009, and we do not expect to declare any dividends in the foreseeable future. Any decision to pay future dividends will be made by our Board of Directors and will depend upon applicable regulatory approvals and our earnings, financial condition, capital and regulatory requirements and such other factors as our Board of Directors deems relevant. In connection with the termination of the Supervisory Agreement, our Board of Directors adopted resolutions requiring FMD to notify the OTS in advance of any distributions to our stockholders in excess of $1.0 million in any fiscal quarter.

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Issuer Purchases of Equity Securities

        In April 2007, our Board of Directors authorized the repurchase of up to 10,000,000 shares of our common stock. The 10,000,000 shares authorized for repurchase included approximately 3,393,300 shares that remained available for repurchase under a previously authorized repurchase program. As of June 30, 2010, we had repurchased an aggregate of 1,169,100 shares under this program at an average price, excluding commissions, of $36.17 per share. We did not repurchase any shares of common stock pursuant to this program in fiscal 2010 or fiscal 2009. Future repurchases pursuant to this program may require regulatory approval.

        During fiscal 2010, 596,582 shares were retained by us upon the vesting of employee restricted stock units in order to satisfy the applicable statutory minimum tax withholding obligations in connection with such vesting.

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Item 6.    Selected Financial Data

        The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes included in Item 8 of this annual report, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 of this annual report. We have derived the data from consolidated financial statements, which were audited by KPMG LLP, an independent registered public accounting firm. The historical results presented here are not necessarily indicative of future results.

				Fiscal years ended June 30,
				2010			2009			2008			2007		2006
				(dollars and shares in thousands, except per share data)
Consolidated Statements of Income Data:
Service revenues:
	Additional structural advisory fees:
		Trust updates		$	(19,825	)	$	(57,157	)	$	(44,106	)	$	1,363	$	1,241
		New securitizations			—			—			24,304			43,984		33,685
	Up-front structural advisory fees				—			—			179,106			457,352		208,178
			Total structural advisory fees		(19,825	)		(57,157	)		159,304			502,699		243,104
	Asset servicing fees:
		Fee income			6,901			2,350			—			—		—
		Fee updates			(3,506	)		35			—			—		—
			Total asset servicing fees		3,395			2,385			—			—		—
	Residuals:
		Trust updates			2,863			(283,295	)		(488,832	)		29,548		28,239
		New securitizations			—			—			116,972			182,744		177,309
			Total residuals		2,863			(283,295	)		(371,860	)		212,292		205,548
	Administrative and other fees				19,967			22,958			158,525			156,342		114,920
			Total service revenues		6,400			(315,109	)		(54,031	)		871,333		563,572
	Net interest income				9,871			25,103			25,622			9,371		5,463
			Total revenues		16,271			(290,006	)		(28,409	)		880,704		569,035
Non-interest expenses:
	Compensation and benefits				43,096			42,232			96,735			111,364		89,214
	General and administrative expenses				58,064			80,438			254,439			141,591		98,593
	Losses on education loans held for sale				130,955			138,163			7,373			—		—
		Total non-interest expenses			232,115			260,833			358,547			252,955		187,807
		Income (loss) from operations			(215,844	)		(550,839	)		(386,956	)		627,749		381,228
		Other income			—			—			—			16		2,526
		Income (loss) before income taxes			(215,844	)		(550,839	)		(386,956	)		627,765		383,754
Income tax expense (benefit)					(70,320	)		(187,819	)		(151,880	)		256,434		147,794
Net income (loss)				$	(145,524	)	$	(363,020	)	$	(235,076	)	$	371,331	$	235,960
Net income (loss) per common share:
	Basic			$	(1.46	)	$	(3.66	)	$	(2.46	)	$	3.94	$	2.47
	Diluted				(1.46	)		(3.66	)		(2.46	)		3.92		2.45
Cash dividends declared per share					—			—			0.395			0.62		0.32
Weighted average shares outstanding:
	Basic				99,537			99,081			95,732			94,296		95,366
	Diluted				99,537			99,081			95,732			94,845		96,258

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	June 30,
	2010		2009		2008		2007		2006
	(dollars in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	330,073	$	158,770	$	70,280	$	95,937	$	75,711
Federal funds sold		2,000		14,326		80,215		10,334		—
Short-term investments, at cost		50,000		—		—		—		—
Investments held for sale, at fair value		4,471		8,450		70,629		128,650		67,250
Education loans held for sale		107,434		350,960		497,324		24,463		—
Service receivables		53,279		67,475		407,097		798,759		541,120
Income taxes receivable		17,560		166,410		—		49,345		11,649
Total assets		633,370		821,330		1,200,898		1,214,463		770,346
Deposits		108,732		154,462		244,113		53,523		—
Education loan warehouse facility		218,059		230,137		242,899		—		—
Total liabilities		363,555		415,865		563,286		371,843		194,177
Total stockholders' equity		269,815		405,465		637,612		842,620		576,169

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our "Selected Financial Data" included in Item 6 of this annual report and "Financial Statements and Supplementary Data" included in Item 8 of this annual report. In addition to historical information, this discussion of financial condition and results of operations contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those expressed or implied by the forward-looking statements due to applications of our critical accounting policies and factors including, but not limited to, those set forth under the caption "Risk Factors" included in Item 1A of this annual report.

Executive Summary

Overview

        We offer outsourcing services to national and regional financial and educational institutions for designing and implementing private education loan programs. These school-certified loan programs are designed to be marketed through educational institutions or to prospective student borrowers and their families directly. The private education loan portfolios generated by these loan programs may be held by the originating lender or financed in the capital markets. In addition, we provide administrative and other services to securitization trusts that we facilitated, asset servicing to the third-party owner of certain securitization trusts as well as portfolio management services.

        We offer clients the opportunity to outsource key components of their private education loan programs to us by providing a fully integrated suite of services, including our Monogram product offering. We offer the following services on a stand-alone, fee-for-service basis or as an integrated part of our Monogram product offering:

•

Loan origination—We provide loan processing services to schools and lenders, from application intake through loan disbursement. We are able to customize our services to meet the specific branding, pricing and underwriting requirements of our clients.

•

Portfolio management—We manage private education loan portfolios on behalf of their owners, including trusts facilitated by us, by employing risk analytics to monitor and manage the performance of the portfolio over time. As part of this service offering, we monitor portfolio performance metrics, manage the performance of third-party vendors and interface with rating

49

agencies. Our infrastructure provides us with data that enables comprehensive analytics, and we are able to customize collections strategies as needed to optimize loan performance.

•

Trust administration—As administrator for securitization trusts that we facilitated, we perform various administrative functions, including preparation of financial statements, monitoring of the performance of loan servicers and third-party collection agencies, including ensuring compliance with the servicing guidelines and various other transaction agreements and overseeing default prevention and collections activities. We are responsible for reconciliation of funds among the third parties and the trusts, and we also provide regular reporting to investors in the ABS issued by the trusts and other parties related to the trusts.

•

Asset Servicing—Our experience enables us to offer asset servicing such as residual analysis and valuation optimization services and strategies relating to asset funding to holders of a residual interest in private education loan securitizations.

        Our subsidiary, Union Federal, is a federally chartered thrift that offers residential and commercial mortgage loans and retail savings, money market and time deposit products. Prior to 2009, Union Federal also offered private education loans directly to consumers; however, Union Federal did not originate private education loans during fiscal 2009 or fiscal 2010, and as of September 2, 2010, we do not expect Union Federal to offer private education loans during fiscal 2011. We have begun exploring strategic alternatives for Union Federal, including a potential sale.

        Substantially all of our financial results have been derived from services provided with respect to private education loans, which we consider to be a single industry segment for financial reporting purposes.

        Our Monogram product encompasses some or all of our service offerings and enables a lender to customize its loan program to meet its risk control and return objectives. Specifically, the lender can customize the range of loan terms offered to its qualified applicants, such as borrower repayment options, repayment terms and borrower pricing. Our Monogram product is based on our proprietary origination risk score model, which uses borrower and cosigner attributes, as well as distribution channel variables, to assign a specific level of credit risk to the application at the time of initial credit decisioning. A score is assigned to each application and governs the loan terms and features offered to applicants who pass the credit review. For example, higher risk applicants may not be eligible to defer principal and interest while in school. Our online application also provides a qualified applicant with some ability to configure loan terms, showing the financial effects of the choices using a real-time repayment calculator. Our Monogram product can be structured so that lenders can hold the loans through the scheduled repayment, prepayment or default, or for some limited period of time before disposing of the loans in a capital markets transaction. We believe that the loans generated through our Monogram product will generally have shorter repayment periods and an increased percentage of borrowers making payments while in school, in each case when compared to loans generated under programs that we previously facilitated, and high cosigner participation rates. The success of our Monogram product will be a key driver of our future financial results and will be critical to growing and diversifying our revenues and client base. Development of our Monogram product was completed in August 2009, and the first loans based on our Monogram product offering were disbursed during the first quarter of fiscal 2011. In connection with the two initial Monogram-based loan programs, we agreed to provide credit enhancement to each of the lenders by funding a Participation Account, up to a specified dollar limit, to serve as a first-loss reserve for defaulted program loans. We will or have already provided an initial deposit into the Participation Accounts and have agreed to provide supplementary deposits into such accounts on a quarterly basis during the term of the loan program agreements based on disbursed loan volume and adjustments to default projections for program loans. As consideration for the credit enhancement, we are entitled to receive a share of the interest

50

generated on the loans. As of September 2, 2010, we have funded capital commitments in the amount of $7.4 million in support of SunTrust Bank's Monogram-based program.

        Historically, the driver of our results of operations and financial condition was the volume of private education loans for which we provided outsourcing services from loan origination through securitization. In addition, asset-backed securitizations were our sole source of permanent financing for our clients' private education loan programs, and substantially all of our income was derived from securitizations. Securitization refers to the technique of pooling loans and selling them to a special purpose entity, typically a trust, which issues notes backed by those loans to investors. In the past, we offered our clients a fully integrated suite of outsourcing services, but we did not charge separate fees for many of those services. Although we provided those various services without charging a separate fee, or at "cost" in the case of loan processing services, we generally entered into agreements with the lender clients giving us the exclusive right to securitize the private education loans that they did not intend to hold. For our past securitization services, we are entitled to receive additional structural advisory fees from the trusts over time and, in the case of certain trusts, residual cash flows.

Business Trends and Uncertainties

        We have not accessed the securitization market since September 2007 as a result of market disruptions that began in the second quarter of fiscal 2008 and, to a lesser extent, persisted as of September 2, 2010. General economic conditions in the United States have deteriorated and not fully recovered over this time period. Our business has been and continues to be materially adversely impacted by these conditions.

        Credit performance of consumer related loans generally, as well as our private education loan portfolios and those held by the various securitization trusts that we facilitated, continued to be adversely affected by general economic conditions, including high unemployment rates. The interest rate and economic and credit environments may continue to have a material negative effect on the estimated value of our service receivables and private education loans held for sale, which at June 30, 2010, primarily consisted of a portfolio of private education loans held by our subsidiary, UFSB-SPV, and pledged to a third party conduit lender pursuant to an education loan warehouse facility. See Note 10, "Liabilities and Unused Lines of Credit—Education Loan Warehouse Facility," in the notes to our consolidated financial statements included in Item 8 of this annual report for additional information.

        Our private education loan portfolios and those of the NCSLT Trusts have experienced higher levels of defaults and lower levels of repayments than we originally projected. As a result, we significantly adjusted our projected performance assumptions associated with the NCSLT Trusts during fiscal 2010 and fiscal 2009, including significant increases in our assumed default rates. During fiscal 2010, prepayment rates, however, remained at a rate that is extremely low by historical standards. During fiscal 2010, credit rating agencies took negative rating actions with respect to certain securitizations that we facilitated, citing ongoing performance deterioration, higher than expected levels of delinquencies and defaults, the expected reprioritization to senior noteholders of subordinate ABS cash flows, declines in parity levels, reductions in available credit support for the transactions and interest trigger events that resulted in an interest shortfall to certain classes of notes. These events have resulted in net reductions in the fair value of our additional structural advisory fees, asset servicing fees and residual receivables.

        We recorded net losses of $17.0 million during fiscal 2010 and $340.5 million during fiscal 2009 as a result of trust updates to our additional structural advisory fee and residual receivables. We also recorded losses of $131.0 million during fiscal 2010 and $138.2 million during fiscal 2009 in connection with fair value adjustments and realized losses on sales of portfolios of private education loans held for sale.

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        In addition, our lender clients previously had the opportunity to mitigate their credit risk through a loan repayment guaranty by TERI, and we historically received reimbursement from TERI for outsourced loan processing services we performed on TERI's behalf. In April 2008, TERI filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. As a result of the TERI Reorganization, many clients elected to terminate some or all of their agreements with us, which resulted in a significant reduction in our facilitated loan volumes during fiscal 2009 and fiscal 2010 as compared to prior fiscal years. The TERI Reorganization, together with capital markets dislocations, has had, and will likely continue to have, a material adverse effect on the securitization trusts' ability to realize guaranty obligations of TERI and our ability to realize fully the cost reimbursement obligations of TERI.

        As a result of economic conditions, we took several measures in fiscal 2010 and fiscal 2009 to adjust our business model:

•

We improved our liquidity position in August 2008, when we received $132.7 million in gross proceeds from an equity financing.

•

We greatly reduced our annual cash expenditure requirements through reductions in headcount, consolidation of office space and other cost saving initiatives that began in fiscal 2008 and continued through fiscal 2010.

•

During fiscal 2009, we made significant changes in our senior management team.

•

Effective March 31, 2009, we sold the Trust Certificate. The sale of the Trust Certificate combined with operating losses in fiscal 2009 resulted in refunds from tax authorities of $176.6 million, received in October 2009. In addition, the purchaser of the Trust Certificate agreed to bear all future federal and state tax liabilities associated with the NCSLT Trust residuals, which would have had a material negative effect on our financial condition and liquidity. We are no longer entitled to the residual cash flows of the NCSLT Trusts, although we continue to be entitled to receive residuals from other trusts.

•

During fiscal 2009, we designed our Monogram product, including the development and validation of our proprietary origination risk score model, product pricing, an enhanced application interface and additional disbursement and reporting capabilities. We completed this development in August 2009. Our Monogram product was designed in part to provide us with fee-based income as our services are provided, reducing our dependence on the securitization market in order to generate revenue. We expect to earn monthly service fees, as well as a share of the portfolio income generated over the life of the loans.

•

In October 2009, we sold approximately 88% of the private education loan portfolio held by Union Federal as part of a risk reduction plan required by our Supervisory Agreement with the OTS. This sale resulted in gross proceeds of $121.6 million. In November 2009, we sold the remainder of Union Federal's private education loan portfolio to one of our non-bank subsidiaries.

•

In April 2010, we restructured UFSB-SPV's education loan warehouse facility. As part of the restructuring, ownership of UFSB-SPV was transferred from Union Federal to one of our non-bank subsidiaries, FMD succeeded Union Federal as master servicer under the facility and FMD assumed certain potential contingent liabilities of Union Federal under the facility, subject to a cap.

•

We continue to examine alternatives with respect to Union Federal, including a potential sale, which we believe would provide further liquidity. We believe that the termination by the OTS of the Order and Supervisory Agreement during the third quarter of fiscal 2010 and the elimination of Union Federal's ongoing duties and potential contingent liabilities related to UFSB-SPV's education loan warehouse facility will be viewed favorably by potential purchasers as we consider our strategic alternatives with respect to Union Federal.

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        We remain focused on preserving capital and maximizing liquidity in these challenging market conditions. Changes in any of the following factors could materially affect our financial results:

•

the level of market acceptance of our Monogram product and our fee-for-service offerings;

•

demand for private education financing, which may be affected by changes in limitations established by the federal government on the amount of federal loans that a student can receive, the terms and eligibility criteria for loans and grants under the federal government's programs and legislation recently passed or under consideration as of September 2, 2010;

•

competition for providing private education financing and reluctance by lenders to participate in the private education loan market;

•

conditions in the private education loan securitization market, including the costs or availability of financing, rating agency assumptions or actions, and market receptivity to private education loan asset-backed securitizations;

•

regulatory requirements applicable to Union Federal and us;

•

general interest rate and consumer credit environments, including their effect on our assumed discount rate, net default and prepayment rates, the forward LIBOR curve and the trusts' ability to recover principal and interest from borrowers;

•

our critical accounting policies and estimates;

•

challenges relating to the federal income tax treatment of the sale of the Trust Certificate or our Asset Services Agreement with the purchaser of the Trust Certificate, including proceedings related to any tax refund previously received;

•

changes in GAAP which could impact the carrying value of assets and liabilities, as well as require the consolidation or deconsolidation of certain variable interest entities, particularly following our consolidation of 14 securitization trusts, and an associated net increase in total assets and liabilities of approximately $8.0 billion and $8.8 billion, respectively, effective July 1, 2010, as further discussed below;

•

applicable laws and regulations, which may affect the terms upon which lenders agree to make private education loans, recovery rates on defaulted private education loans and the cost and complexity of our loan facilitation operations; and

•

developments in connection with the TERI Reorganization, including the consummation of the Modified Plan of Reorganization proposed by TERI and the Creditors Committee in August 2010 or the terms of a successor plan of reorganization.

        We have made substantial progress in improving our financial condition and liquidity since the beginning of fiscal 2009. At June 30, 2008, we had $140.9 million of cash, cash equivalents and investments. Compensation and benefits expense during fiscal 2008 was $96.7 million, and our product offering was dependent on securitization markets that we could not access and a bankrupt third-party guarantor. In addition, we were at the time confronting significant future tax liabilities on income from the NCSLT Trusts prior to our receipt of cash from these trusts, and had at June 30, 2008 private education loans held for sale with a principal and interest balance of $504.7 million. In contrast, we ended fiscal 2010 with $384.5 million of cash, cash equivalents and investments. Compensation and benefits expense during fiscal 2010 was $43.1 million, and our Monogram product offering had been designed and successfully sold to two lender clients. We believe that we have eliminated our future tax liabilities relating to income from the NCSLT Trusts, and we have reduced the outstanding principal and interest balance of private education loans held for sale to $273.4 million at June 30, 2010. In addition, we successfully defended securities class action litigation and resolved formal enforcement actions initiated by the OTS.

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        Although we have limited experience with our Monogram product, we believe that it will provide us with an opportunity to structure, process and originate private education loans and that our two recent loan program agreements are a significant step in our return to the private education lending marketplace.

        We also believe that conditions in capital markets generally continued to improve during fiscal 2010, potentially creating additional flexibility with regard to the financing of private education loans. We continue to believe, as of September 2, 2010, however, that the structure and economics of any near-term financing transaction would be less favorable than our past securitizations, with possibly lower revenues and additional cash requirements on our part.

        During fiscal 2011, we expect to continue to press for resolution of our claims against TERI in the context of the TERI Reorganization, explore strategic alternatives for Union Federal, cultivate additional lender clients for our Monogram product and seek innovative and efficient portfolio funding transactions.

Application of Critical Accounting Policies and Estimates

        Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the reported amounts of income and expenses during the reporting periods. We base our estimates, assumptions and judgments on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under varying assumptions or conditions.

        Our significant accounting policies are more fully described in Note 2, "Significant Accounting Policies," in the notes to our consolidated financial statements included in Item 8 of this annual report. On an ongoing basis, we evaluate our estimates and judgments, particularly as they relate to accounting policies that we believe are most important to the portrayal of our financial condition and results of operations, such as those involving recognition of service revenues and the valuation of our service receivables and portfolio of private education loans held for sale. We regard an accounting estimate or assumption underlying our financial statements to be a "critical accounting estimate" where:

•

the nature of the estimate or assumption is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and

•

the impact of the estimates and assumptions on our financial condition or operating performance is material.

        We have discussed our accounting policies with the Audit Committee of our Board of Directors, and we expect to make changes to our critical accounting policies during the first quarter of fiscal 2011 as a result of our adoption of certain accounting pronouncements. See "—Consolidation" below for additional information. As of June 30, 2010, we determined that our estimates relating to the recognition and valuation of our securitization-related revenues and receivables and asset servicing revenue and receivables, as described below, fit the definition of critical accounting estimates. As of June 30, 2010, we also considered our policy with respect to the determination of whether or not to consolidate the financial results of the securitization trusts that we facilitate and the valuation of the portfolios of private education loans held for sale to be critical accounting policies.

Service Receivables and Related Revenue

        We have historically structured and facilitated securitization transactions for our clients through a series of special purpose statutory trusts. Through the securitization process, the trusts obtained private education loans from the originating lenders or their assignees, which relinquished to the trust their

54

ownership interest in the loans. The debt instruments that the trusts issued to finance the purchase of these private education loans are obligations of the trusts, rather than our obligations or those of originating lenders or their assignees. We have recognized several types of fees in connection with our past securitization services:

•

Additional structural advisory fees.  We are entitled to receive a structural advisory fee over the life of the trust, based on the amount of loans outstanding in the trust from time to time.

•

Residuals.  We also have the right to receive a portion of the residual interests, if any, generated by various securitization trusts other than the NCSLT Trusts. This right is junior in priority to the rights of the holders of the debt sold in the securitizations and additional structural advisory fees.

•

Up-front structural advisory fees.  We received a structural advisory fee at the time of our previous securitizations, based on the volume of loans securitized.

        We are entitled to receive asset servicing fees from the owner of the Trust Certificate for services that we provide on an ongoing basis. Receipt of these fees is contingent upon distributions available to the owners of the residual interests of such trusts.

        As required under GAAP, we recognize the fair value of additional structural advisory fees and residuals as revenue at the time the securitization trust purchases the private education loans, as they are deemed to be earned at the time of the securitization but before we actually receive payment. These amounts are deemed earned because evidence of an arrangement exists, we have provided the services, the fee is fixed and determinable based upon a discounted cash flow analysis and there are no future contingencies or obligations due on our part. On a quarterly basis, as required under GAAP, we update our estimate of the fair value of these receivables as if they are investments in securities classified as trading, similar to retained interests in securitizations. We recognize changes in fair value, less cash received, if any, as trust updates in servicing revenue in the period in which the change in estimate occurs.

        We earn asset servicing fees as the services are performed; however, the receipt of the fees is contingent on distributions available to the owners of the residual interests of the trusts subject to these services. We estimate the fair value of our asset servicing fee receivable based on income earned to date and the expected timing of the cash receipts of such income. The net present value of fees earned for services performed during the period is recognized in revenue as fee income and changes in the estimated fair value of the receivable are recognized in revenue as fee updates.

        Because there are no quoted market prices for our additional structural advisory fees, asset servicing fees or residual receivables, we use discounted cash flow modeling techniques and the following key assumptions to estimate fair value:

•

expected annual rate and timing of loan defaults, including the effects of various risk mitigation strategies and temporarily modified payment plans for borrowers;

•

expected amount and timing of recoveries of defaulted loans;

•

discount rate, which we use to calculate the present value of our future cash flows;

•

trend of interest rates over the life of the loan pool, including the forward LIBOR curve and expected auction rates, if applicable;

•

annual rate and timing of private education loan prepayments;

•

results of the TERI Reorganization and anticipated settlement of claims; and

•

fees and expenses of the securitization trusts.

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        We base our estimates on historical data, certain macroeconomic indicators, publicly available third-party data and our industry experience adjusted for specific product and borrower characteristics such as loan type and borrower creditworthiness. We monitor trends in loan performance over time and make adjustments we believe are necessary to value properly our receivable balances and private education loans at each balance sheet date. Management's ability to determine which factors should be more heavily weighted in our estimates, and our ability to accurately incorporate those factors into our loan performance assumptions, can have a material effect on our valuations.

        At June 30, 2010 and 2009, additional structural advisory fee receivables were primarily due from the NCSLT Trusts. At June 30, 2010 and 2009, the aggregate outstanding principal balance of the debt issued by the NCSLT Trusts was $12.10 billion and $12.77 billion, respectively. The principal underlying assets in the NCSLT Trusts were TERI-guaranteed private education loans with an aggregate outstanding principal and interest balance of $10.48 billion, of which $2.42 billion in outstanding principal and interest, or 23.2%, were in deferment, $495.2 million in outstanding principal and interest, or 4.7%, were in forbearance and $7.56 billion in outstanding principal and interest, or 72.1%, were in repayment status as of June 30, 2010. In accordance with previously established servicer guidelines, certain borrowers have utilized a modified graduated payment program which permitted such borrowers to make payments that, for two years, were less than original contractual amounts due, then reset to require full repayment in accordance with original contractual interest rates and maturity dates. During fiscal 2009 and fiscal 2010, the average outstanding aggregate principal and interest balance of loans entering this program was 26% of the average outstanding aggregate principal and interest balance of loans then in repayment. Outstanding principal and interest in the amount of $6.89 billion, or 91.2%, of the loans in repayment status as of June 30, 2010 were current, $345.6 million in outstanding principal and interest, or 4.5%, were between 31 and 90 days past due, $177.0 million in outstanding principal and interest, or 2.3%, were between 91 and 180 days past due, and $154.0 million in outstanding principal and interest, or 2.0%, were greater than 180 days past due. The payment status of borrowers, including borrowers making payments pursuant to a modified graduated payment program, is determined by contractual due dates. As of June 30, 2010, the cumulative gross default rate with regard to loans in, and loans that have previously been in, repayment status in the NCSLT Trusts was 14.5%. We have posted to our website, www.firstmarblehead.com, and filed as exhibit 99.1 to this annual report, static pool data as of June 30, 2010, including original pool characteristics and borrower payment status, delinquency, cumulative loss and prepayment data as of June 30, 2010 for certain securitization trusts that we facilitated. We have also posted to our website, and filed as exhibit 99.2 to this annual report, a supplemental presentation of certain historical trust performance data, including parity ratios by trust, net recovery rates by year of default, six-month rolling prepayment rates, payment status by trust and payment status by risk segment.

Default, Recovery and Prepayment Rates.

        Default, recovery and prepayment rates are defined as follows:

•

Default rates are the estimated cumulative principal balance of defaulted loans over the life of a trust divided by the original principal balance of the loans;

•

Recovery rates are the estimated net cumulative amount of recoveries (reduced by costs of recovery) on defaulted loans over the life of the trust; and

•

Prepayments are the difference between the total amount of payments, both principal and interest, received from or on behalf of a borrower and the amount of principal and interest billed to the borrower during the same period.

        Prior to the third quarter of fiscal 2010, our assumptions for default, recovery and prepayment rates relied primarily on historical data, updated in the short-term for differences between projected results and actual results. We evaluate our modeling methodologies on an ongoing basis, and during

56

fiscal 2010, we engaged an independent consulting firm to assist us in assessing our loss forecasting modeling methodology. As a result of this assessment, we refined our models effective March 31, 2010 to include a prospective methodology that also applies macroeconomic factors in projecting future loan performance. Historical data was used to validate the enhanced methodology.

        Discount Rates.    We apply discount rates to each of our financial instruments that we believe are commensurate with the tenure and risks involved. In determining an appropriate discount rate for valuing our asset servicing fee and residual receivables, we consider a number of factors, including market data made available to us on spreads on federally guaranteed loans and private education loans, as well as rates used in the much broader ABS market. We also evaluate yield curves for corporate subordinated debt with maturities similar to the weighted-average life of our residual interests. Until the third quarter of fiscal 2010, the discount rate that we used to estimate fair value of our additional structural advisory fees was based on the 10-year U.S. Treasury Bond rate plus a risk premium. In determining the risk premium, we considered factors such as yields on B-rated instruments, the level of cash flows available to residual interests that support the additional structural advisory fees, as well as the weighted-average life of the additional structural advisory fee receivables. During the fourth quarter of fiscal 2010, we refined our methodology for determining default and prepayment assumptions, which resulted in changes to projected cash flows. These projected cash flows had the effect of lengthening the weighted-average life of the additional structural advisory fee receivables, significantly reducing the amount of cash flows available to the residual interests that support the cash flows available for additional structural advisory fees and delaying the timing of receipt of additional structural advisory fees. The combination of all these factors led us to determine that additional structural advisory fee receivables are more analogous to longer term financial instruments than 10-year debt instruments. The 14.0% discount rate used for additional structural advisory fees reflects market data made available to us on spreads on federally guaranteed loans and private education loans, as well as rates used in the much broader ABS market and is 2.0% less than the 16.0% used for residual receivables, reflecting the seniority of the additional structural advisory fees in the cash flow waterfall of the securitization trusts.

        Auction Rate Note Interest Rates.    Five of the NCSLT Trusts issued auction rate notes to finance, in whole or in part, the purchase of private education loans. Failed auctions occurred and have persisted as of September 2, 2010 with respect to these five trusts. The failed auctions, deterioration in trust performance and the downgrade in insurance financial strength ratings assigned to the credit enhancement provider for certain auction rate notes, have resulted in the auction rate notes bearing interest at a maximum spread over one-month LIBOR as specified in the indentures, based on the ratings assigned to the notes as of September 2, 2010. We assume that all auction rate notes will continue to bear interest at their current maximum spreads until their expected maturity dates.

        Forward LIBOR Curve.    The forward LIBOR curve is a market observable input obtained from an independent third party. LIBOR is the underlying rate for most of the trusts' assets and liabilities, and fluctuations in LIBOR can have a significant effect on the cash flows generated by each trust. Changes in the forward LIBOR curve affect the principal balances of private education loans held by the trusts, particularly as interest is capitalized during loan deferment, which affects the net interest margin that the trust generates. In addition, certain trusts have issued a tranche of ABS that bears a fixed interest rate. A decrease in the forward LIBOR curve has resulted in the past in a reduced spread on the fixed-interest tranche, which has in the past decreased the estimated fair value of our service receivables. Significant changes to the forward LIBOR curve can also affect the estimated fair value of our additional structural advisory fees accumulated, the majority of which bear interest at the rate of LIBOR plus a spread to the extent such fees are accrued but unpaid by the trusts.

        TERI's Obligation to Pay Claims.    During fiscal 2008, we adjusted the estimated fair value of our service receivables to reflect our assumption that TERI would not be able to honor its obligations to the NCSLT Trusts beyond the amounts available in Pledged Accounts, assuming all recoveries on

57

defaulted loans would be used to replenish such Pledged Accounts. During fiscal 2010, we updated our assumptions to reflect the terms of the Plan of Reorganization, as follows:

•

With limited exceptions, each NCSLT Trust will receive from TERI the balance, if any, remaining in its respective Pledged Account;

•

Certain defaulted loans transferred by the NCSLT Trusts to TERI prior to the TERI Reorganization will be assigned to the respective NCSLT Trust, and, with limited exceptions, all recoveries on such loans will benefit the respective NCSLT Trust;

•

Defaulted loans transferred by the NCSLT Trusts to TERI subsequent to the TERI Reorganization using funds from a Pledged Account will not be assigned to the respective NCSLT Trust, but rather will be assigned to a liquidating trust. Recoveries on such loans will benefit unsecured creditors of TERI pro rata, including the NCSLT Trusts, and will not replenish the Pledged Account of the respective NCSLT Trust; and

•

Each NCSLT Trust will receive a pro rata distribution of defaulted loan recoveries available to the general unsecured creditors of TERI based on each trust's unsecured claim. No other amounts have been assumed to benefit the trusts for their claims as general unsecured creditors.

        The Modified Plan of Reorganization, which was filed in August 2010, changes certain aspects of the settlements offered to the NCSLT Trusts compared to the settlements offered by the Plan of Reorganization. As of September 2, 2010, we did not expect those changes to have a material effect on the estimated fair value of our service receivables. As of September 2, 2010, the voting and confirmation process for the Modified Plan of Reorganization had not commenced, and the terms of the Modified Plan of Reorganization remain subject to change. See Note 12, "Commitments and Contingencies—TERI Reorganization," in the notes to our consolidated financial statements included in Item 8 of this annual report for additional details.

Sensitivity Analysis

        Increases in our estimates of defaults, prepayments and discount rates, as well as decreases in default recovery rates and the multi-year forward estimates of LIBOR, would have a negative effect on the value of our additional structural advisory fees, as well as our asset servicing fee receivables and our private education loans held for sale.

        Information about the actual performance of the NCSLT Trusts is included above under "—Application of Critical Accounting Policies and Estimates—Service Receivables and Related Revenue" and as exhibit 99.1 to this annual report. You should consider that actual trust performance data in assessing our projected performance assumptions at June 30, 2010. The following table illustrates the anticipated impact on the fair value of additional structural advisory fee receivables that would occur for changes in loan performance and discount rate assumptions at June 30, 2010. We used variations of 10% and 20%, up and down, except for the forward LIBOR rates, which are based on variations of 1% and 2%, from the assumptions used at June 30, 2010. We also assumed that the Plan of Reorganization, including terms applicable to the NCSLT Trusts, would be confirmed by the Bankruptcy Court. Changes to the Plan of Reorganization, such that the NCLST Trusts were to receive less defaulted loans or less recoveries on defaulted loans, would have an additional negative effect on the value of our receivables.

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        The sensitivities presented below are hypothetical and should be used with caution. The effect of each change in assumption must be calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact be independent, the net effect of simultaneous adverse changes in key assumptions may differ materially from the sum of the individual effects calculated below. For a description of risk segments, see "—Results of Operations—Years ended June 30, 2010, June 30, 2009 and June 30, 2008—Service Revenues—Private Education Loan Performance Assumptions—Risk Segments" below.

								Management assumptions and receivables balance at June 30, 2010
		Change in assumption									Change in assumption
Structural advisory fees		Down 20%			Down 10%						Up 10%			Up 20%
		(dollars in thousands)
Default rate:
	Management assumptions(1):
	Segment 1		8.8	%		9.2	%		9.7	%		10.1	%		10.6	%
	Segment 2		17.8			18.7			19.6			20.5			21.4
	Segment 3		45.2			47.1			48.8			50.5			52.2
	Total structural advisory fees	$	37,338		$	35,999		$	34,676		$	33,177		$	27,834
	Change in receivables balance		7.7	%		3.8	%					(4.3	)%		(19.7	)%
Default recovery rate:
	Management assumption		32.0	%		36.0	%		40.0	%		44.0	%		48.0	%
	Total structural advisory fees	$	30,471		$	33,242		$	34,676		$	35,732		$	36,699
	Change in receivables balance		(12.1	)%		(4.1	)%					3.0	%		5.8	%
Annual prepayment rate:
	Management assumption:
	Segment 1		5.5	%		6.2	%		6.9	%		7.6	%		8.3	%
	Segment 2		3.9			4.4			4.9			5.4			5.9
	Segment 3		2.5			2.8			3.1			3.4			3.7
	Total structural advisory fees	$	35,390		$	35,038		$	34,676		$	34,299		$	33,915
	Change in receivables balance		2.1	%		1.0	%					(1.1	)%		(2.2	)%
Discount rate:
	Management assumption		11.2	%		12.6	%		14.0	%		15.4	%		16.8	%
	Total structural advisory fees	$	53,054		$	42,859		$	34,676		$	28,101		$	22,815
	Change in receivables balance		53.0	%		23.6	%					(19.0	)%		(34.2	)%

		Change in assumption								Change in assumption
								Receivables balance
		Down 2%			Down 1%					Up 1%			Up 2%
		(dollars in thousands)
Forward LIBOR rates:
	Total structural advisory fees	$	28,117		$	31,134		$	34,676	$	38,608		$	39,060
	Change in receivables balance		(18.9	)%		(10.2	)%				11.3	%		12.6	%

(1)

The percentage change in assumptions applies to future conditional default rates in the portfolio after taking into account actual defaults occurring in the portfolio through June 30, 2010. As a result, application of the nominal 10% or 20% variation results in a change in the management assumption that is less than 10% or 20% of the default rate.

Education Loans Held for Sale.

        Private education loans held for sale by UFSB-SPV have been pledged to an education loan warehouse facility provided by a third-party lender. The loans are subject to call provisions by the

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third-party lender, and, therefore, we do not have the ability to hold the loans to maturity. Private education loans held for sale are carried at the lower of cost or fair value. The fair value of private education loans held for sale is evaluated on a quarterly basis. When available, the fair value is based on quoted market values. In the absence of readily determined market values, fair value is estimated by management based on the present value of expected future cash flows from the private education loans held for sale. These estimates are based on historical and third-party data, macroeconomic indicators and our industry experience with the assumptions for, among other things, default rates, recovery rates on defaulted loans, prepayment rates and discount rates commensurate with the risks involved. If readily determined market values became available, or if actual performance were to vary appreciably from management's estimates, the fair value of the loans would need to be further adjusted, which could result in material differences from the recorded carrying amounts. Changes in the carrying value of private education loans held for sale are recorded as a separate component of non-interest expense.

Consolidation

        Our consolidated financial statements include the accounts of FMD and its subsidiaries, after eliminating inter-company accounts and transactions. We have not consolidated the financial results of the securitization trusts purchasing loans that we have facilitated.

        At June 30, 2010 and 2009, each of the securitization trusts created after January 31, 2003, has met the criteria to be a QSPE, as defined by ASC 860-40. Accordingly, we did not consolidate these existing securitization trusts in our financial statements. In addition, the securitization trusts created prior to January 31, 2003 in which we hold a variable interest that could result in our being considered the primary beneficiary of such trusts have been amended in order for them to be considered QSPEs.

        Effective July 1, 2010, we adopted ASU 2009-16, Transfers and Servicing (Topic 860)—Accounting for Transfers of Financial Assets, or ASU 2009-16, and ASU 2009-17. Prior to their codification, ASU 2009-16 was referred to as Financial Accounting Standard 166, Accounting for Transfers of Financial Assets, an Amendment of FASB Statement 140, and ASU 2009-17 was referred to as Financials Accounting Standard 167, Amendments to FASB Interpretation No. 46(R).

        ASU 2009-16 removes the concept of a QSPE from ASC 860-40 and removes the exemption from consolidation for QSPEs from ASC 810-10, Consolidation, or ASC 810-10. ASU 2009-17 updates ASC 810-10 to require that certain types of enterprises perform analyses to determine if they are the primary beneficiary of a variable interest entity. A primary beneficiary of a variable interest entity is the enterprise that has both of the following characteristics:

•

The power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance; and

•

The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity.

        In addition, ASU 2009-17 requires us to continuously reassess whether consolidation of variable interest entities is appropriate, as opposed to the trigger-based assessment allowed under previous guidance. As a result, we may be required to consolidate or deconsolidate variable interest entities on a quarterly basis, which may lead to volatility in our financial results and make comparisons of results between time periods more challenging.

        Effective July 1, 2010, we consolidated 14 securitization trusts that we previously facilitated and deconsolidated UFSB-SPV. Assets and liabilities of the entities consolidated were measured as if they had been consolidated at the time we became the primary beneficiary. All intercompany transactions are eliminated. Profits and losses of the consolidated variable interest entities are allocated to non-controlling interests based on the percentage ownership of voting interests, before the effect of

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intercompany elimination entries. ASU 2009-17 has been applied through a cumulative-effect adjustment to the opening balance of retained earnings at the effective date.

        At the effective date of consolidation, we recorded a net increase in total assets and total liabilities of approximately $8.0 billion and $8.8 billion, respectively, and a net decrease in total stockholders' equity of approximately $800 million (comprised of an increase in FMD stockholders' equity of approximately $60 million recorded as an adjustment to opening retained earnings more than offset by a non-controlling interest deficit of approximately $860 million). Included in these amounts were the following adjustments:

•

Consolidation of approximately $8.2 billion of held-to-maturity securitized loan receivables, at amortized cost;

•

Consolidation of approximately $9.0 billion of non-recourse debt issued by the trusts to third-party investors;

•

Reversal of additional structural advisory fee and residual interest receivables totaling $38.7 million, previously recorded as due from the 14 asset securitization trusts consolidated; and

•

Deconsolidation of UFSB-SPV with assets of $108.4 million and liabilities of $225.0 million, and reversal of $45.9 million in deferred tax assets associated with the unrealized losses of UFSB-SPV on private education loans held for sale.

        After adoption of ASU 2009-16 and ASU 2009-17, our results of operations will no longer reflect securitization-related income, trust updates or administrative fees from the 14 securitization trusts. Instead, we will recognize interest income associated with securitized loan receivables in the same line item as interest income from non-securitized assets, as well as a provision for loan losses, and we will recognize interest expense associated with debt issued by the trusts to third-party investors on the same line item as other interest-bearing liabilities of FMD. On a consolidated basis, we will not record any revaluation gains or losses related to the additional structural advisory fee and residual interest receivables due from the 14 securitization trusts, but we continue to recognize revaluation gains and losses on receivables from securitization trusts that were not consolidated. The effect of the consolidation will be reflected in our results for the first quarter of fiscal 2011 ending September 30, 2010.

        Adoption of ASU 2009-16 and ASU 2009-17 will also have the effect of requiring us to re-evaluate which accounting policies should be considered critical accounting polices. As a result of adoption of these accounting pronouncements, we believe that our critical accounting policies will:

•

include policies related to determination of an allowance for loan losses and related provisions;

•

include policies related to recognition and presentation of loans and the related interest income;

•

continue to include our consolidation policy, although it will be significantly different;

•

not include service receivables and related revenue because they will almost entirely be eliminated upon consolidation of the trusts; and

•

not include valuation of private education loans held for sale because all private education loans held for sale are owned by UFSB-SPV, which was deconsolidated upon adoption.

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Results of Operations—Years ended June 30, 2010, June 30, 2009 and June 30, 2008

Summary

        The following table summarizes our results of operations:

	Fiscal years ended June 30,									Change between periods
	2010			2009			2008			2010 - 2009			2009 - 2008
	(dollars and shares in thousands, except per share data)
Service revenues	$	6,400		$	(315,109	)	$	(54,031	)	$	321,509		$	(261,078	)
Net interest income		9,871			25,103			25,622			(15,232	)		(519	)
Total revenues		16,271			(290,006	)		(28,409	)		306,277			(261,597	)
Non-interest expenses		232,115			260,833			358,547			(28,718	)		(97,714	)
Loss before income taxes		(215,844	)		(550,839	)		(386,956	)		334,995			(163,883	)
Income tax benefit		(70,320	)		(187,819	)		(151,880	)		117,499			(35,939	)
Net loss	$	(145,524	)	$	(363,020	)	$	(235,076	)	$	217,496		$	(127,944	)
Net loss per share, diluted	$	(1.46	)	$	(3.66	)	$	(2.46	)	$	2.20		$	(1.20	)
Diluted weighted average shares outstanding		99,537			99,081			95,732			456			3,349

        We reported a net loss of $145.5 million, or $1.46 per share, on a fully diluted basis, for fiscal 2010, compared with a net loss of $363.0 million, or $3.66 per share, in fiscal 2009. The improvement in earnings is attributable to both an increase in revenue of $306.3 million, resulting from lower valuation reductions to service receivables, and to lower non-interest expenses of $28.7 million, resulting from lower general and administrative expenses and lower losses on private education loans held for sale.

        We reported a net loss of $363.0 million, or $3.66 per share, on a fully diluted basis, for fiscal 2009, compared with a net loss of $235.1 million, or $2.46 per share, in fiscal 2008. Total revenues decreased $261.6 million, primarily as a result of write-downs of our service receivables in fiscal 2009 due to market conditions and the sale of the Trust Certificate, a $179.1 million decrease in up-front structural advisory fees in fiscal 2009, and a $123.5 million decrease in processing fees from TERI due to the TERI Reorganization. Partially offsetting the decrease in revenue, total non-interest expenses decreased $97.7 million over the same period. The cessation of services for TERI and marketing support services for other clients, combined with reductions in headcount and other cost-savings initiatives, reduced combined compensation and benefits and general and administrative expenses by $228.5 million during fiscal 2009. However, losses to adjust the carrying value of our private education loan portfolio held for sale to fair value increased by $130.8 million from fiscal 2008 to fiscal 2009.

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Service Revenues

        The following table summarizes the changes in our service revenues:

			Fiscal years ended June 30,									Change between periods
			2010			2009			2008			2010 - 2009			2009 - 2008
			(dollars in thousands)
Additional structural advisory fees:
	Trust updates		$	(19,825	)	$	(57,157	)	$	(44,106	)	$	37,332		$	(13,051	)
	New securitizations			—			—			24,304			—			(24,304	)
Up-front structural advisory fees				—			—			179,106			—			(179,106	)
		Total structural advisory fees		(19,825	)		(57,157	)		159,304			37,332			(216,461	)
Asset servicing fees:
	Fee income			6,901			2,350			—			4,551			2,350
	Fee updates			(3,506	)		35			—			(3,541	)		35
		Total asset servicing fees		3,395			2,385			—			1,010			2,385
Residuals:
	Trust updates			2,863			(283,295	)		(488,832	)		286,158			205,537
	New securitizations			—			—			116,972			—			(116,972	)
		Total residuals		2,863			(283,295	)		(371,860	)		286,158			88,565
Administrative and other fees				19,967			22,958			158,525			(2,991	)		(135,567	)
		Total service fee revenue	$	6,400		$	(315,109	)	$	(54,031	)	$	321,509		$	(261,078	)
Total income on new securitizations			$	—		$	—		$	320,382		$	—		$	(320,382	)
Volume of loans securitized				—			—			2,027,079			—			(2,027,079	)
Total yield on new securitizations(1)				—			—			15.8	%

(1)

We believe, as of September 2, 2010, that the structure and economics of any future financing transaction will be less favorable than in the past, with lower revenues and additional cash requirements on our part.

        Additional structural advisory fee and residual receivables represent the estimated fair value of service receivables expected to be collected over the life of the various separate securitization trusts that have purchased private education loans facilitated by us, with no further service obligation on our part. Asset servicing fee receivables represent the estimated fair value of service receivables earned as of the balance sheet date.

Additional structural advisory fees

        We are entitled to receive additional structural advisory fees over time, based on payment priorities established in the trusts' indentures. In general, the amounts due to us from the trusts accumulate monthly from the date of a securitization at a rate of 0.15% to 0.30% of loan principal outstanding per year plus accrued interest on earned but unpaid fee income. We generally become entitled to receive this fee, plus interest, once the ratio of trust assets to trust liabilities in the particular trust, which we refer to as the parity ratio, reaches a stipulated level, which ranges from 103% to 105.5%. The level applicable to a particular trust is determined at the time of securitization; however, the occurrence of Trigger Events (defined below) can impact the payment priorities. Actual parity ratios at June 30, 2010 for the NCSLT Trusts ranged from 87.24% to 95.02%. Please refer to exhibit 99.2 to this annual report for additional information on actual trust parity ratios for the NCSLT Trusts as of June 30, 2010. The stipulated parity ratio levels may be raised if certain trust characteristics change.

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        At the time of securitization, we recorded additional structural advisory fees at net present value, or estimated fair value, on the balance sheet as additional structural advisory fee receivables and in the statement of operations as additional structural advisory fees—new securitizations. On a quarterly basis, we update our estimate of the fair value of our structural advisory fee receivables and recognize the change in fair value, less cash received, if any, in the statement of operations as additional structural advisory fees—trust updates. To estimate fair value, we apply a discount rate commensurate with the risk applicable to the projected cash flows of the trusts. Projected cash flows are developed using trust performance assumptions including expected operational expenses, expected rate and timing of loan defaults and recoveries on defaulted loans, the rate and timing of prepayments, the trend of contractual and market interest rates over the life of the loan pool, the cost of funding outstanding auction rate notes, assumptions relating to the TERI Reorganization and the existence of certain circumstances, which we refer to as Trigger Events, upon the occurrence of which payments that would otherwise be due with respect to additional structural advisory fees and residuals would instead be directed to the holders of the notes issued by the trusts until the condition causing the Trigger Event ceases to exist or all notes and related interest are paid in full. These assumptions are based on historical and third-party data, macroeconomic indicators and our industry experience.

        As of June 30, 2010, we estimate that we will receive fees approximately five to 22 years after the date of a particular securitization transaction. However, for many of the NCSLT Trusts, the bankruptcy filing of their loans' primary guarantor, TERI, or cumulative gross default rates have resulted in Trigger Events. These events may significantly delay the receipt of fees.

        The following table summarizes changes in the estimated fair value of our additional structural advisory fee receivables:

				Fiscal years ended June 30,
				2010			2009			2008
				(dollars in thousands)
Fair value at beginning of period				$	55,130		$	113,842		$	133,644
	Additions from new securitizations				—			—			24,304
	Cash received from trust distributions				(629	)		(1,555	)		—
	Trust updates:
		Passage of time—fair value accretion			6,194			9,362			10,258
		Increase in timing and average default rate			(42,081	)		(11,262	)		(2,910	)
		Decrease (increase) in average prepayment rate			25,338			3,127			(3,168	)
		Increase in discount rate assumptions			(9,803	)		(23,022	)		(41,555	)
		Decrease in forward LIBOR curve			(2,305	)		(12,517	)		(5,442	)
		Increase in auction rate notes spread			—			(13,087	)		(140	)
		Decrease in recovery assumption			—			(9,416	)		—
		Other factors, net			2,832			(342	)		(1,149	)
			Net change from trust updates		(19,825	)		(57,157	)		(44,106	)
Fair value at end of period				$	34,676		$	55,130		$	113,842

        During fiscal 2010, we refined our methodology to include prospective macroeconomic factors in projecting future loan performance. Using this refined model, we increased the expected default rate assumptions and decreased the expected prepayment rate assumptions used in our cash flow models. We also increased the discount rate as a result of the reduction in cash flows available to residual interests that support the additional structural advisory fees combined with the lengthening of the weighted average life of the receivables. The combination of changes in our assumptions and a decrease in the forward LIBOR curve resulted in a reduction in the carrying value recorded as trust updates of $19.8 million for fiscal 2010.

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        For fiscal 2009, we recorded losses for additional structural advisory fees—trust updates of $57.2 million, compared to losses from trust updates of $44.1 million for fiscal 2008, reflecting increases in the assumed discount rate, net default rates and auction rate note spreads, as well as a decrease in the forward LIBOR curve.

        Fiscal 2008 service revenue also included additional structural advisory fees—new securitizations of $24.3 million of revenue attributable to new securitizations, with no comparable amount recorded in fiscal 2009 or fiscal 2010.

        For a detailed discussion of the underlying assumptions used to determine the amounts reported above, see the section "—Private Education Loan Performance Assumptions" below.

Residuals

        As we facilitated the securitizations of loan pools, we were entitled to receive a portion of the residual cash flows, if any, generated by the various securitization trusts that purchased the loans. At the time of securitization, we recorded the estimated fair value of these residual cash flows on our balance sheet as residual receivables and in the statement of operations as residuals—new securitizations. On a quarterly basis, we update our estimate of the fair value of residual receivables and recognize the change in fair value less cash received in the statement of operations as residuals—trust updates.

        As a result of the sale of the Trust Certificate, effective March 31, 2009, we are no longer entitled to the residual cash flows of the NCSLT Trusts, although we continue to be entitled to receive residuals from other trusts. The sale of the Trust Certificate resulted in a reduction in the carrying value of residual receivables in fiscal 2009 of $134.5 million and reduced our exposure to changes in fair value during fiscal 2010.

        The following table summarizes the changes in the estimated fair value of our residual receivables:

				Fiscal years ended June 30,
				2010			2009			2008
				(dollars in thousands)
Fair value at beginning of period				$	9,960		$	293,255		$	665,115
	Additions from new securitizations				—			—			116,972
	Trust updates:
		Passage of time—fair value accretion			1,828			20,453			75,070
		Decrease (increase) in discount rate assumptions			1,176			(82,571	)		(129,169	)
		Increase in timing and average default rate			(353	)		(50,108	)		(49,929	)
		Increase (decrease) in forward LIBOR curve			160			(22,009	)		(17,590	)
		Increase in auction rate notes spread			—			(31,779	)		(93,813	)
		Decrease (increase) in average prepayment rate			—			11,336			(34,765	)
		Decrease to reflect disposition			—			(134,481	)		—
		TERI's inability to pay claims			—			—			(219,553	)
		Increase in trust expenses			—			—			(9,026	)
		Other factors, net			52			5,864			(10,057	)
			Net change from trust updates		2,863			(283,295	)		(488,832	)
Fair value at end of period				$	12,823		$	9,960		$	293,255

        Residuals—trust updates in fiscal 2010 of $2.9 million related only to the trusts that were not part of the sale of the Trust Certificate. The net increase primarily reflected accretion for the passage of time and a decrease in the discount rate.

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        For fiscal 2009, residuals—trust updates was a net loss of $283.3 million. The loss, in part, reflected valuation adjustments primarily related to higher default and discount rate assumptions, higher interest rates on auction rate notes and a decrease in the forward LIBOR curve, partially offset by accretion for the passage of time and lower assumed prepayment rates. In addition, we recorded a loss of $134.5 million to reflect a reduction in carrying value due to the sale of the Trust Certificate, as described below.

        On March 31, 2009, NC Residuals Owners Trust was formed by the statutory conversion of our wholly-owned subsidiary, GATE Holdings, Inc. As a result of the conversion, we became the sole legal and beneficial owner of the Trust Certificate. NC Residuals Owners Trust, together with its wholly-owned subsidiary, owned certain certificates of beneficial ownership interests, or Residuals, of the NCSLT Trusts. The NCSLT Trusts are the holders of substantially all TERI-guaranteed loans facilitated by us.

        Effective March 31, 2009, we entered into, among other agreements, a purchase agreement, or the Purchase Agreement, with VCG Owners Trust, a newly formed statutory trust, which we refer to as the Purchaser, and VCG Securities, LLC, which we refer to as Vanquish Investor. The Purchaser and Vanquish Investor are affiliates of Vanquish Capital Management LLC.

        Pursuant to the Purchase Agreement, we transferred the Trust Certificate to the Purchaser effective as of March 31, 2009, and we recorded the decrease in the carrying value of our residual receivables of $134.5 million. As a result, the Purchaser became the indirect owner of the Residuals that were formerly owned by us indirectly through NC Residuals Owners Trust. In consideration for the sale, the Purchaser and Vanquish Investor agreed to bear all future federal and state tax liabilities associated with the Residuals.

        Residuals—trust updates for fiscal 2008 was a net loss of $488.8 million, as a result of a $219.6 million adjustment to reflect the TERI Reorganization and TERI's inability to pay future claims beyond the balance in the Pledged Accounts, combined with $269.2 million of losses primarily related to increases in discount and default rate assumptions and higher interest rates on auction rate notes.

        Residuals—new securitizations for fiscal 2008 reflected two trusts facilitated during the first quarter of that year. We have been unable to access the securitization market since that time.

        To estimate fair value, we apply a discount rate commensurate with the risk involved to the projected cash flows of the trusts. The projected cash flows of the trusts are the same projected cash flows used to estimate the fair value of our additional structural advisory fee receivables. For a detailed discussion of the underlying assumptions used to determine the amounts reported above, see "—Private Education Loan Performance Assumptions" below.

Asset Servicing Fees

        In connection with the sale of the Trust Certificate discussed above, we entered into an Asset Services Agreement and a data sharing and license agreement with the Purchaser effective March 31, 2009. Pursuant to the Asset Services Agreement, we have agreed to provide certain asset servicing to the Purchaser to support the Purchaser's ownership of the Residuals, including, among others, analysis and valuation optimization services and services relating to funding strategy. As compensation for services, we are entitled to an asset servicing fee, calculated as a percentage of the aggregate outstanding principal balance of loans outstanding in the trusts. Although this fee is earned monthly, our right to receive the fee is contingent on distributions made to the holders of the Residuals. Distributions made by each of the NCSLT Trusts will be allocated as follows:

•

commencing with the first calendar month in which residual cash flows are paid, and for each payment date during the next 60 calendar months from that date, we will receive 60.0% of the Purchaser's residual cash flows;

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•

for each payment date after that, we will receive 40.0% of the Purchaser's residual cash flows until all earned but unpaid asset servicing fees are paid in full; and

•

thereafter, once all earned but unpaid fees have been received, we will receive our monthly fee, paid in full.

        We will not receive any asset servicing fees until the Purchaser has begun to receive residual cash flows.

        During fiscal 2010, our asset servicing fees earned reflected a full year of earnings, while the Asset Services Agreement was only in effect for one fiscal quarter in fiscal 2009. Fee updates for fiscal 2010 were a loss of $3.5 million, reflecting changes in the volume and timing of projected cash flows available to the holders of the Residuals for the payment of such fees. See "—Private Education Loan Performance Assumptions" below for changes in performance assumptions. Fee updates in fiscal 2009 reflected accretion for the passage of time.

Private Education Loan Performance Assumptions

        During the third quarter of fiscal 2010, we completed initial enhancements to the financial models that we use to estimate the fair value of our service receivables. The enhancements provide for the inclusion of certain prospective macroeconomic factors in our performance assumptions for those private education loans securitized in the NCSLT Trusts. As our risk models continue to evolve, we anticipate additional future enhancements.

        Risk Segments.    During the third quarter of fiscal 2010, we retroactively scored loans in the NCSLT Trusts using our proprietary risk score modeling, loan origination data as well as additional credit bureau data made available following origination. We then divided loans into three risk segments, with loans in Segment 1 expected to perform better than loans in Segment 2 and loans in Segment 2 expected to perform better than loans in Segment 3. The table below identifies performance assumptions for each segment, as well as the percentage of the NCSLT Trust portfolios in each segment.

		June 30, 2010
NCSLT Portfolio		Segment 1			Segment 2			Segment 3
Distribution by original loan amount			25.5	%		27.0	%		47.5	%
Distribution by total outstanding loan amount(1):
	Not in repayment(2)		4.3			6.7			16.9
	In repayment		18.5			20.5			33.1
	Total by segment		22.8			27.2			50.0
Gross default rate(3)			9.7			19.6			48.8
Recovery rate(3)			40.0			40.0			40.0
Net default rate(3)			5.8			11.8			29.3
Prepayment rate(4)			6.9			4.9			3.1

(1)

Outstanding aggregate principal and capitalized interest balance as of June 30, 2010.

(2)

Loans "not in repayment" include loans in deferment or forbearance status as of June 30, 2010.

(3)

Using projected defaults, net defaults and recoveries over the lives of the trusts as a percentage of original outstanding aggregate principal and accrued interest balance.

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(4)

Amount presented is the weighted average conditional prepayment rate, or CPR, over the lives of the trusts. The CPR is an estimate of the likelihood that a loan will be prepaid during a period given that it has not previously defaulted or been repaid in full.

        The table below identifies our overall assumptions as of June 30, 2009 and 2008:

	June 30,						Year over year change
	2009			2008			2009 - 2008
Gross default rate		19.0	%		14.8	%		4.2	%
Net default rate		11.4			7.7			3.7
Recovery rate		40.0			48.0			(8.0	)
Prepayment rate		8.0			8.4			(0.4	)

        Year-end discount rate assumptions for fiscal 2010, 2009 and 2008 were as follows:

										Year over year change
	June 30,
										2010 - 2009			2009 - 2008			2008 - 2007
	2010			2009			2008
Additional structural advisory fee receivables		14.0	%		12.5	%		9.7	%		1.5	%		2.8	%		2.7	%
Asset servicing fee and residual receivables		16.0			17.0			14.9			(1.0	)		2.1			3.1

        Default and Recovery Rates.    During fiscal 2010, we reduced the carrying value of additional structural advisory fee receivables by $42.1 million as a result of higher assumed default rates, with no change to recovery rates. The change in our default assumptions had the effect of delaying the projected timing of our receipt and amount of cash flows available for asset servicing fees. As a result, we decreased asset servicing fee receivables by $3.5 million for fiscal 2010. Our residual receivables, which decreased by $353 thousand during fiscal 2010, were less affected by the change in default rates, in light of our sale of the Trust Certificate in fiscal 2009.

        During fiscal 2009, we increased our gross default rate assumption from 14.8% to 19.0%, reflecting general economic conditions and actual loss experience of the trusts. In addition, we reduced our assumed recovery rate from 48.0% to 40.0%, and we lengthened the projected recovery timetable we used from nine to 15 years as a result of a refinement to the methodology for determining the endpoint default rate, as well as the actual timing of recoveries. The higher gross default rates resulted in decreases in the estimated fair values of our additional structural advisory fee and residual receivables of $11.3 million and $50.1 million, respectively, during fiscal 2009. The change in rate and timing of recoveries reduced the estimated fair value of additional structural advisory fees by $9.4 million, but did not have a material impact on residual receivables because the change was made in the fourth quarter, subsequent to the sale of the Trust Certificate.

        During fiscal 2008, the higher projected gross default rate resulted from weakening general economic conditions. The gross default rate increased by 5.4% during fiscal 2008 to 14.8%, reducing the fair value of additional structural advisory fee and residual receivables by $2.9 million and $49.9 million, respectively. The increase in the recovery rate from 40.0% to 48.0% did not have a material impact.

        Prepayment Rates.    In general, prepayment rates have been in decline since March 2008. Our financial model enhancements incorporate certain prospective macroeconomic factors in determining prepayment assumptions. As a result of those macroeconomic factors, including the interest rate environment and economic conditions, such as unemployment rates, prepayments are expected to be lower and slower than previously projected, and therefore, we increased the value of our structural advisory fee receivables by $25.3 million during fiscal 2010. Changes to prepayment rates did not significantly affect the fair value of our residual or asset servicing fee receivables.

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        During fiscal 2009, in response to a historically low prepayment rate, we decreased our assumed prepayment rate by 0.4%, which resulted in an increase to additional structural advisory fee receivables of $3.1 million and an increase to the residual receivables of $11.3 million prior to the sale of the Trust Certificate.

        During fiscal 2008, prepayment rates increased by 0.4% due to higher prepayment activity experienced by the trusts during that period. As result, we recorded decreases in the estimated fair value of our additional structural advisory fee and residual receivables of $3.2 million and $34.8 million, respectively.

        Discount Rate—Additional Structural Advisory Fees.    Until the third quarter of fiscal 2010, the discount rate that we used to estimate the fair value of our additional structural advisory fees was based on the 10-year U.S. Treasury Bond rate plus a risk premium. In determining the risk premium, we considered factors such as yields on B-rated instruments, the level of available cash flows from residual interests that support the additional structural advisory fees, as well as the weighted-average life of the additional structural advisory fee receivables.

        Beginning in the third quarter of fiscal 2010, we utilized a discount rate of 14.0% in determining the fair value of our additional structural advisory fee receivables. The change from an index-based discount rate to a rate of 14.0% reflects a reduction in the amount of residual interest cash flows available to support the cash flows available for additional structural advisory fees, as well as the lengthening of the weighted-average life of the additional structural advisory fee receivables. The combination of these factors led us to determine that additional structural advisory fee receivables are more analogous to longer-term financial instruments than 10-year debt instruments, and therefore, a higher discount rate is appropriate. The 14.0% discount rate used for the additional structural advisory fees reflects market data made available to us on spreads on federally guaranteed loans and private education loans, as well as rates used in the much broader ABS market and is 2.0% less than the 16.0% used for residual receivables, reflecting the seniority of the additional structural advisory fees in our cash flow waterfall of the securitization trusts. The increase in the discount rate resulted in a $9.8 million decrease in the value of additional structural advisory fee receivables for fiscal 2010.

        During fiscal 2009, we increased the discount rate spread over the 10-year U.S. Treasury Bond rate by 3.2%, to 9.0%. In increasing the discount rate, we considered, among other things, overall significant widening in spreads in the ABS marketplace, as well as increases in indicative spreads on subordinate private education loan securities. The 10-year U.S. Treasury Bond rate decreased by 0.4% during the same period, to 3.5% at June 30, 2009. As a result, we applied a discount rate of 12.5% for purposes of estimating the fair value. The increase in the discount rate during fiscal 2009 resulted in a decrease of $23.0 million in the estimated fair value of additional structural advisory fees.

        During fiscal 2008, we increased the discount rate spread over the 10-year U.S. Treasury Bond rate from 2.0% to 5.8%. The 10-year U.S. Treasury Note rate decreased by 1.1% during the same period resulting in a discount rate of 9.7%, up 2.7% from June 30, 2007, in response to the deterioration in the market for structured and corporate debt. The effect of the increase to the discount rate was a decrease of $41.6 million in the estimated fair value of additional structural advisory fee receivables during fiscal 2008.

        Discount Rate—Asset Servicing Fees and Residuals.    In determining an appropriate discount rate for purposes of estimating the fair value of our asset servicing fee and residual receivables, we consider a number of factors, including market data made available to us on spreads on federally guaranteed loans and private education loans, as well as rates used in the much broader ABS market. We also evaluate yield curves for corporate subordinated debt with maturities similar to the weighted-average life of our residuals.

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        We applied a discount rate of 16.0% during fiscal 2010, which was a decrease of 1.0%, from 17.0%, at the prior year-end. As a result, there was an increase in residual receivables of $1.2 million during fiscal 2010 due to changes in the discount rate and no material change to our asset servicing fee receivable.

        During fiscal 2009, we increased the discount rate from 14.9% to 17.0%, which resulted in decreases in the estimated fair value of our residual receivables of $82.6 million. The increase over the prior fiscal year was in response to the deterioration of the ABS market and revised assumptions about TERI's ability to pay claims.

        During fiscal 2008, we increased the discount rate used for estimating for residual receivables by 3.1% to 14.9% in response to deteriorating market conditions. The higher discount rate resulted in a reduction to the estimated fair value of residual receivables of $129.2 million.

        Forward LIBOR Curve.    Fluctuations in interest rates, specifically LIBOR, which is the underlying rate for most of the trusts' assets and liabilities, can have a significant impact on the cash flows generated by each trust. The forward LIBOR curve is a market observable input obtained from an independent third party. Changes in the forward LIBOR curve can have a significant impact on the principal balances of the private education loans (especially early in a loan's life when interest is capitalizing on loans in deferment), which affects the overall net interest margin the trust can generate, and can impact our additional structural advisory fee receivables as the majority of accrued but unpaid fees bear interest at LIBOR plus 1.5%. In addition, certain trusts have issued a tranche of ABS that bears a fixed interest rate. A decrease in the forward LIBOR curve may result in a reduced spread on the fixed interest-rate tranche, which, in turn, decreases the estimated fair value of our service receivables.

        For the fiscal year ended June 30, 2010, the forward LIBOR curve shifted downward from the prior year-end, reducing the value of the additional structural advisory fee receivables by $2.3 million, with no material impact to residual receivables.

        During fiscal 2009, large decreases in the forward LIBOR curve resulted in decreases in the estimated fair value of additional structural advisory fee and residual receivables of $12.5 million and $22.0 million, respectively. Similarly, during fiscal 2008, decreases in the forward LIBOR curve resulted in decreases in the estimated fair value of additional structural advisory fee and residual receivables of $5.4 million and $17.6 million, respectively.

        Auction Rate Note Interest Rates.    Prior to fiscal 2009, we facilitated five trusts that issued auction rate notes to finance, in whole or in part, the purchase of private education loans. Interest rates for the auction rate notes are determined from time to time at auction; however, during fiscal 2010 and fiscal 2009, failed auctions occurred or persisted with respect to auction rate notes issued by each of the five trusts. In the second quarter of fiscal 2009, the ratings assigned to the auction rate notes of these trusts were downgraded due to failed auctions, deterioration in trust performance and the downgrade of the insurance financial strength rating assigned to the credit enhancement provider for certain auction rate notes. As a result, the auction rate notes bear interest at a maximum spread over one-month LIBOR as specified in the indentures, based on the ratings then assigned to the notes. Increases in the interest expense of the trusts reduced the estimated fair value of our additional structural advisory fees and residual receivables and delayed the timing of receipt of additional structural advisory fees. As a result, during the second quarter of fiscal 2009, we decreased the estimated fair value of our additional structural advisory fee receivables by $13.1 million and our residual receivables by $31.8 million. We did not make any further adjustments during fiscal 2009. During fiscal 2010, we assumed that the notes would continue to bear interest at the contractual maximum spread.

        TERI's Obligation to Pay Claims.    During fiscal 2008, we reduced the carrying value of our residual receivables in response to the TERI Reorganization and our assumption that TERI would not be able

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to honor its guaranty obligations to the NCSLT Trusts beyond the amounts available in the Pledged Accounts, assuming that all recoveries on defaulted loans would be used to replenish such Pledged Accounts. The change in our assumptions with regard to TERI's ability to pay claims resulted in a decrease of $219.6 million in the estimated fair value of our residual receivables during fiscal 2008. No changes were made to our assumptions regarding TERI's ability to pay claims during fiscal 2009. During fiscal 2010, we updated our assumptions regarding TERI's obligation to pay claims based on the Plan of Reorganization presented for creditor approval in April 2010. The updated assumptions did not have a material effect on the estimated value of our additional structural advisory fee or asset servicing fee receivables. The Modified Plan of Reorganization, which was filed in August 2010, changes certain aspects of the settlements offered to the NCSLT Trusts compared to the settlements offered by the Plan of Reorganization. As of September 2, 2010, we did not expect those changes to have a material effect on the estimated fair value of our service receivables. As of September 2, 2010, the voting and confirmation process for the Modified Plan of Reorganization had not commenced and the Modified Plan of Reorganization remains subject to change.

Administrative and Other Fees

        During fiscal 2010, administrative and other fees were $20.0 million, down $3.0 million from fiscal 2009. Fees in fiscal 2010 primarily consisted of compensation for loan portfolio default prevention and trust administration services provided to the trusts that we facilitated. Fees from these services increased by a net $6.2 million over fiscal 2009; however, the increase was more than offset by declines in marketing-related cost reimbursement and TERI processing fees.

        Prior to the TERI Reorganization, we provided outsourcing services for TERI, including loan origination, customer service, default processing, default prevention and administrative services, at cost, under a master servicing agreement. We recognized TERI's reimbursement of our expenses for these services as revenue. In June 2008, in the context of the TERI Reorganization, the Bankruptcy Court entered an order approving a motion by TERI to reject the master servicing agreement effective May 31, 2008, but provided for a transition services agreement between TERI and us with a term through September 29, 2008. As a result, our reimbursement from TERI for fiscal 2009 was $3.0 million, down from $126.5 million in fiscal 2008. We do not expect to receive a material amount of processing fees from TERI in the future. Prior to the TERI Reorganization, we received marketing-related cost reimbursement upon disbursement of loans to borrowers. We generally ceased processing loan applications for TERI-guaranteed loan programs at the time the TERI Reorganization began.

Up-front Structural Advisory Fees

        Historically, we received up-front structural advisory fees at the time a securitization trust purchased loans as compensation for structuring debt securities sold in the securitization, coordination of the attorneys, accountants, trustees, loan servicers, loan originators and other transaction participants and preparation of cash flow modeling for rating agencies, as needed. We did not record any up-front structural advisory fees in fiscal 2010 or fiscal 2009 because we did not facilitate any securitizations during these periods. We recorded $179.1 million in up-front structural advisory fees in fiscal 2008 related to two securitizations of TERI-guaranteed loans that we facilitated during the first quarter of fiscal 2008.

Net Interest Income

        Net interest income decreased to $9.9 million in fiscal 2010 from $25.1 million in fiscal 2009 and $25.6 million in fiscal 2008. Interest income from private education loans held for sale decreased by $17.7 million in fiscal 2010 as a result of the sale of approximately 88% of Union Federal's portfolio in October 2009, and lower rates on loans, cash and cash equivalents. Interest expense decreased $4.0 million, largely as a result of lower deposit volumes and rates paid on deposits and lower volumes of borrowings, partially offset by a higher rate of interest paid on the education loan warehouse facility.

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        During fiscal 2009, net interest income was relatively flat compared to fiscal 2008. Overall, volumes of interest-bearing assets and liabilities were higher, but rates earned and paid declined during the year. The source of interest income shifted from cash, cash equivalents and federal funds sold to private education loans held for sale, when compared with fiscal 2008, largely because the portfolios generated by Union Federal and held by Union Federal and UFSB-SPV during fiscal 2008 were outstanding for the full year in fiscal 2009. The sources of interest expense shifted from time and savings accounts to money market accounts and the education loan warehouse facility, with the borrowings under the education loan warehouse facility outstanding for a full year in fiscal 2009 versus a partial year in fiscal 2008.

        The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities:

Consolidated average balance sheet, interest and rates

(Taxable-equivalent rates(1))

	Fiscal years ended June 30,
	2010								2009								2008
	Average daily balance			Interest		Rate			Average daily balance			Interest		Rate			Average daily balance			Interest		Rate
	(dollars in thousands)
Assets
Cash and cash equivalents	$	317,524		$	598		0.19	%	$	114,507		$	970		0.88	%	$	102,732		$	3,697		3.87	%
Federal funds sold		6,523			3		0.06			44,852			469		1.05			54,272			1,761		3.24
Short-term investments		32,877			201		0.61			—			—		—			—			—		—
Investments held for sale		6,542			328		5.01			74,338			1,582		2.93			128,231			4,233		4.84
Education loans held for sale		343,436			20,974		6.11			507,889			38,646		7.61			336,975			32,656		9.69
Loans held to maturity		27,518			925		3.36			10,727			575		5.36			11,914			758		6.36
Total interest-earning assets		734,420			23,029		3.14			752,313			42,242		5.80			634,124			43,105		7.34
Cash and cash equivalents		3,738								1,248								451
Mark-to-market reserves		(181,576	)							(64,834	)							(567	)
Other assets		158,618								358,074								820,759
Total assets	$	715,200							$	1,046,801							$	1,454,767
Liabilities
Time and savings deposits	$	93,545			1,429		1.53	%	$	130,183			3,885		2.98	%	$	162,594			7,262		4.47	%
Money market deposits		45,053			651		1.45			48,076			1,419		2.95			7,848			240		3.06
Education loan warehouse facility		226,975			10,403		4.58			244,042			10,993		4.50			189,343			9,250		4.89
Other short-term borrowings		—			—		—			22,194			128		0.58			—			—		—
Other interest-bearing liabilities		12,245			675		5.51			12,141			714		5.88			11,043			731		6.62
Total interest-bearing liabilities		377,818			13,158		3.48			456,636			17,139		3.75			370,828			17,483		4.71
Non-interest-bearing deposits		852								3,482								66
All other liabilities		20,995								11,772								240,116
Total liabilities		399,665								471,890								611,010
Stockholders' equity		315,535								574,911								843,757
Total liabilities and stockholders' equity	$	715,200							$	1,046,801							$	1,454,767
Net interest—earning assets	$	734,420							$	752,313							$	634,124
Net interest income				$	9,871							$	25,103							$	25,622
Net interest margin							1.34	%							3.34	%							4.04	%

(1)

In fiscal 2009 and fiscal 2008, we invested in certain cash equivalents and investments securities that are tax-exempt. Taxable-equivalent rates are a method of presentation in which the tax savings achieved by investing in tax-exempt securities are included in interest revenue for purposes of calculating the yield. This method facilitates the comparison of the performance of tax-exempt and taxable securities. The adjustment is computed using a federal income tax rate of 35%.

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Analysis of changes in net interest income

	From 2009 to 2010 due to change in									From 2008 to 2009 due to change in
	Volume			Rate			Net change			Volume			Rate			Net change
	(dollars in thousands)
Cash and cash equivalents	$	1,720		$	(2,092	)	$	(372	)	$	482		$	(3,209	)	$	(2,727	)
Federal funds sold		(401	)		(65	)		(466	)		(306	)		(986	)		(1,292	)
Short-term investments		201			—			201			—			—			—
Investments held for sale		(1,442	)		188			(1,254	)		(1,717	)		(934	)		(2,651	)
Education loans held for sale		(12,514	)		(5,158	)		(17,672	)		16,563			(10,573	)		5,990
Loans held to maturity		900			(550	)		350			(76	)		(107	)		(183	)
Total interest income								(19,213	)								(863	)
Time and savings deposits		(1,093	)		(1,363	)		(2,456	)		(1,448	)		(1,929	)		(3,377	)
Money market deposits		(89	)		(679	)		(768	)		1,228			(49	)		1,179
Education loan warehouse facility		(769	)		179			(590	)		2,672			(929	)		1,743
Other short-term borrowings		(128	)		—			(128	)		128			—			128
Other interest-bearing liabilities		6			(45	)		(39	)		73			(90	)		(17	)
Total interest expense								(3,981	)								(344	)
Net (decrease) increase in net interest income							$	(15,232	)							$	(519	)

Non-interest Expenses

        Total non-interest expenses decreased to $232.1 million in fiscal 2010 from $260.8 million in fiscal 2009, a decrease of $28.7 million, primarily due to decreases in general and administrative expenses of $22.4 million and lower losses on private education loans held for sale of $7.2 million. Non-interest expenses of $260.8 million in fiscal 2009 were down from $358.5 million in fiscal 2008, reflecting decreases in all categories of expense except for losses on private education loans held for sale. The following table reflects non-interest expenses:

								Change between periods
		Fiscal years ended June 30,
								From 2010 to 2009			From 2009 to 2008
		2010		2009		2008
		(dollars in thousands)
Compensation and benefits		$	43,096	$	42,232	$	96,735	$	864		$	(54,503	)
General and administrative expenses:
	Depreciation and amortization		13,359		17,800		19,633		(4,441	)		(1,833	)
	Third-party services		20,587		29,991		66,652		(9,404	)		(36,661	)
	Occupancy and equipment		17,078		16,699		28,752		379			(12,053	)
	Marketing		80		3,482		100,754		(3,402	)		(97,272	)
	Other		6,960		12,466		38,648		(5,506	)		(26,182	)
Subtotal—general and administrative expenses			58,064		80,438		254,439		(22,374	)		(174,001	)
Losses on education loans held for sale			130,955		138,163		7,373		(7,208	)		130,790
Total non-interest expenses		$	232,115	$	260,833	$	358,547	$	(28,718	)	$	(97,714	)
Total number of employees at fiscal year-end			219		223		368		(4	)		(145	)

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Compensation and Benefits Expenses

        Compensation and benefits expense increased to $43.1 million in fiscal 2010 from $42.2 million in fiscal 2009. The increase relates to the higher cost of stock-based compensation for restricted stock units granted during the year, largely offset by the lower cost of benefits and lower severance costs. During fiscal 2009, compensation and benefits expense decreased by $54.5 million primarily due to a net decrease of headcount of 800 employees during fiscal 2008 and fiscal 2009, including departures of former executive management.

General and Administrative Expenses

        In fiscal 2010, general and administrative expenses decreased to $58.1 million from $80.4 million, in part, reflecting continued cost cutting and efficiency efforts. Expenses decreased across every category, except occupancy expense which reflected a charge related to unoccupied space in the amount of $5.6 million taken in fiscal 2010. Depreciation and amortization expense decreased due to the retirement of certain fixed assets. Lower third-party service costs reflect the reduced use of consultants and outside counsel as outstanding litigation was resolved and we recouped $1.0 million in legal fees from insurance providers. Other expenses were down due to lower goodwill write-downs and lower liquidity fees.

        General and administrative expenses decreased during fiscal 2009 from fiscal 2008, primarily due to the termination by clients of their marketing-related agreements, largely as a result of the TERI Reorganization. The overall decrease in loan volumes reduced the need for and expenses related to external call centers, professional and consulting services and other costs for loan origination and liquidity and guaranty fees included in other expenses. In addition, the reduced headcount in fiscal 2009 resulted in lower occupancy and equipment costs.

Losses on Private Education Loans Held for Sale

        We recorded losses on private education loans held for sale of $131.0 million in fiscal 2010, compared with $138.2 million in fiscal 2009 and $7.4 million in fiscal 2008. During the second quarter of fiscal 2010, we sold private education loans held for sale by Union Federal to an unaffiliated third party for proceeds of $121.6 million. Such loans comprised approximately 88% of Union Federal's portfolio of private education loans directly held by it for sale, excluding loans held by UFSB-SPV. We recorded unrealized losses during the first quarter of fiscal 2010 of $123.9 million on all private education loans held for sale based on the bid we received from the third party for the loans.

        In addition to the sale, we recorded additional net unrealized losses of $7.1 million during fiscal 2010. Our estimates of fair value of the private education loans held for sale at June 30, 2010, are based on our cash flow model, which reflects increases in assumptions for default rates and lower recovery rates, similar to the deterioration in performance experienced by the securitization trusts we facilitated.

        During fiscal 2009, we recorded losses on private education loans of $138.2 million, reflecting increases in assumptions related to the discount and default rates, and a decrease in the assumption for recoveries. The net default rate used for our own private education loan portfolios is higher than that of the NCSLT Trusts based on trust performance and borrower characteristics.

Income Tax Benefit

        Our income tax benefit decreased to $70.3 million in fiscal 2010 from $187.8 million in fiscal 2009. The lower overall benefit in fiscal 2010 was a result of lower pre-tax losses during fiscal 2010. During fiscal 2010, our effective tax rate, or the income tax benefit as a percentage of pre-tax loss, decreased to 32.6% from an effective tax rate of 34.1% for fiscal 2009. Our effective tax rate in fiscal 2010

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reflects our inability to utilize state net operating losses, particularly in Massachusetts, which does not provide for any carryback or carryforward of such losses, as well as certain non-deductible compensation costs.

        As a result of the sale of the Trust Certificate, effective March 31, 2009, as well as our operating losses for fiscal 2009, we recorded income tax receivables during fiscal 2009 for federal and state income taxes paid on prior taxable income. During fiscal 2010, we received a total of $189.3 million in federal and state income tax refunds related to our income tax receivables. During April 2010, the IRS commenced an audit of our tax returns for fiscal years 2007, 2008 and 2009. We cannot predict the timing or outcome of the audit at this time.

        In November 2009, the Worker, Homeownership and Business Assistance Act of 2009, or WHBAA, was signed into law. Pursuant to the WHBAA, we are allowed to carry back the taxable losses from either fiscal 2009 or fiscal 2010 for five years, instead of two years. We have estimated that taxable income in previous years will be sufficient to cover the taxable losses of both fiscal 2009 and fiscal 2010 regardless of which fiscal year is carried back. As a result of the WHBAA and pre-existing net operating loss carry back rules, we recorded an income tax receivable of $42.1 million at June 30, 2010.

        We have determined that a valuation allowance is necessary for certain deferred tax assets because it is more likely than not that these assets will not be realized through future reversals of existing temporary differences or available tax planning strategies. We review the criteria related to the recognition of deferred tax assets on a quarterly basis. Based on current tax laws, beginning in fiscal 2011, we will not have remaining taxes paid within available net operating loss carry back periods. As a result, the recognition of any additional net operating losses or deductable temporary differences is expected to be more limited than in years prior to fiscal 2011, and a valuation allowance will be required to the extent that deferred tax assets exceed future reversals of then existing temporary differences or available tax planning strategies.

        Included in the balance at June 30, 2010 and 2009 are $20.1 million and $14.4 million, respectively, of net unrecognized tax benefits that, if recognized, would favorably affect our effective income tax rate. During fiscal 2010 and fiscal 2009, we accrued approximately $1.7 million and $202 thousand, respectively, of interest. At June 30, 2010, we had approximately $3.8 million accrued for interest and no amount accrued for the payment of penalties. At June 30, 2009, we had approximately $2.1 million accrued for interest and no amount accrued for the payment of penalties.

        During fiscal 2009, our income tax benefit increased to $187.8 million from $151.9 million in fiscal 2008. The increase in income tax benefit was primarily the result of an increase in the amount of pre-tax losses between periods, partially offset by a decrease in the effective tax rate. During fiscal 2009, our effective tax rate decreased to 34.1% from an effective tax rate of 39.3% for fiscal 2008. The decrease in our effective tax rate between fiscal 2009 and fiscal 2008 was primarily due to our inability to utilize state net operating losses, primarily in the Commonwealth of Massachusetts, which does not provide for a carry back or a carry forward of such losses.

Subsequent Events

Monogram Loan Programs

        As of September 2, 2010, we had begun to perform services under our loan program agreement with SunTrust Bank, and we expect to begin performing services under our loan program agreement with Kinecta Federal Credit Union by September 30, 2010. The loan program agreements each relate to school-certified private education loan programs to be funded by these clients based on our Monogram product. We expect to facilitate up to an aggregate of $275.0 million in loans over the terms

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of the two loan programs. See "Business—Description of Services," included in Item 1 of this annual report for additional information on our Monogram product offering.

        We will perform a range of services in support of the programs, including loan processing and management, and program administration services. We generally provide these services on a fee-for-service basis, although we are also entitled to a portion of the yield generated by the portfolio of program loans in connection with certain administration services and for providing credit enhancement.

        Under both loan program agreements, we provide credit enhancement in the form of Participation Accounts, which are deposit accounts funded by us based on credit mix and volume of disbursed program loans, up to the Participation Cap, which is a dollar amount specified in the applicable loan program agreement. The Participation Accounts for each client serve as a first-loss reserve for defaulted program loans. We are not required to fund Participation Accounts in excess of the Participation Cap specified in the applicable loan program agreements. To the extent that loan volumes decrease as a result of repayments or default experience is less than our funded amounts, we would be eligible to receive a monthly release of funds from the Participation Accounts beginning in July 2014, in the case of SunTrust Bank, and following expiration of the terms of our loan program agreement, in the case of Kinecta Federal Credit Union. As of September 2, 2010, we have provided $7.4 million in support of SunTrust Bank's Monogram-based loan program.

Financial Condition, Liquidity and Capital Resources

        We expect to fund our short-term liquidity requirements primarily through cash and cash equivalents and revenues from operations, and we expect to fund our long-term liquidity requirements through revenues from operations and issuances of common stock, promissory notes or other securities. We expect to assess our financing alternatives periodically and access the capital markets opportunistically. If our existing resources are insufficient to satisfy our liquidity requirements, or if we were to enter into a strategic arrangement with another company, we may need to sell additional equity or debt securities. Any sale of additional equity or convertible debt securities may result in additional dilution to our stockholders, and we cannot be certain that additional public or private financing will be available in amounts or on terms acceptable to us, if at all. If we are unable to obtain this additional financing, we may be required to further delay, reduce the scope of, or eliminate one or more aspects of our operational activities, which could harm our business.

        Our actual liquidity and capital funding requirements may depend on a number of factors, including:

•

expenses necessary to fund our operations, including the operations of Union Federal;

•

the extent to which our services and products, including our Monogram product, gain market share and remain competitive at pricing favorable to us;

•

the extent to which we contribute cash to clients or credit facility providers in connection with our Monogram product;

•

the regulatory capital requirements applicable to Union Federal (see "—Support of Subsidiary Bank" below for additional information);

•

the amount and timing of receipt of additional structural advisory fees, asset servicing fees and residuals;

•

the results of the audit conducted by the IRS of our tax returns for fiscal years 2007, 2008 and 2009, which could result in adjustments to tax refunds previously received in connection with the sale of the Trust Certificate; and

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•

the timing, size, structure and terms of any securitization or other funding transactions that we structure, as well as the composition of the loan pool being securitized.

        Liquidity is required for capital expenditures, working capital, business development expenses, costs associated with alternative financing transactions, general corporate expenses, credit enhancement provided in connection with our Monogram product and maintaining the regulatory capital of our bank subsidiary, Union Federal. In order to preserve capital and maximize liquidity in challenging market conditions, we have taken certain broad measures to reduce the risk related to private education loans and residual receivables on our balance sheet, change our fee structure and add new products and reduce our overhead expenses. See "—Executive Summary—Business Trends and Uncertainties" above for an expanded description of actions taken by us during fiscal 2010 and fiscal 2009 in response to the economic challenges facing us. In addition, our Board of Directors has eliminated regular quarterly cash dividends and repurchases of our common stock for the foreseeable future.

        We had combined cash, cash equivalents, federal funds sold, short-term investments and investments held for sale of $386.5 million and $181.5 million, at June 30, 2010 and June 30, 2009, respectively. Of the $386.5 million at June 30, 2010, approximately $265.0 million was held by FMD and its non-bank subsidiaries and approximately $121.5 million was held by Union Federal. In fiscal 2010, we received a total of $189.3 million in federal and state tax refunds for income taxes previously paid by us on our prior taxable income, and Union Federal received $121.6 million from the sale of a portion of its private education loan portfolio to an unaffiliated third party. Net cash provided by operating activities was $268.5 million in fiscal 2010, reflecting the receipt of the tax refunds and proceeds from the sale of the loans. Net cash used in operating activities was $56.3 million for fiscal 2009, reflecting the funding of operations and payment of taxes. Net cash used in operating activities in fiscal 2008 was $456.1 million, reflecting a net use of $479.0 million by Union Federal to originate private education loans.

        During the first quarter of fiscal 2011, we began processing loans based on our Monogram product. See Note 22, "Subsequent Events—Monogram Loan Programs," in the notes to our consolidated financial statements included in Item 8 of this annual report for additional details. We expect to receive fees for our services, and to retain a portion of the interest spread from the loans we facilitate offset by any contribution by us to fund Participation Accounts. While we believe that we may be successful in completing negotiations with respect to the sale of our Monogram product offering to additional potential lenders, we are uncertain as to how much loan volume may be originated by these lenders in fiscal 2011.

        We anticipate continuing to receive administrative and other fees related to our daily management and information gathering and reporting services for parties related to securitization trusts, as well as fees on a stand-alone basis for loan portfolio management services. We believe that these administrative and other fees, as well as management of our expenses, coupled with our significant cash, cash equivalents and investments, including the significant tax refunds received in fiscal 2010 and $42.1 million in federal tax refunds expected to be received in fiscal 2011, will be adequate to fund our operations in the short term as we seek to rebuild our client base and generate fee revenues through our Monogram product over the short term and long term. In addition, at June 30, 2010, we had $6.1 million available for borrowing under an unused line of credit with the Federal Home Loan Bank of Boston. There were no borrowings outstanding at June 30, 2010 or June 30, 2009.

        Net interest income for fiscal 2010, on a consolidated basis, was $9.9 million, of which $3.9 million was attributable to operations of Union Federal. During the second quarter of fiscal 2010, Union Federal sold its entire portfolio of private education loans held for sale, excluding the loans held by UFSB-SPV, Union Federal's subsidiary at that time. Subsequent to the loss of this source of net interest income, Union Federal has experienced monthly operating losses of approximately $330 thousand. In connection with our previously announced exploration of strategic alternatives for

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Union Federal, including a potential sale, we have adopted a conservative investment strategy, maintaining Union Federal's investable assets in cash and cash equivalents. We believe this investment strategy will be viewed favorably by potential bidders. Due to the net losses Union Federal is currently generating, we believe a sale of Union Federal would have a positive impact on our consolidated earnings as well as providing enhanced liquidity to us through an additional cash infusion from the sale proceeds. Furthermore, we do not believe a sale of Union Federal would result in a material change to our ongoing operations because we do not expect Union Federal to offer private education loans during fiscal 2011 or to otherwise serve as a funding source.

        In considering our short-term and long-term plans to increase cash inflows, we have taken into account the cash flows related to asset servicing fees recorded with respect to services provided to the third-party purchaser of the Trust Certificate, as well as our other service revenue receivables, based on the private education loan performance assumptions as of June 30, 2010. Despite the uncertainties discussed above, we believe, based on our operating plan that we have sufficient liquidity to fund our operations through fiscal 2011.

        Cash used in investing activities of $32.9 million in fiscal 2010 was primarily due to a net $50.0 million of cash invested in short-term investments, partially offset by a net reduction in federal funds sold. Cash provided by investing activities of $127.3 million in fiscal 2009 was primarily due to the net reductions in federal funds sold and investments held for sale, the proceeds of which were used to finance operating activities. Cash used by investing activities of $20.6 million in fiscal 2008 reflected a higher volume of federal funds sold and equipment purchases, in part offset by net cash provided by the disposition of investments held for sale.

        Cash used in financing activities in fiscal 2010 of $64.3 million reflected decreases in the volume of deposits and payments under capital leases and borrowings under the education loan warehouse facility. Cash payments related to the education loan warehouse facility are generally limited to cash received on the private education loans held for sale used as collateral. See "—Contractual Obligations" below for a more detailed discussion of required payments under the facility.

        Cash provided by financing activities in fiscal 2009 reflected the net issuance proceeds of series B non-voting convertible preferred stock of $125.9 million, largely offset by a reduction in deposit levels and payments under capital leases and borrowings under the education loan warehouse facility. In fiscal 2009, at the request of the OTS, we reduced the level of broker deposits at Union Federal by $125.2 million, some of which we were able to offset by increases in other types of deposits. Cash provided by financing activities in fiscal 2008 reflected the build-up of the deposit balance at Union Federal, borrowings made under the education loan warehouse facility to fund private education loans (reflected in cash used by operating activities) and the issuance of common stock, less dividends paid.

        The following table summarizes our time deposits at Union Federal greater than $100 thousand by maturity at June 30, 2010:

	(dollars in thousands)
Within three months	$	6,949
Three to six months		6,798
Six months to one year		5,238
Over one year		921
	$	19,906

        The maturities of these deposits are not directly indicative of future timing of cash needed for financing activities because they do not take into account the customers that may reinvest their funds into new time deposits or into other types of deposit accounts.

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        We had treasury stock of $186.2 million and $184.2 million at June 30, 2010 and 2009, respectively. Our treasury stock balance was primarily derived from the repurchases of our common stock in open market transactions. Treasury stock also includes shares of our stock withheld from employees to satisfy statutory minimum withholding obligations as equity compensation awards vest. The increase in treasury stock during fiscal 2010 was solely attributable to withholding obligations relating to compensation awards that vested. In April 2007, our Board of Directors authorized the repurchase of up to 10,000,000 shares of our common stock. As of June 30, 2010, we had repurchased an aggregate of 1,169,100 shares at an average price, excluding commissions, of $36.17 per share, under this repurchase program. We did not repurchase any shares of our common stock pursuant to this repurchase program during fiscal 2010 or fiscal 2009, and as of September 2, 2010, we do not plan to repurchase additional shares of our common stock for the foreseeable future. Future repurchases pursuant to this program may require regulatory approval.

        The OTS regulates all capital distributions by Union Federal directly or indirectly to us, including dividend payments. Union Federal is required to file a notice with the OTS at least 30 days before the proposed declaration of a dividend or approval of a proposed capital distribution by Union Federal's board of directors. Union Federal must file an application to receive the approval of the OTS for a proposed capital distribution when, among other circumstances, the total amount of all capital distributions (including the proposed capital distribution) for the applicable calendar year exceeds net income for that year to date plus the retained net income for the preceding two years.

        A notice or application to make a capital distribution by Union Federal may be disapproved or denied by the OTS if it determines that, after making the capital distribution, Union Federal would fail to meet minimum required capital levels or if the capital distribution raises safety or soundness concerns or is otherwise restricted by statute, regulation or agreement between Union Federal and the OTS or the FDIC or a condition imposed by an OTS agreement. Under the Federal Deposit Insurance Act, or FDIA, an FDIC-insured depository institution such as Union Federal is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become "undercapitalized" (as such term is used in the FDIA).

Support of Subsidiary Bank

        Union Federal is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements would initiate certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on our liquidity. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Union Federal must meet specific capital guidelines that involve quantitative measures of Union Federal's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification, however, are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

        Union Federal's equity capital was $44.4 million at June 30, 2010, down from $84.3 million at June 30, 2009, due to dispositions of private education loans held for sale during the period and the generation of monthly operating losses. Quantitative measures established by regulation to ensure capital adequacy require Union Federal to maintain minimum amounts and ratios of total capital and Tier 1 capital to risk-weighted assets (each as defined in the regulations). As of June 30, 2010 and June 30, 2009, Union Federal was well capitalized under the regulatory framework for prompt corrective action.

        In July 2009, FMD entered into the Supervisory Agreement and Union Federal consented to the Order, pursuant to which FMD and Union Federal agreed to comply with certain requirements imposed by the OTS. During fiscal 2010, FMD and Union Federal complied in all material respects with the conditions set forth in the Supervisory Agreement and the Order, respectively. In March 2010,

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the OTS terminated the Supervisory Agreement and the Order, each in its entirety. See Note 21, "Union Federal Regulatory Matters—Supervisory Agreement and Order to Cease and Desist," in the notes to our consolidated financial statements included in Item 8 of this annual report for additional details.

        In connection with the termination of the Supervisory Agreement, our Board of Directors adopted resolutions requiring FMD to support the implementation by Union Federal of its business plan, so long as Union Federal is owned or controlled by FMD, and to notify the OTS in advance of any distributions to our shareholders in excess of $1.0 million per fiscal quarter and any incurrence or guarantee of debt in excess of $5.0 million. Following termination of the Supervisory Agreement and the Order, FMD remains subject to extensive regulation, supervision and examination by the OTS as a savings and loan holding company, and Union Federal remains subject to extensive regulation, supervision and examination by the OTS and the FDIC.

        Union Federal's regulatory capital ratios were as follows as of the dates below:

		Regulatory Guidelines
		Minimum			Well Capitalized			June 30, 2010			June 30, 2009
Risk-based capital ratios:
	Tier 1 capital		4	%		6	%		124.83	%		37.86	%
	Total capital		8			10			125.47			37.91
Tier 1 (core) capital ratio			4			5			27.88			34.51

Contractual Obligations

        In July 2007, UFSB-SPV, which was a subsidiary of Union Federal at the time, entered into a $300.0 million education loan warehouse facility with a third-party conduit lender. The facility served as a source of interim financing for private education loan programs initially funded by Union Federal. UFSB-SPV used advances under the facility to fund purchases of private education loans from Union Federal, which we refer to as the financed loans. To secure its repayment obligations, UFSB-SPV granted a security interest to the conduit lender in certain collateral, including the financed loans. Neither FMD nor Union Federal is a borrower or co-borrower under the facility, and the facility was structured to generally limit the conduit lender's recourse to the assets of UFSB-SPV, which consist almost exclusively of the financed loans.

        At June 30, 2010 and June 30, 2009, $218.1 million and $230.1 million, respectively, were outstanding under the facility, which we restructured in April 2010. Until April 15, 2010, the borrowings accrued interest at the prime rate plus 2.0%. Following the debt restructuring entered into on April 16, 2010, and until April 16, 2011, outstanding notes under the facility accrue interest at a rate of the lender's cost of funds (as specified in the indenture relating to the facility) plus 0.5%. Beginning April 17, 2011, the rate will increase to the lender's cost of funds plus 3.0%. Principal and interest on each outstanding advance are paid on a monthly settlement date pursuant to the indenture, in accordance with the payment priorities set forth in the indenture. Principal and interest are paid out of amounts collected on the financed loans during the preceding month and deposited in a collection account pursuant to the indenture.

        The facility termination date was declared by the conduit lender in April 2008, and UFSB has not been eligible for further borrowings under the facility since that time. All outstanding notes under the facility became due on July 14, 2010, and UFSB-SPV was unable to pay the outstanding notes in full. As a result, the conduit lender has the right to foreclose on the collateral at any time in its discretion. As of September 2, 2010, the conduit lender has elected not to exercise such right. We expect the conduit lender to continue to require repayment of the outstanding notes from collections on the financed loans, until the outstanding notes are paid in full, if possible. See Note 10, "Liabilities and Unused Lines of Credit—Education Loan Warehouse Facility," in the notes to our consolidated financial statements included in Item 8 of this annual report for additional information.

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        At June 30, 2010, we had $6.1 million available for borrowing under an unused line of credit with the Federal Home Loan Bank of Boston. There were no borrowings outstanding under this line of credit at June 30, 2010 or June 30, 2009.

        We entered into two ten-year 6% fixed notes payable agreements with TERI in June 2001 to fund the acquisition of TERI's loan processing operations and loan database. As a result of the TERI Reorganization, we have not made any scheduled payments on the notes outstanding since April 2008. The outstanding principal balance of the notes payable at June 30, 2010 was $3.0 million. As of September 2, 2010, we expect amounts outstanding under the notes to be offset against our claims against TERI's bankruptcy estate.

        We have future cash obligations under long-term operating and capital leases for office space and office equipment. The table below summarizes our future payments under contractual obligations as of June 30, 2010, excluding obligations to TERI and borrowings under the education loan warehouse facility described above:

	Contractual obligations
Fiscal years ending June 30,	Capital leases		Operating leases		Total
	(dollars in thousands)
2011	$	1,418	$	10,330	$	11,748
2012		—		9,312		9,312
2013		—		7,375		7,375
2014		—		5,897		5,897
2015 (none thereafter)		—		350		350
Total	$	1,418	$	33,264	$	34,682

As of September 2, 2010, we were in discussions to amend the lease relating to our Medford, Massachusetts location to, among other things, reduce the rented space by approximately 60,000 square feet by April 1, 2011 and extend the term of the lease to March 31, 2017. The table above does not reflect any changes to the terms of the lease in effect as of September 2, 2010.

Off-Balance Sheet Arrangements

        We offer outsourcing services in connection with private education loan programs, from program design through securitization of the loans. We have structured and facilitated the securitization of private education loans for our clients through a series of bankruptcy remote, special purpose trusts.

        The principal uses of these trusts have been to generate sources of liquidity for our clients' and Union Federal's assets sold into such trusts and make available more funds to students and colleges. See "—Executive Summary—Application of Critical Accounting Policies and Estimates—Consolidation" above for a discussion of our determination to not consolidate these securitization trusts as of June 30, 2010 and the impact that newly issued accounting pronouncements that we have not yet adopted as of that date will have on our determination to consolidate these trusts.

Inflation

        Inflation was not a material factor in either revenue or operating expenses during the periods presented.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

        In the ordinary course of business, we are subject to interest-rate risk and credit risk. Interest-rate risk applies to all of our interest-bearing assets and liabilities, as well as service receivables. Credit risk is primarily related to private education loans held for sale, service receivables, mortgage loans, cash equivalents and investments.

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Interest-Rate Risk

        The interest-rate characteristics of our interest-bearing assets are driven by the nature, volume and duration of our interest-bearing liabilities. Generally, our interest-bearing liabilities are either variable-rate instruments or are of a short duration and are subject to frequent repricing at maturity.

        Less than 3% of our fixed-rate customer deposits at Union Federal have maturities in excess of twelve months from June 30, 2010. Approximately 84% of the deposits have variable interest rates or fixed interest rates with maturities of six months or less from June 30, 2010. Deposit pricing is subject to weekly examination by a committee of senior managers from Union Federal and FMD's Finance and Risk and Compliance Departments. The committee considers competitors' pricing, inflows and outflows of deposit balances and Union Federal's funding requirements to make pricing decisions on the desired volume of deposits in each given duration and product type.

        The frequent repricing of our liabilities drives our investment decisions. All of our private education loans, and approximately 65% of our mortgage loans, have variable interest rates. Interest rates on private education loans are based on the one-month LIBOR rate. Excess cash is primarily invested in money market funds, federal funds sold, time deposits with original maturities of less than one year and U.S. federal agency mortgage-backed securities.

        The matching of the interest-rate characteristics and duration of assets and liabilities mitigates interest-rate risk with respect to net interest revenue. However, we are still subject to interest-rate risk because as interest rates decline, the spreads between our assets and liabilities narrow and net interest income may decline.

        The fair value of private education loans held for sale and our service receivables will fluctuate due to variances in prepayments and discount rates, as well as the multi-year forward estimates of LIBOR, which is the reference rate for the loan assets and assumed borrowings assumptions used in our cash flow model. We frequently monitor these assumptions and their effect on the estimated fair value of these assets. We believe that we have adequately addressed interest-rate risks in our cash flow models.

Credit Risk

        We manage cash, cash equivalents and investment assets conservatively. The primary objective of our investment policy is the preservation of capital. Therefore, cash, cash equivalents, short-term investments and investments held for sale are placed with the Federal Reserve, or invested in federal funds sold, money market funds, deposits at highly rated institutions and government agency mortgage-backed securities.

        Union Federal offers conventional conforming and non-conforming fixed- and variable-rate first and second residential mortgage loans, as well as commercial real estate loans. We base our loan underwriting criteria primarily on credit score, consumer credit file information and collateral characteristics. All mortgage loans are underwritten such that they are saleable to institutional investors. Union Federal does not offer high loan-to-value second mortgages, option adjustable rate mortgages or sub-prime mortgage products.

        Our assumptions regarding defaults and recoveries of securitized loans affect the expected timing of cash payments to us in respect of additional structural advisory fees, asset servicing fees and residual cash flows and our estimates of their fair value. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary—Application of Critical Accounting Policies and Estimates" included in Item 7 of this annual report. We believe that we have adequately addressed credit risks in our cash flow models.

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Item 8.    Financial Statements and Supplementary Data

FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

The First Marblehead Corporation:

        We have audited the accompanying consolidated balance sheets of The First Marblehead Corporation and subsidiaries (the "Company") as of June 30, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended June 30, 2010. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2010, in conformity with U.S. generally accepted accounting principles.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of June 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated September 2, 2010 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ KPMG LLP

Boston, Massachusetts
September 2, 2010

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30, 2010 and 2009

(dollars and shares in thousands, except per share amounts)

			2010			2009
ASSETS
Cash and cash equivalents			$	330,073		$	158,770
Federal funds sold				2,000			14,326
Short-term investments, at cost				50,000			—
Investments held for sale, at fair value				4,471			8,450
Education loans held for sale				107,434			350,960
Service receivables:
	Additional structural advisory fees			34,676			55,130
	Asset servicing fees			5,780			2,385
	Residuals			12,823			9,960
		Total service receivables		53,279			67,475
Property and equipment, net				8,086			19,929
Intangible assets, net				1,194			1,931
Loans held to maturity, net				8,573			9,515
Income taxes receivable				17,560			166,410
Net deferred tax asset				41,915			13,124
Other assets				8,785			10,440
	Total assets		$	633,370		$	821,330
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
	Deposits		$	108,732		$	154,462
	Education loan warehouse facility			218,059			230,137
	Accounts payable and accrued expenses			30,235			21,512
	Other liabilities			6,529			9,754
		Total liabilities		363,555			415,865
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.01 per share; 20,000 shares authorized; 133 shares issued and outstanding				1			1
Common stock, par value $0.01 per share; 250,000 shares authorized; 108,975 and 106,768 shares issued, respectively; 100,736 and 99,125 shares outstanding, respectively				1,090			1,068
Additional paid-in capital				443,290			431,461
Retained earnings				11,389			156,913
Treasury stock, 8,239 and 7,643 shares, respectively, at cost				(186,218	)		(184,246	)
Accumulated other comprehensive income				263			268
		Total stockholders' equity		269,815			405,465
		Total liabilities and stockholders' equity	$	633,370		$	821,330

See accompanying notes to consolidated financial statements.

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal years ended June 30, 2010, 2009 and 2008

(dollars and shares in thousands, except per share amounts)

				2010			2009			2008
Service revenues:
	Additional structural advisory fees:
		Trust updates		$	(19,825	)	$	(57,157	)	$	(44,106	)
		New securitizations			—			—			24,304
	Up-front structural advisory fees				—			—			179,106
			Total additional structural advisory fees		(19,825	)		(57,157	)		159,304
	Asset servicing fees:
		Fee income			6,901			2,350			—
		Fee updates			(3,506	)		35			—
			Total asset servicing fees		3,395			2,385			—
	Residuals:
		Trust updates			2,863			(283,295	)		(488,832	)
		New securitizations			—			—			116,972
			Total residuals		2,863			(283,295	)		(371,860	)
	Administrative and other fees				19,967			22,958			158,525
			Total service revenues		6,400			(315,109	)		(54,031	)
	Net interest income				9,871			25,103			25,622
		Total revenues			16,271			(290,006	)		(28,409	)
Non-interest expenses:
	Compensation and benefits				43,096			42,232			96,735
	General and administrative expenses				58,064			80,438			254,439
	Losses on education loans held for sale				130,955			138,163			7,373
			Total non-interest expenses		232,115			260,833			358,547
Loss before income taxes					(215,844	)		(550,839	)		(386,956	)
Income tax benefit					(70,320	)		(187,819	)		(151,880	)
Net loss				$	(145,524	)	$	(363,020	)	$	(235,076	)
	Net loss per share:
		Basic		$	(1.46	)	$	(3.66	)	$	(2.46	)
		Diluted			(1.46	)		(3.66	)		(2.46	)
	Cash dividends declared per share				—			—			0.395
	Weighted-average shares outstanding:
		Basic			99,537			99,081			95,732
		Diluted			99,537			99,081			95,732

See accompanying notes to consolidated financial statements.

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Fiscal years ended June 30, 2010, 2009 and 2008

(dollars and shares in thousands, except per share amounts)

		Non-voting convertible preferred stock issued						Common stock
																								Accumulated other comprehensive income, net of tax
								Issued				In treasury
																		Additional paid-in capital			Retained earnings						Total stockholders' equity
		Shares			Amount			Shares		Amount		Shares			Amount
Balance at June 30, 2007			—		$	—			100,874	$	1,009		(7,532	)	$	(183,070	)	$	232,664		$	791,953		$	64		$	842,620
Comprehensive income (loss):
	Net loss		—			—			—		—		—			—			—			(235,076	)		—			(235,076	)
	Accumulated other comprehensive income, net		—			—			—		—		—			—			—			—			45			45
Total comprehensive loss			—			—			—		—		—			—			—			(235,076	)		45			(235,031	)
	Issuance of preferred stock		60			59,800			—		—		—			—			(208	)		—			—			59,592
	Conversion of preferred stock to common stock		(60	)		(59,800	)		5,320		54		—			—			59,746			—			—			—
	Options exercised		—			—			5		—		—			—			17			—			—			17
	Stock issuance through employee stock purchase plan		—			—			45		—		—			—			883			—			—			883
	Net stock issuance from vesting of stock units		—			—			212		2		(38	)		(923	)		(2	)		—			—			(923	)
	Stock-based compensation		—			—			—		—		—			—			7,015			—			—			7,015
	Tax benefit from stock-based compensation		—			—			—		—		—			—			383			—			—			383
	Cash dividends declared ($0.395 per share)		—			—			—		—		—			—			—			(36,944	)		—			(36,944	)
Balance at June 30, 2008			—			—			106,456		1,065		(7,570	)		(183,993	)		300,498			519,933			109			637,612
Comprehensive income (loss):
	Net loss		—			—			—		—		—			—			—			(363,020	)		—			(363,020	)
	Accumulated other comprehensive income, net		—			—			—		—		—			—			—			—			159			159
Total comprehensive loss			—			—			—		—		—			—			—			(363,020	)		159			(362,861	)
	Issuance of preferred stock		133			1			—		—		—			—			125,857			—			—			125,858
	Net stock issuance from vesting of stock units		—			—			312		3		(73	)		(253	)		(3	)		—			—			(253	)
	Stock-based compensation		—			—			—		—		—			—			7,285			—			—			7,285
	Tax expense from stock-based compensation		—			—			—		—		—			—			(2,176	)		—			—			(2,176	)
Balance at June 30, 2009			133			1			106,768		1,068		(7,643	)		(184,246	)		431,461			156,913			268			405,465
Comprehensive loss:
	Net loss		—			—			—		—		—			—			—			(145,524	)		—			(145,524	)
	Accumulated other comprehensive loss, net		—			—			—		—		—			—			—			—			(5	)		(5	)
Total comprehensive loss			—			—			—		—		—			—			—			(145,524	)		(5	)		(145,529	)
	Options exercised		—			—			6		—		—			—			4			—			—			4
	Stock issuance from vesting of stock units		—			—			2,201		22		(596	)		(1,972	)		(22	)		—			—			(1,972	)
	Stock-based compensation		—			—			—		—		—			—			13,013			—			—			13,013
	Tax expense from stock-based compensation		—			—			—		—		—			—			(1,166	)		—			—			(1,166	)
Balance at June 30, 2010			133		$	1			108,975	$	1,090		(8,239	)	$	(186,218	)	$	443,290		$	11,389		$	263		$	269,815

See accompanying notes to consolidated financial statements.

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal years ended June 30, 2010, 2009 and 2008

(dollars in thousands)

				2010			2009			2008
Cash flows from operating activities:
Net loss				$	(145,524	)	$	(363,020	)	$	(235,076	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
	Depreciation and amortization				13,359			17,800			19,633
	Deferred tax benefit				(28,791	)		(23,509	)		(237,363	)
	Stock-based compensation				13,013			7,285			7,015
	Losses on education loans held for sale				130,955			138,163			7,373
	Proceeds from the sale of education loans				121,585			—			—
	Proceeds from TERI to settle obligations on Union Federal's loans held for sale				—			30,046			—
	Additional structural advisory fee distributions				629			1,555			—
	Other non-cash charges				123			3,815			5,235
	Changes in assets/liabilities:
		Education loans held for sale			(9,799	)		(21,845	)		(480,234	)
		Additional structural advisory fees			19,825			57,157			19,802
		Asset servicing fees			(3,395	)		(2,385	)		—
		Residuals			(2,863	)		283,295			371,860
		Income taxes receivable			148,850			(166,410	)		49,345
		Other assets			1,655			12,821			23,001
		Accounts payable and accrued expenses and other liabilities			8,880			(31,045	)		(6,671	)
			Net cash provided by (used in) operating activities		268,502			(56,277	)		(456,080	)
Cash flows from investing activities:
	Net change in federal funds sold				12,326			65,889			(69,881	)
	Purchases of short-term investments				(75,000	)		—			—
	Proceeds from maturities of short-term investments				25,000			—			—
	Purchases of investments held for sale				—			(33,600	)		(33,300	)
	Proceeds from maturities and dispositions of investments held for sale				3,974			95,938			91,366
	Purchases of other long-term assets				(902	)		(2,137	)		(9,342	)
	Net change in loans held to maturity				1,727			1,239			573
			Net cash (used in) provided by investing activities		(32,875	)		127,329			(20,584	)
Cash flows from financing activities:
	Net change in deposits				(45,730	)		(89,651	)		190,590
	(Payments for) proceeds from education loan warehouse facility				(12,078	)		(12,762	)		242,899
	Payments for capital leases and other long-term obligations				(3,382	)		(3,578	)		(5,490	)
	Tax (expense) benefit from stock-based compensation				(1,166	)		(2,176	)		383
	Issuances of common stock, net				4			—			900
	Issuance of non-voting convertible preferred stock, net				—			125,858			59,592
	Repurchase of common stock				(1,972	)		(253	)		(923	)
	Cash dividends on common stock and cash paid in lieu of fractional shares				—			—			(36,944	)
			Net cash (used in) provided by financing activities		(64,324	)		17,438			451,007
Net increase (decrease) in cash and cash equivalents					171,303			88,490			(25,657	)
Cash and cash equivalents, beginning of year					158,770			70,280			95,937
Cash and cash equivalents, end of year				$	330,073		$	158,770		$	70,280
Supplemental disclosures of cash flow information:
	Interest paid			$	8,053		$	16,151		$	16,237
	Income taxes paid				112			41,622			51,772
Supplemental disclosure of non-cash activities:
	Reclassification of education loans held for sale to held to maturity			$	785		$	—		$	—
	Acquisition of property and equipment through capital leases				—			—			7,478
	Conversion of series A non-voting convertible preferred stock to common stock				—			—			59,800
	Reclassification of mortgages from held for sale to held to maturity				—			—			11,327

See accompanying notes to consolidated financial statements.

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2010, 2009 and 2008

(1) Nature of Business

        Unless otherwise indicated or unless the context of the discussion requires otherwise, all references in these notes to consolidated financial statements to "we", "us", "our" or similar references mean The First Marblehead Corporation (FMD) and its subsidiaries on a consolidated basis. All references in these notes to consolidated financial statements to "FMD" means The First Marblehead Corporation on a standalone basis.

        We offer outsourcing services to national and regional financial and educational institutions for designing and implementing private education loan programs. These school-certified loan programs are designed to be marketed through educational institutions or to prospective student borrowers and their families directly and to generate portfolios intended to be held by the originating lender or financed in the capital markets. We offer a fully integrated suite of services through our Monogram product, as well as certain services on a stand alone, fee-for-service basis. In addition, we provide administrative and other services to securitization trusts that we facilitated, asset servicing to the third-party owner of certain of those securitization trusts (NCSLT Trusts), as well as portfolio management services.

        Our bank subsidiary, Union Federal Savings Bank (Union Federal), is a federally chartered thrift that offers residential and commercial mortgage loans, and retail savings, money market and time deposit products. As a result of our ownership of Union Federal, we are a savings and loan holding company subject to regulation, supervision and examination by the U.S. Office of Thrift Supervision (OTS). During the second quarter of fiscal 2010, we announced that we had begun exploring strategic alternatives for Union Federal. As of September 2, 2010, we were actively considering those alternatives, including a potential sale.

        Substantially all of our financial results have been derived from our services relating to private education loans (education loans), which are considered to be in a single industry segment for financial reporting purposes.

        Historically, the driver of our results of operations and financial condition was the volume of education loans for which we provided outsourcing services from loan origination through securitization. In addition, asset-backed securitizations were our sole source of permanent financing for our clients' education loan programs, and substantially all of our income was derived from securitizations. Securitization refers to the technique of pooling loans and selling them to a special purpose, bankruptcy remote entity, typically a trust, which issues notes backed by those loans to investors. In the past, we offered our clients a fully integrated suite of outsourcing services, but we did not charge separate fees for many of those services. Although we provided those various services without charging a separate fee, or at "cost" in the case of loan processing services, we generally entered into agreements with the lender clients giving us the exclusive right to securitize the education loans that they did not intend to hold. For our past securitization services, we are entitled to receive additional structural advisory fees from the trusts over time and, in the case of certain trusts, residual cash flows.

Business Trends, Uncertainties and Outlook

        We have not accessed the securitization market since September 2007 as a result of market disruptions that began in the second quarter of fiscal 2008, continued through fiscal 2009 and, to a lesser extent, persisted as of June 30, 2010. General economic conditions in the United States have

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(1) Nature of Business (Continued)

deteriorated and not fully recovered over this time period. Our business has been and continues to be materially adversely impacted by these conditions.

        In addition, credit performance of consumer-related loans generally, as well as our education loan portfolios and those held by the various securitization trusts that we facilitated, were adversely affected by general economic conditions in the United States, including increased unemployment rates. The interest rate, economic and credit environments may continue to have a material negative effect on the estimated value of our service receivables.

        Our lender clients previously had the opportunity to mitigate their credit risk through a loan repayment guaranty by The Education Resources Institute, Inc. (TERI). TERI guaranteed the education loans held by the NCSLT Trusts, and we historically received reimbursement from TERI for outsourced loan processing services we performed on TERI's behalf. In April 2008, TERI filed a voluntary petition for relief (TERI Reorganization) under Chapter 11 of the United States Bankruptcy Code (Bankruptcy Code). As a result of capital market disruptions and the TERI Reorganization, many clients elected to terminate some or all of their agreements with us, which resulted in a significant reduction in our facilitated loan volumes during fiscal 2009 and fiscal 2010 compared to prior fiscal years. The TERI Reorganization, together with capital markets dislocations, has had, and will likely continue to have, a material adverse effect on the securitization trusts' ability to realize guaranty obligations of TERI, the valuation of our receivables from the securitization trusts for past services and our ability to realize fully the cost reimbursement obligations of TERI.

        As a result of economic conditions, we took several measures in fiscal 2010 and fiscal 2009 to adjust our business model:

•

During the fourth quarter of fiscal 2010, we entered into loan program agreements with SunTrust Bank and Kinecta Federal Credit Union. Pursuant to the agreements, we will perform a range of services in support of school-certified education loan programs to be funded by these lenders, including, as applicable, loan origination, portfolio management and other services. We have invested or will invest specified amounts of capital as a credit enhancement feature for these loan programs, and we expect to generate ongoing monthly revenue through the maturity of the program loans. This revenue model is consistent with our objective of improving our cash flows and reducing our dependence on the credit and capital markets. See Note 22, "Subsequent Events—Monogram Loan Programs," for more information.

•

In April 2010, we restructured the education loan warehouse facility of UFSB Private Loan SPV, LLC (UFSB-SPV), a wholly owned subsidiary of Union Federal at that time. The facility previously served as a source of interim financing for education loan programs that had been funded by Union Federal. The restructuring involved the substitution of FMD for Union Federal as master servicer under the indenture, the assumption by FMD of certain potential contingent liabilities of Union Federal under the facility, subject to a cap, and the indirect contribution by FMD of $6.5 million in cash and current education loans with an outstanding principal and interest balance of approximately $6.9 million, and a fair value of $3.1 million, to the facility. In exchange, the third-party conduit lender released Union Federal and UFSB-SPV from certain potential contingent liabilities, permitted the transfer of the membership interests of UFSB-SPV from Union Federal to a non-bank subsidiary of FMD and made certain concessions with

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(1) Nature of Business (Continued)

respect to the interest rate and fees applicable to the facility. We believe that the restructuring will be viewed favorably by potential purchasers as we consider our strategic alternatives with respect to Union Federal. See Note 10, "Liabilities and Unused Lines of Credit—Education Loan Warehouse Facility," for more information.

•

In March 2010, the OTS terminated a supervisory agreement (Supervisory Agreement) with FMD and an order (Order) to cease and desist with Union Federal. The Supervisory Agreement required FMD, among other things, to maintain a deposit at Union Federal in the amount of $30.0 million and maintain Union Federal's regulatory capital ratios at specified levels. The Order required Union Federal, among other things, to reduce by December 31, 2009 the concentration of education loans to Tier 1 capital (as defined in the regulations) plus allowances for loan losses below 50%. See Note 21, "Union Federal Regulatory Matters—Supervisory Agreement and Order to Cease and Desist," for more information.

•

In October 2009, Union Federal sold approximately 88% of its portfolio of education loans held for sale, which excluded loans held by UFSB-SPV, for gross proceeds of $121.6 million. As a result of the sale, Union Federal achieved the loan concentration reduction imposed by the OTS, and FMD was refunded a deposit in the amount of $30.0 million that FMD had been required to maintain at Union Federal. In November 2009, Union Federal sold the remainder of its portfolio of education loans held for sale, excluding loans held by UFSB-SPV, to a newly formed statutory trust owned by a subsidiary of FMD. See Note 5, "Education Loans Held for Sale," for more information.

•

In October 2009, we received tax refunds of $176.6 million related to operating losses for fiscal 2009 and the sale of the trust certificate (Trust Certificate), of NC Residuals Owners Trust, which held our residual interests in the NCSLT Trusts. We sold the Trust Certificate in fiscal 2009. See Note 19, "Income Taxes," for more information. In addition to the tax refund generated, the sale of the Trust Certificate is expected to eliminate certain future tax liabilities, which would have had a material negative effect on our financial condition and liquidity. As a result of the sale, we are no longer entitled to receive residual cash flows from the NCSLT Trusts, although we continue to have rights to additional structural advisory fees and asset servicing fees from the NCSLT Trusts, as well as additional structural advisory fees and residuals from certain trusts other than the NCSLT Trusts. See Note 6, "Service Receivables and Related Revenues," for more information.

•

During the first quarter of fiscal 2010, we favorably resolved certain securities litigation, including dismissals of a consolidated class action lawsuit and state and federal shareholder derivative lawsuits. No compensation in any form passed directly or indirectly from any defendant to any plaintiff or any of plaintiffs' attorneys in any of these actions. In November 2009, we recouped $1.0 million in legal expenses pursuant to our directors and officers liability insurance policy.

•

In August 2008, we received $132.7 million in gross proceeds from an equity financing, which improved our liquidity position. See Note 13, "Stockholders' Equity—Preferred Stock," for more information.

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(1) Nature of Business (Continued)

•

We greatly reduced our annual cash expenditure requirements through reductions in headcount, consolidation of office space and other cost saving initiatives that began in fiscal 2008 and continued through fiscal 2010. See Note 18, "General and Administrative Expenses," for more information.

        We believe that our Monogram product will provide us with an opportunity to structure, process and originate education loans and that the two loan program agreements we have entered into are a significant step in our return to the education lending marketplace. We also believe that conditions in capital markets generally continued to improve during fiscal 2010, potentially creating additional flexibility with regard to the financing of education loans. We continue to believe, as of September 2, 2010, however, that the structure and economics of any financing transaction will be less favorable than our past securitizations, with possibly lower revenues and additional cash requirements on our part.

        Our near term financial performance and future growth depend in large part on our ability to successfully market our Monogram product and transition to more fee-based revenues while growing and diversifying our client base. We are uncertain as to the degree of market acceptance our Monogram product will have, particularly in the current economic environment where many lenders continue to evaluate their education lending business models.

Servicing Concentration

        As of June 30, 2010, there were six loan servicers providing services to trusts that we facilitated, including processing deferment and forbearance requests, sending out account statements and accrual notices, responding to borrower inquiries and collecting and crediting payments received from borrowers. As of June 30, 2010, Pennsylvania Higher Education Assistance Agency (PHEAA) serviced a significant majority of the loans for which we facilitated origination. PHEAA also operates under the name American Education Services.

(2) Significant Accounting Policies

Use of Estimates

        The preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We base our estimates and judgments on historical experience, economic conditions and on various other factors. Actual results may differ from these estimates under varying assumptions or conditions. On an ongoing basis, we evaluate our estimates and judgments, particularly as they relate to accounting policies that we believe are most important to the portrayal of our financial condition and results of operations. Material estimates that are particularly susceptible to change relate to the recognition of service revenues and the valuation of our service receivables and our portfolio of education loans held for sale.

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(2) Significant Accounting Policies (Continued)

(a)   Cash and Cash Equivalents

        All highly liquid debt instruments with original maturities of three months or less on the date of purchase, and all funds invested in money market funds are considered cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value.

(b)   Investments

        Investments with original maturities greater than three months and remaining maturities of less than one year at the date of purchase are classified as short-term investments and are carried at cost, which approximates fair value.

        Investments in marketable debt securities are classified as either available for sale, trading or held to maturity. Available-for-sale investments are carried at fair value with net unrealized gains and losses recorded in other comprehensive income, a component of stockholders' equity. Trading securities are securities held in anticipation of short-term market movements, and are carried at fair value with net unrealized gains and losses recorded in the statement of operations. Investments are classified as held to maturity when we have both the ability and intent to hold the securities until maturity. Held-to-maturity investments are carried at amortized cost.

(c)   Loans Held for Sale

        Education loans held for sale and the related interest receivable are carried at the lower of cost or fair value. Fair value is evaluated on a quarterly basis. When available, fair value is based on quoted market values. In the absence of readily determined market values, fair value is estimated by management based on the present value of expected future cash flows from the education loans held for sale. These estimates are based on historical and third-party data, macroeconomic indicators and our industry experience with assumptions for, among other things, default rates, recovery rates on defaulted loans, prepayment rates and a discount rate commensurate with the risks involved. If readily determined market values became available, or if actual performance were to vary appreciably from management's estimates, the fair value of the education loans would need to be further adjusted, which could result in material differences from the recorded carrying amounts. We record changes in the carrying value of education loans held for sale and the related interest receivable in the statement of operations.

(d)   Property and Equipment

        Leasehold improvements, computers, software and other equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded in general and administrative expenses and are calculated using the straight-line method over the estimated useful lives of the assets or the remaining terms of the lease, if shorter. Maintenance and repairs are charged to general and administrative expense as incurred, while major leasehold improvements are capitalized and amortized over the lesser of their estimated useful life or the remaining terms of the lease.

        Costs related to internal-use software development projects are capitalized if the software is expected to yield long-term operational benefits, such as operational efficiencies and/or incremental revenue streams.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(2) Significant Accounting Policies (Continued)

(e)   Loans Held to Maturity

        Loans are classified as held to maturity when we have both the intent and ability to hold the loans through maturity. Loan origination fees, net of certain direct organization costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. If a mortgage loan is delinquent by greater than 90 days, the accrual of interest income on that loan is discontinued until the loan is brought current or paid. If an education loan is delinquent by greater than 90 days, the accrual of interest income on that loan is discontinued until the loan is brought current or paid or defaults. Past due status is based on contractual terms. An allowance for loan losses is established through a charge to non-interest expense. When management believes that the collection of a loan's principal balance is unlikely, the principal amount is charged to the allowance. Recoveries are credited to the allowance as amounts are recovered. Interest accrual is resumed on loans that become current.

(f)    Fair Value of Financial Instruments

        The Accounting Standards Codification (ASC) 820-10, Fair Value Measurements and Disclosures, of the Financial Accounting Standards Board (FASB), permits, but does not require, entities to measure many financial instruments and certain other items not specifically identified in other topics of the ASC, such as available-for-sale investments, at fair value. We have not elected to measure additional assets and liabilities at fair value.

        Fair value is defined as the price that would be received in the sale of an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. A three-level valuation hierarchy is used to qualify fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date:

        Level 1.    Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 assets and liabilities include debt and equity securities and derivative financial instruments actively traded on exchanges, as well as U.S. Treasury securities and U.S. Government and agency mortgage-backed securities that are actively traded in highly liquid over-the-counter markets.

        Level 2.    Model inputs are observable inputs, other than Level 1 prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs that are observable or can be corroborated, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 assets and liabilities include debt instruments that are traded less frequently than exchange traded securities and derivative instruments, for which the model inputs are observable in the market or can be corroborated by market observable data. Examples in this category are less frequently traded mortgage-backed securities, corporate debt securities and derivative contracts.

        Level 3.    Inputs to the valuation methodology are unobservable but significant to the fair value measurement. Examples in this category include interests in loans held for sale, certain securitized financial assets or certain private equity investments.

        Fair value is applied to eligible assets based on quoted market prices, where available. For financial instruments for which quotes from recent exchange transactions are not available, fair value is

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(2) Significant Accounting Policies (Continued)

based on discounted cash flow analysis and comparisons to similar instruments. Discounted cash flow analysis is dependent upon estimated future cash flows and the level of interest rates.

        The methods used for current fair value calculations of Level 2 and Level 3 assets and liabilities may not be indicative of net realizable value or reflective of future fair values. If readily determined market values became available, or if actual performance were to vary appreciably from assumptions used, assumptions may need to be adjusted, which could result in material differences from the recorded carrying amounts. We believe our methods of determining fair value are appropriate and consistent with other market participants. However, the use of different methodologies or application of different assumptions to value certain financial instruments could result in a different estimate of fair value.

(g)   Revenue Recognition

        Additional Structural Advisory Fees.    We are entitled to additional structural advisory fees for structuring and facilitating the securitization of the education loans held by various securitization trusts we facilitated, principally the NCSLT Trusts. We are entitled to receive these fees over time, based on the payment priorities established in the trusts' indentures. We generally become entitled to receive these additional fees, plus interest, once the parity ratio of trust assets to trust liabilities reaches a stipulated level, which ranges from 103.0% to 105.5%, or after all noteholders have been paid in full. The indentures relating to certain of the securitization trusts specify circumstances (Trigger Events) upon the occurrence of which payments that would otherwise be due with respect to additional structural advisory fees and residuals would instead be directed to the holders of the notes issued by the trusts until the condition causing the Trigger Event ceases to exist or all notes and related interest are paid in full.

        Additional structural advisory fee receivables are carried at fair value. In the absence of readily determined market values, we update our estimates of the fair value of additional structural advisory fee receivables on a quarterly basis, based on the present value of expected future cash flows. Our estimates reflect assumptions for discount rates commensurate with the risks involved and trust performance assumptions, including estimated operational expenses, the expected annual rate and timing of education loan defaults and recoveries, macroeconomic factors, the annual rate and timing of education loan prepayments, the trend of contractual and market interest rates over the life of the loan pools, including the forward London Interbank Offered Rate (LIBOR), the cost of funding outstanding auction rate notes, the existence of Trigger Events and TERI's obligation and ability to pay default claims and its use of recoveries to replenish the segregated reserve accounts pledged to the NCSLT Trusts to secure its guaranty obligations (Pledged Accounts). See Note 12, "Commitments and Contingencies—TERI Reorganization," for more information regarding TERI's obligation to pay default claims. These assumptions are based on historical and third-party data, macroeconomic indicators and our industry experience.

        If readily determined market values became available or if actual performance were to vary appreciably from assumptions used, assumptions may need to be adjusted, which could result in material differences from the recorded carrying amounts. Changes to the fair value of these receivables are recorded in the statement of operations as additional structural advisory fees—trust updates.

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(2) Significant Accounting Policies (Continued)

        Residuals.    Residuals associated with any securitization trusts that we facilitated are typically junior in priority to the rights of the holders of the asset-backed securities (ABS) issued in the securitizations and any additional structural advisory fees. As a result, residual interests are comparable to equity securities and, as such, are carried at fair value on the balance sheet. For those trusts in which we retain a residual interest, fair value is estimated by management using the same assumptions used for additional structural advisory fee receivables, with the exception of the discount rate, which is higher, commensurate with the risks involved. Changes in the fair value during the period are included in the statement of operations as residuals—trust updates.

        Asset Servicing Fees.    In connection with the sale of the Trust Certificate, we entered into an asset services agreement (Asset Services Agreement) with the third-party purchaser of the Trust Certificate effective as of March 31, 2009. Pursuant to the terms of the Asset Services Agreement, we are entitled to asset servicing fees from the third-party purchaser for services provided to support its ownership of residual interests in the NCSLT Trusts. The services we provide include analysis and valuation optimization and services related to funding strategy, among others. As compensation for our services, we are entitled to a monthly asset servicing fee based on the aggregate outstanding principal balance of the loans owned by the NCLST Trusts. Our receipt of the fees, however, is contingent upon distributions available to the third-party purchaser of the Trust Certificate. Under no circumstance will we receive cash for our asset servicing fees until residual cash flows are distributed from the NCSLT Trusts.

        If the third-party purchaser terminates the Asset Services Agreement without cause prior to 2019, it is required to pay a termination fee in addition to the receivables recorded as of the date of termination. The amount of the termination fee varies based on the year of termination; however, in all cases, the termination fee exceeds the receivables balance currently recorded. After December 31, 2019, we would not be entitled to a termination fee. In addition, if the third-party purchaser sells the Trust Certificate, the Asset Services Agreement is required to be transferred to the new owner. As such, we believe that receipt of our fees will come from either the residual distributions themselves or, in the case of termination, from the termination fee and, therefore, it is appropriate to record such receivable and recognize the related revenues.

        In determining the appropriate accounting for our asset servicing fees, we relied on the revenue recognition guidance in ASC 605-10-25-1, Revenue Recognition—Revenue and Gains, which provides that revenue is recognizable when goods or services have been exchanged for cash or claims to cash, and an entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. In addition, we considered the criteria enumerated in Staff Accounting Bulletin No. 104, Revenue Recognition, in our determination of revenue recognition:

•

An arrangement exists between the third-party purchaser and us, as evidenced by the contract;

•

Services have been provided in accordance with the arrangement;

•

The asset servicing fees are fixed and determinable as a percentage of the aggregate outstanding principal balance of the education loans owned by the NCSLT Trusts; and

•

Collectability is reasonably assured through the residual cash flows of the NCSLT Trusts or the termination fee under the Asset Services Agreement, as described above.

95

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(2) Significant Accounting Policies (Continued)

        The amount of revenue recognized as fee income is equal to the estimated net present value of the receivable generated from services performed during the period. We discount the value of the asset servicing fees using a discount rate commensurate with similar receivables. In accordance with ASC 835-30-05, Interest—Imputation of Interest, we have presumed that a portion of the asset servicing fees received will represent interest compensation until cash distributions are actually received. Changes in the net present value of asset servicing fee receivables are recognized as fee updates in the statement of operations.

        Administrative and Other Fees.    Administrative fees are received from the securitization trusts for services performed in administering them, including their daily management, coordination of loan servicers and reporting information to the parties related to the securitizations. The fees are based upon a percentage of the outstanding principal balance of the loan pools of each of the trusts. The fees vary with each separate securitization and are recognized in service revenue when earned, as administrative services are provided.

        During the fourth quarter of fiscal 2009, we began receiving fees from certain securitization trusts under a special servicing agreement. These fees are paid by the securitization trusts for the performance by us of default prevention services and management of education loan collections. Such fees are based, in part, upon the reimbursement of expenses, and are recognized as the expenses are incurred.

        Other fees are earned on a stand-alone, fee-for-service basis and are considered earned in the period in which the service was provided, or in the case of loan originations, at the time the funds are disbursed or as the applications are processed, in accordance with contractual terms.

        Net Interest Income.    Interest income and interest expense are recognized using the effective interest method.

(h)   Stock-based compensation

        We record compensation expense equal to the estimated fair value on the grant date of stock options granted to purchase common stock, on a straight-line basis over the options' vesting period. We record compensation expense for equity-based awards other than options based on the timing of vesting.

        We use a Black-Scholes option pricing model to determine the fair value of options granted. The fair values of equity-based awards other than options, such as restricted stock units (RSUs), are based on the price of our common stock on the date of grant.

(i)    Income Taxes

        In determining a provision for income taxes, the estimated annual effective tax rate is based on expected annual income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. The estimated annual effective tax rate also includes our best estimate of the ultimate outcome of tax audits.

96

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(2) Significant Accounting Policies (Continued)

        The asset and liability method of accounting is utilized for recognition of income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized in connection with the tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry backs and carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized as tax expense (benefit) in the period that includes the enactment date. A deferred tax asset valuation allowance is established if it is considered more likely than not that all or a portion of the deferred tax assets will not be realized.

(j)    Net Loss Per Share

        Basic net loss per share is computed by dividing net loss by the basic weighted average number of shares of common stock outstanding for the periods presented. Diluted net income per share is computed by dividing net income by basic weighted average shares and, if dilutive, common stock equivalent shares outstanding during the period. To the extent income available to stockholders is a loss, all common stock equivalents are assumed to be anti-dilutive, and are excluded from diluted weighted average shares outstanding. Common stock equivalent shares outstanding are determined in accordance with the treasury stock method. Common stock equivalents consist of shares issuable upon the exercise of outstanding stock options, conversion of preferred stock to common stock and the vesting of RSUs.

(k)   Consolidation

        Our consolidated financial statements include the accounts of FMD and its subsidiaries, after eliminating inter-company accounts and transactions. We have not consolidated the financial results of the securitization trusts purchasing loans that we facilitated.

        At June 30, 2010 and 2009, each of the securitization trusts created after January 31, 2003, has met the criteria to be a qualified special purpose entity (QSPE) as defined by ASC 860-40, Transfers and Servicing—Transfers to Qualifying Special Purpose Entities (ASC 860-40). Accordingly, we did not consolidate these existing securitization trusts in our financial statements. In addition, the securitization trusts created prior to January 31, 2003 in which we hold a variable interest that could result in our being considered the primary beneficiary of such trusts have been amended in order for them to be considered QSPEs.

        Effective July 1, 2010, we adopted Accounting Standards Update (ASU) 2009-16, Transfers and Servicing (Topic 860)—Accounting for Transfers of Financial Assets (ASU 2009-16), and ASU 2009-17, Consolidations (Topic 810)—Improvements to Financial Reporting by Enterprises Involved With Variable Interest Entities (ASU 2009-17). Prior to their codification, ASU 2009-16 was referred to as Financial Accounting Standard 166, Accounting for Transfers of Financial Assets, an Amendment of FASB Statement 140, and ASU 2009-17 was referred to as Financials Accounting Standard 167, Amendments to FASB Interpretation No. 46(R).

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(2) Significant Accounting Policies (Continued)

        ASU 2009-16 removes the concept of a QSPE from ASC 860-40 and removes the exemption from consolidation for QSPEs from ASC 810-10, Consolidation (ASC 810-10). ASU 2009-17 updates ASC 810-10 to require that certain types of enterprises perform analyses to determine if they are the primary beneficiary of a variable interest entity. A primary beneficiary of a variable interest entity is the enterprise that has both of the following characteristics:

•

The power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance; and

•

The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity.

        In addition, ASU 2009-17 requires us to continuously reassess whether consolidation of variable interest entities is appropriate, as opposed to the trigger-based assessment allowed under previous guidance. As a result, we may be required to consolidate or deconsolidate variable interest entities on a quarterly basis, which may lead to volatility in our financial results and make comparisons of results between time periods more challenging.

        Effective July 1, 2010, we consolidated 14 securitization trusts that we previously facilitated and deconsolidated UFSB-SPV. Assets and liabilities of the entities consolidated were measured as if they had been consolidated at the time we became the primary beneficiary. All intercompany transactions are eliminated. Profits and losses of the consolidated variable interest entities are allocated to non-controlling interests based on the percentage ownership of voting interests, before the effect of intercompany elimination entries. ASU 2009-17 has been applied through a cumulative-effect adjustment to the opening balance of retained earnings at the effective date.

        At the effective date of consolidation, we recorded a net increase in total assets and total liabilities of approximately $8.0 billion, and $8.8 billion, respectively, and a net decrease in total stockholders' equity of approximately $800 million (comprised of an increase in FMD stockholders' equity of approximately $60 million recorded as an adjustment to opening retained earnings more than offset by a non-controlling interest deficit of approximately $860 million). Included in these amounts were the following adjustments:

•

Consolidation of approximately $8.2 billion of held-to-maturity securitized loan receivables, at amortized cost;

•

Consolidation of approximately $9.0 billion of non-recourse debt issued by the trusts to third-party investors;

•

Reversal of additional structural advisory fee and residual interest receivables totaling $38.7 million, previously recorded as due from the 14 asset securitization trusts consolidated; and

•

Deconsolidation of UFSB-SPV with assets of $108.4 million and liabilities of $225.0 million, and reversal of $45.9 million in deferred tax assets associated with the unrealized losses of UFSB-SPV on education loans held for sale.

        After adoption of ASU 2009-16 and ASU 2009-17, our results of operations will no longer reflect securitization-related income, trust updates or administrative fees from the 14 securitization trusts.

98

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(2) Significant Accounting Policies (Continued)

Instead, we will recognize interest income associated with securitized loan receivables in the same line item as interest income from non-securitized assets, as well as a provision for loan losses, and we will recognize interest expense associated with debt issued by the trusts to third-party investors on the same line item as other interest-bearing liabilities of FMD. On a consolidated basis, we will not record any revaluation gains or losses related to the additional structural advisory fee and residual interest receivables due from the 14 securitization trusts, but we continue to recognize revaluation gains and losses on receivables from securitization trusts that were not consolidated. The effect of the consolidation will be reflected in our results for the first quarter of fiscal 2011 ending September 30, 2010.

(l)    New Accounting Pronouncements

        ASU 2009-16 and ASU 2009-17, as described in "—Consolidation" above, are the only new accounting pronouncements issued, but not yet effective, that we expect will have a material impact to our financial statements when adopted. No recently effective accounting pronouncements have had a material impact on our financial statements.

(3) Cash and Cash Equivalents

        The following table summarizes our cash and cash equivalents:

	June 30,
	2010		2009
	(dollars in thousands)
Cash equivalents (money market funds)	$	217,076	$	142,723
Interest-bearing deposits with the Federal Reserve Bank		92,545		—
Interest-bearing deposits with other banks		15,285		11,550
Non-interest-bearing deposits with banks		5,167		4,497
Total cash and cash equivalents	$	330,073	$	158,770

        Cash and cash equivalents of Union Federal of $115.1 million at June 30, 2010 are not available for dividends without prior approval from the OTS. Cash collected on delinquent and defaulted loans on behalf of the securitization trusts is deposited in segregated accounts for the eventual payment to the trusts. Cash held by UFSB-SPV is only available to the creditors of UFSB-SPV.

        Included in cash equivalents is an investment in a money market fund for which the investment advisor is the institutional money management firm, Milestone Capital Management, LLC (MCM), a wholly-owned subsidiary of Milestone Group Partners. MCM receives fees for services it performs from the money market fund. Members of the immediate family of one of FMD's directors owned approximately 65% of Milestone Group Partners as of June 30, 2010, making MCM a related party. At June 30, 2010 and June 30, 2009, $30.0 million and $60.0 million of our holdings in money market funds, respectively, were invested in funds managed by MCM.

99

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(4) Short-Term Investments and Investments Held for Sale

        Short-term investments of $50.0 million at June 30, 2010 included certificates of deposit with highly rated financial institutions, carried at cost.

        Available for sale investments consisted of mortgage-backed federal agency securities held by Union Federal, with gross unrealized gains of $263 thousand and $268 thousand at June 30, 2010 and 2009, respectively, recognized in other comprehensive income, a component of stockholders' equity.

(5) Education Loans Held for Sale

        All education loans held for sale have variable rates. The following table reflects the carrying value of education loans held for sale:

		June 30,
		2010			2009
		(dollars in thousands)
Principal and interest		$	273,409		$	526,542
Fair value adjustment			(165,975	)		(175,582	)
Net carrying value		$	107,434		$	350,960
Principal and interest:
	Pledged as collateral under education loan warehouse facility	$	273,409		$	261,923
	Delinquent (>90 days past due)		4,410			10,619
	In default (>180 days past due)		46,660			21,818

	Fiscal years ended June 30,
	2010			2009			2008
	(dollars in thousands)
Net carrying value, beginning of period	$	350,960		$	497,324		$	24,463
Losses on education loans held for sale		(130,955	)		(138,163	)		(7,373	)
Cash receipts from TERI recorded as a reduction in fair value(1)		—			(30,046	)		—
Proceeds from the sale of education loans		(121,585	)		—			—
Reclassification of education loans from held for sale to held to maturity		(785	)		—			—
Net adjustment to reconcile net loss to cash (provided by) used in operating activities(2)		9,799			21,845			480,234
Net carrying value, end of period	$	107,434		$	350,960		$	497,324

(1)

During fiscal 2009, we received $30.0 million of segregated reserves held by TERI in settlement of Union Federal's claims in the TERI Reorganization, which we recorded as a decrease to the fair value of loans held for sale.

(2)

Represents cash used for loans originated and non-cash accruals for interest income capitalized on loans in deferment, less aggregate principal and interest payments received.

100

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(5) Education Loans Held for Sale (Continued)

        At June 30, 2010, education loans held for sale consisted solely of an education loan portfolio held by UFSB-SPV. The assets of UFSB-SPV are pledged as collateral to the indenture trustee, for the benefit of the third-party conduit lender under the education loan warehouse facility (conduit lender). Loans used to secure the facility are subject to call provisions by the administrator of the indenture; therefore, we do not have the ability to hold those loans to maturity, and we have classified them as held for sale. The conduit lender's recourse to us is limited to the assets pledged as collateral.

        At June 30, 2009, education loans held for sale included education loan portfolios held by both Union Federal and UFSB-SPV. During fiscal 2010 as part of a risk reduction plan agreed upon with the OTS, we took measures to decrease Union Federal's education loan portfolio concentration. In October 2009, Union Federal completed a sale of all education loans that it directly held and that were less than 31 days delinquent. The sale of these loans, which had an aggregate outstanding principal and accrued interest balance of approximately $233.8 million, resulted in proceeds to Union Federal of $121.6 million. Following the sale, the purchaser bears the risk of future performance of the loans, including risk of future default, except as otherwise set forth in the loan purchase and sale agreement. The sale did not include loans held by UFSB-SPV.

        In November 2009, Union Federal sold the remainder of its portfolio of education loans held for sale, excluding loans held by UFSB-SPV, to a newly formed statutory trust owned by a subsidiary of FMD. Union Federal received proceeds of $3.9 million from the sale.

        During the fourth quarter of fiscal 2010, we completed a restructuring of UFSB-SPV's education loan warehouse facility. On April 16, 2010, in connection with the restructuring of the facility, FMD indirectly contributed cash of $6.5 million and loans with a fair value of $3.1 million from the newly formed statutory trust owned by a subsidiary of FMD to UFSB-SPV. These loans serve as collateral for the debt outstanding under the facility.

        See Note 8, "Loans Held to Maturity," for additional information on the loans reclassified as held to maturity and Note 10, "Liabilities and Unused Lines of Credit—Education Loan Warehouse Facility," for additional information about the restructuring of the education loan warehouse facility.

(6) Service Receivables and Related Revenues

        Additional structural advisory fees and residual receivables represent the estimated fair value of service receivables expected to be collected over the life of the various separate securitization trusts that have purchased education loans facilitated by us, with no further service obligations on our part. Asset servicing fee receivables represent the estimated fair value of service revenues earned as of the balance sheet date from the purchaser of the Trust Certificate.

101

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(6) Service Receivables and Related Revenues (Continued)

(a)   Additional Structural Advisory Fee Receivables

        The following table summarizes changes in the estimated fair value of our additional structural advisory fee receivables:

				Fiscal years ended June 30,
				2010			2009			2008
				(dollars in thousands)
Fair value at beginning of period				$	55,130		$	113,842		$	133,644
	Additions from new securitizations				—			—			24,304
	Cash received from trust distributions				(629	)		(1,555	)		—
	Trust updates:
		Passage of time—fair value accretion			6,194			9,362			10,258
		Increase in timing and average default rate			(42,081	)		(11,262	)		(2,910	)
		Decrease (increase) in average prepayment rate			25,338			3,127			(3,168	)
		Increase in discount rate assumption			(9,803	)		(23,022	)		(41,555	)
		Decrease in forward LIBOR curve			(2,305	)		(12,517	)		(5,442	)
		Increase in auction rate notes spread			—			(13,087	)		(140	)
		Decrease in recovery assumption			—			(9,416	)		—
		Other factors, net			2,832			(342	)		(1,149	)
			Net change from trust updates		(19,825	)		(57,157	)		(44,106	)
Fair value at end of period				$	34,676		$	55,130		$	113,842

        At June 30, 2010 and 2009, additional structural advisory fee receivables were primarily due from the NCSLT Trusts. At June 30, 2010 and 2009, the aggregate outstanding principal balance of the debt issued by the NCSLT Trusts was $12.10 billion and $12.77 billion, respectively. The principal underlying assets in the NCSLT Trusts were TERI-guaranteed education loans, of which approximately 23.2% were in deferment, 4.7% were in forbearance and 72.1% were in repayment status as of June 30, 2010. Approximately 91.2% of the loans in repayment status as of June 30, 2010 were current, 4.5% were between 31 and 90 days past due, 2.3% were between 91 and 180 days past due, and 2.0% were greater than 180 days past due. All borrowers who are current in making repayments, even if the original amount of such repayments has been reduced pursuant to a temporarily modified payment plan, are considered current and in repayment status. As of June 30, 2010, the cumulative gross default rate with regard to loans in, and loans that have previously been in, repayment status in the NCSLT Trusts was 14.5%.

102

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(6) Service Receivables and Related Revenues (Continued)

(b)   Residual Interest Receivables

        The following table summarizes the changes in the estimated fair value of our residual receivables:

				Fiscal years ended June 30,
				2010			2009			2008
				(dollars in thousands)
Fair value at beginning of period				$	9,960		$	293,255		$	665,115
	Additions from new securitizations				—			—			116,972
	Trust updates:
		Passage of time—fair value accretion			1,828			20,453			75,070
		Decrease (increase) in discount rate assumption			1,176			(82,571	)		(129,169	)
		Increase in timing and average default rate			(353	)		(50,108	)		(49,929	)
		Increase (decrease) in forward LIBOR curve			160			(22,009	)		(17,590	)
		Increase in auction rate notes spread			—			(31,779	)		(93,813	)
		Decrease (increase) in average prepayment rate			—			11,336			(34,765	)
		Decrease to reflect disposition(1)			—			(134,481	)		—
		TERI's inability to pay claims			—			—			(219,553	)
		Increase in trust expenses			—			—			(9,026	)
		Other factors, net			52			5,864			(10,057	)
			Net change from trust updates		2,863			(283,295	)		(488,832	)
Fair value at end of period				$	12,823		$	9,960		$	293,255

(1)

On March 31, 2009, NC Residuals Owners Trust was formed by the statutory conversion of our wholly-owned subsidiary, GATE Holdings, Inc. As a result of the conversion, we became the sole legal and beneficial owner of the Trust Certificate. NC Residuals Owners Trust, together with its wholly-owned subsidiary, owned certain certificates of beneficial ownership interests (Residuals) of the NCSLT Trusts. The NCSLT Trusts are the holders of substantially all TERI-guaranteed loans facilitated by us.

Effective March 31, 2009, we entered into, among other agreements, a purchase agreement (Purchase Agreement) with VCG Owners Trust, a newly formed statutory trust (Purchaser), and VCG Securities, LLC (Vanquish Investor). The Purchaser and Vanquish Investor are affiliates of Vanquish Capital Management LLC.

Pursuant to the Purchase Agreement, we transferred the Trust Certificate to the Purchaser effective as of March 31, 2009, and we recorded a decrease in the carrying value of our residual receivables of $134.5 million. As a result, the Purchaser became the indirect owner of the Residuals that were formerly owned by us indirectly through NC Residuals Owners Trust. In consideration for the sale, the Purchaser and Vanquish Investor agreed to bear all future federal and state tax liabilities associated with the Residuals.

103

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(6) Service Receivables and Related Revenues (Continued)

(c)   Asset Servicing Fee Receivables

        In connection with the sale of the Residuals discussed above, we entered into an Asset Services Agreement and a data sharing and license agreement with the Purchaser, also effective March 31, 2009. Pursuant to the Asset Services Agreement, we have agreed to provide certain asset servicing to the Purchaser to support the Purchaser's ownership of the Residuals, including, among others, analysis and valuation optimization services and services relating to funding strategy. As compensation for services, we are entitled to an asset servicing fee, calculated as a percentage of the aggregate outstanding principal balance of loans outstanding in the trusts. Although this fee is earned monthly, our right to receive the fee is contingent on distributions made to the holders of the Residuals. Distributions made by each of the NCSLT Trusts will be allocated as follows:

•

commencing with the first calendar month in which residual cash flows are paid, and for each payment date during the next 60 calendar months from that date, we will receive 60.0% of the residual cash flows;

•

for each payment date after that, we will receive 40.0% of residual cash flows until all earned but unpaid asset servicing fees are paid in full; and

•

thereafter, once all earned but unpaid fees have been received, we will receive our monthly fee, paid in full.

        We will not receive any asset servicing fees until the Purchaser has begun to receive residual cash flows.

        During fiscal 2010, our asset servicing fees earned, reported as fee income, reflected a full year of earnings, while the Asset Services Agreement was only in effect for one fiscal quarter in fiscal 2009. Fee updates for fiscal 2010 were a loss of $3.5 million in fiscal 2010, reflecting changes in the volume and timing of projected cash flows available to the Residual holders of the NCSLT Trusts for the payment of such fees. See "—Performance Assumptions Overview" below for changes in performance assumptions. Fee updates in fiscal 2009 reflected accretion for the passage of time.

(d)   Performance Assumption Overview

        During the third quarter of fiscal 2010, we completed initial enhancements to the financial models that we use to estimate the fair value of our service receivables. The enhancements provided for the inclusion of certain prospective macroeconomic factors in our performance assumptions for those education loans securitized in the NCSLT Trusts.

        Risk Segments.    During the third quarter of fiscal 2010, we retroactively scored loans held by the NCSLT Trusts using our proprietary risk score modeling, origination data and additional credit bureau data made available following origination. We then divided loans into three risk segments, with loans in Segment 1 expected to perform better than loans in Segment 2, and loans in Segment 2 expected to

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(6) Service Receivables and Related Revenues (Continued)

perform better than loans in Segment 3. The table below identifies performance assumptions for each segment, as well as the percentage of the NCSLT Trust portfolios in each segment.

		June 30, 2010
NCSLT Portfolio		Segment 1			Segment 2			Segment 3
Distribution by original loan amount			25.5	%		27.0	%		47.5	%
Distribution by total outstanding loan amount(1):
	Not in repayment(2)		4.3			6.7			16.9
	In repayment		18.5			20.5			33.1
	Total by segment		22.8			27.2			50.0
Gross default rate(3)			9.7			19.6			48.8
Recovery rate(3)			40.0			40.0			40.0
Net default rate(3)			5.8			11.8			29.3
Prepayment rate(4)			6.9			4.9			3.1

(1)

Outstanding aggregate principal and capitalized interest balance as of June 30, 2010.

(2)

Loans "not in repayment" include loans in deferment or forbearance status as of June 30, 2010.

(3)

Using projected defaults, net defaults and recoveries over the lives of the trusts as a percentage of original outstanding aggregate principal and accrued interest balance.

(4)

Amount presented is the weighted average conditional prepayment rate (CPR) over the lives of the trusts. The CPR is an estimate of the likelihood that a loan will be prepaid during a period given that it has not previously defaulted or been repaid in full.

        The table below identifies our overall assumptions as of June 30, 2009 and 2008:

	June 30,						Year over year change
	2009			2008			2009 - 2008
Gross default rate		19.0	%		14.8	%		4.2	%
Net default rate		11.4			7.7			3.7
Recovery rate		40.0			48.0			(8.0	)
Prepayment rate		8.0			8.4			(0.4	)

        Year-end discount rate assumptions for fiscal 2010, 2009 and 2008 were as follows:

										Year over year change
	June 30,
										2010 - 2009			2009 - 2008			2008 - 2007
	2010			2009			2008
Additional structural advisory fee receivables		14.0	%		12.5	%		9.7	%		1.5	%		2.8	%		2.7	%
Asset servicing fee and residual receivables		16.0			17.0			14.9			(1.0	)		2.1			3.1

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(6) Service Receivables and Related Revenues (Continued)

        Default and Recovery Rates.    During fiscal 2010, we reduced the carrying value of additional structural advisory fee receivables by $42.1 million as a result of higher assumed default rates, with no change to recovery rates. The change in our default assumptions had the effect of delaying the projected timing of our receipt and amount of cash flows available for asset servicing fees. As a result, we decreased asset servicing fee receivables by $3.5 million for fiscal 2010. Our residual receivables, which decreased by $353 thousand during fiscal 2010, were less affected by the change in default rates in light of our sale of the Trust Certificate in fiscal 2009.

        During fiscal 2009, we increased our gross default rate assumption from 14.8% to 19.0%, reflecting general economic conditions and actual loss experience of the trusts. In addition, we reduced our assumed recovery rate from 48.0% to 40.0%, and we lengthened the recovery timetable we used from nine to 15 years as a result of a refinement to the methodology for determining the endpoint default rate, as well as the actual timing of recoveries. The higher gross default rates resulted in decreases in the estimated fair values of our additional structural advisory fee and residual receivables of $11.3 million and $50.1 million, respectively, during fiscal 2009. The change in rate and timing of recoveries reduced the estimated fair value of additional structural advisory fees by $9.4 million, but did not have a material impact on residual receivables because the change was made in the fourth quarter, subsequent to the sale of the Trust Certificate.

        During fiscal 2008, the higher projected gross default rate resulted from weakening general economic conditions. The gross default rate increased by 5.4% during fiscal 2008 to 14.8%, reducing the fair value of additional structural advisory fee and residual receivables by $2.9 million and $49.9 million, respectively. The increase in the recovery rate from 40.0% to 48.0% did not have a material impact.

        Prepayment Rates.    In general, prepayment rates have been in decline since March 2008. Our financial model enhancements incorporate certain prospective macroeconomic factors in determining prepayment assumptions. As a result of those macroeconomic factors, including the interest rate environment and economic conditions such as unemployment rates, prepayments are expected to be lower and slower than previously projected and, therefore, we increased the value of our structural advisory fee receivables by $25.3 million during fiscal 2010. Changes to prepayment rates did not significantly affect the fair value of our residual or asset servicing fee receivables.

        During fiscal 2009, in response to a historically low prepayment rate, we decreased our assumed prepayment rate by 0.4%, which resulted in an increase to additional structural advisory fee receivables of $3.1 million and an increase to the residual receivables of $11.3 million prior to the sale of the Trust Certificate.

        During fiscal 2008, prepayment rates increased by 0.4% due to higher prepayment activity experienced by the trusts during that period. As a result, we recorded decreases in the estimated fair value of our additional structural advisory fee and residual receivables of $3.2 million and $34.8 million, respectively.

        Discount Rate—Additional Structural Advisory Fees.    Until the third quarter of fiscal 2010, the discount rate that we used to estimate the fair value of our additional structural advisory fees was based on the 10-year U.S. Treasury Bond rate plus a risk premium. In determining the risk premium,

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June 30, 2010, 2009 and 2008

(6) Service Receivables and Related Revenues (Continued)

we considered factors such as yields on B-rated instruments, the level of available cash flows from residual interests that support the additional structural advisory fees, as well as the weighted-average life of the additional structural advisory fee receivables.

        Beginning in the third quarter of fiscal 2010, we utilized a discount rate of 14.0% in determining the fair value of our additional structural advisory fee receivables. The change from an index-based discount rate to a rate of 14.0% reflects a reduction in the amount of residual interest cash flows available to support the cash flows available for additional structural advisory fees, as well as the lengthening of the weighted-average life of our additional structural advisory fee receivables. The combination of these factors led us to determine that additional structural advisory fee receivables are more analogous to longer-term financial instruments than 10-year debt instruments and, therefore, a higher discount rate is appropriate. The 14.0% discount rate used for additional structural advisory fees reflects market data made available to us on spreads on federally guaranteed loans and education loans, as well as rates used in the much broader ABS market and is 2.0% less than the 16.0% used for residual receivables, reflecting the seniority of our additional structural advisory fees in our cash flow waterfall of the securitization trusts. The increase in the discount rate resulted in a $9.8 million decrease in the value of additional structural advisory fee receivables for fiscal 2010.

        During fiscal 2009, we increased the discount rate spread over the 10-year U.S. Treasury Bond rate by 3.2%, to 9.0%. In increasing the discount rate, we considered, among other things, overall significant widening in spreads in the ABS marketplace, as well as increases in indicative spreads on subordinate education loan securities. The 10-year U.S. Treasury Bond rate decreased by 0.4% during the same period, to 3.5% at June 30, 2009. As a result, we applied a discount rate of 12.5% for purposes of estimating the fair value of our additional structural advisory fees. The increase in the discount rate during fiscal 2009 resulted in a decrease of $23.0 million in the estimated fair value of additional structural advisory fee receivables.

        During fiscal 2008, we increased the discount rate spread over the 10-year U.S. Treasury Bond rate from 2.0% to 5.8%. The 10-year U.S. Treasury Note rate decreased by 1.1% during the same period resulting in a discount rate of 9.7% up 2.7% from June 30, 2007, in response to the deterioration in the market for structured and corporate debt. The effect of the increase to the discount rate was a decrease of $41.6 million in the estimated fair value of additional structural advisory fee receivables during fiscal 2008.

        Discount Rate—Asset Servicing Fees and Residuals.    In determining an appropriate discount rate for purposes of estimating the fair value of our asset servicing fee and residual receivables, we consider a number of factors, including market data made available to us on spreads on federally guaranteed loans and education loans, as well as rates used in the much broader ABS market. We also evaluate yield curves for corporate subordinated debt with maturities similar to the weighted-average life of our residuals.

        We applied a discount rate of 16.0% during fiscal 2010, which was a decrease of 1.0%, from 17.0%, at the prior year-end. As a result, there was an increase in residual receivables of $1.2 million during fiscal 2010 due to changes in the discount rate and no material change to our asset servicing fee receivable.

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June 30, 2010, 2009 and 2008

(6) Service Receivables and Related Revenues (Continued)

        During fiscal 2009, we increased the discount rate from 14.9% to 17.0%, which resulted in decreases in the estimated fair value of our residual receivables of $82.6 million. The increase over the fiscal year was in response to the deterioration of the ABS market and revised assumptions about TERI's ability to pay claims.

        During fiscal 2008, we increased the discount rate used for estimating for residual receivables by 3.1% to 14.9% in response to deteriorating market conditions. The higher discount rate resulted in a reduction to the estimated fair value of residual receivables of $129.2 million.

        Forward LIBOR Curve.    Fluctuations in interest rates, specifically LIBOR, which is the underlying rate for most of the trusts' assets and liabilities, can have a significant impact on the cash flows generated by each trust. The forward LIBOR curve is a market observable input obtained from an independent third party. Changes in the forward LIBOR curve can have a significant impact on the principal balances of the education loans (especially early in a loan's life when interest is capitalizing on loans in deferment), which affects the overall net interest margin the trust can generate, and can impact our additional structural advisory fee receivables as the majority of accrued but unpaid fees bear interest at LIBOR plus 1.5%. In addition, certain trusts have issued a tranche of ABS that bears a fixed interest rate. A decrease in the forward LIBOR curve may result in a reduced spread on the fixed interest-rate tranche, which, in turn, decreases the estimated fair value of our service receivables.

        For the fiscal year ended June 30, 2010, the forward LIBOR curve shifted downward from the prior year-end, reducing the value of the additional structural advisory fee receivables by $2.3 million, with no material impact to residual receivables.

        During fiscal 2009, large decreases in the forward LIBOR curve resulted in decreases in the estimated fair value of additional structural advisory fee and residual receivables of $12.5 million and $22.0 million, respectively. Similarly, during fiscal 2008, decreases in the forward LIBOR curve resulted in decreases in the estimated fair value of additional structural advisory fee and residual receivables of $5.4 million and $17.6 million, respectively.

        Auction Rate Note Interest Rates.    Prior to fiscal 2009, we facilitated five trusts that issued auction rate notes to finance, in whole or in part, the purchase of education loans. Interest rates for the auction rate notes are determined from time to time at auction; however, during fiscal 2010 and fiscal 2009, failed auctions occurred or persisted with respect to auction rate notes issued by each of the five trusts. In the second quarter of fiscal 2009, the ratings assigned to the auction rate notes of these trusts were downgraded due to failed auctions, deterioration in trust performance and the downgrade of the insurance financial strength rating assigned to the credit enhancement provider for certain auction rate notes. As a result, the auction rate notes bear interest at a maximum spread over one-month LIBOR as specified in the indentures, based on the ratings then assigned to the notes. Increases in the interest expense of the trusts reduced the estimated fair value of our additional structural advisory fees and residual receivables and delayed the timing of receipt of additional structural advisory fees. As a result, during the second quarter of fiscal 2009, we decreased the estimated fair value of our additional structural advisory fees by $13.1 million and our residual receivables by $31.8 million. We did not make any further adjustments during fiscal 2009. During fiscal 2010, we have assumed that the notes would continue to bear interest at the contractual maximum spread.

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June 30, 2010, 2009 and 2008

(6) Service Receivables and Related Revenues (Continued)

        TERI's Obligation to Pay Claims.    During fiscal 2008, we reduced the carrying value of our residual receivables in response to the TERI Reorganization and our assumption that TERI would not be able to honor its guaranty obligations to the NCSLT Trusts beyond the amounts available in the Pledged Accounts, assuming that all recoveries on defaulted loans would be used to replenish such Pledged Accounts. The change in our assumptions with regard to TERI's ability to pay claims resulted in a decrease of $219.6 million in the estimated fair value of our residual receivables during fiscal 2008. No changes were made to our assumptions regarding TERI's ability to pay claims during fiscal 2009. During fiscal 2010, we updated our assumptions regarding TERI's obligation to pay claims based on the Plan of Reorganization presented for creditor approval in April 2010. The updated assumptions did not have a material effect on the estimated value of our additional structural advisory fee or asset servicing fee receivables. The Modified Plan of Reorganization, which was filed in August 2010, changes certain aspects of the settlements offered to the NCSLT Trusts compared to the settlements offered by the Plan of Reorganization. As of September 2, 2010, we did not expect those changes to have a material effect on the estimated fair value of our service receivables. As of September 2, 2010, the voting and confirmation process for the Modified Plan of Reorganization had not commenced and the Modified Plan of Reorganization remains subject to change.

Sensitivity Analysis

        Increases in our estimates of defaults, prepayments and discount rates, as well as decreases in default recovery rates and the multi-year forward estimates of LIBOR, would have a negative effect on the value of our additional structural advisory fees, as well as our asset servicing fee receivables and our education loans held for sale.

        The following table illustrates the anticipated impact on the fair value of additional structural advisory fee receivables that would occur for changes in loan performance and discount rate assumptions at June 30, 2010. We used variations of 10% and 20%, up and down, except for the forward LIBOR rates, which are based on variations of 1% and 2%, from the assumptions used at June 30, 2010. We also assumed that the Plan of Reorganization, including terms applicable to the NCSLT Trusts, would be confirmed by the United States Bankruptcy Court for the District of Massachusetts (Bankruptcy Court). Changes to the Plan of Reorganization, such that the NCLST Trusts were to receive less defaulted loans or less recoveries on defaulted loans, would have an additional negative effect on the value of our receivables.

        The sensitivities presented below are hypothetical and should be used with caution. The effect of each change in assumption must be calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact be independent, the net effect of simultaneous adverse

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June 30, 2010, 2009 and 2008

(6) Service Receivables and Related Revenues (Continued)

changes in key assumptions may differ materially from the sum of the individual effects calculated below. For a description of risk segments, see "—Risk Segments" above.

		Change in assumption						Management assumptions and receivables balance at June 30, 2010			Change in assumption
Structural advisory fees		Down 20%			Down 10%						Up 10%			Up 20%
		(dollars in thousands)
Default rate:
	Management assumptions(1):
	Segment 1		8.8	%		9.2	%		9.7	%		10.1	%		10.6	%
	Segment 2		17.8			18.7			19.6			20.5			21.4
	Segment 3		45.2			47.1			48.8			50.5			52.2
	Total structural advisory fees	$	37,338		$	35,999		$	34,676		$	33,177		$	27,834
	Change in receivables balance		7.7	%		3.8	%					(4.3	)%		(19.7	)%
Default recovery rate:
	Management assumption		32.0	%		36.0	%		40.0	%		44.0	%		48.0	%
	Total structural advisory fees	$	30,471		$	33,242		$	34,676		$	35,732		$	36,699
	Change in receivables balance		(12.1	)%		(4.1	)%					3.0	%		5.8	%
Annual prepayment rate:
	Management assumption:
	Segment 1		5.5	%		6.2	%		6.9	%		7.6	%		8.3	%
	Segment 2		3.9			4.4			4.9			5.4			5.9
	Segment 3		2.5			2.8			3.1			3.4			3.7
	Total structural advisory fees	$	35,390		$	35,038		$	34,676		$	34,299		$	33,915
	Change in receivables balance		2.1	%		1.0	%					(1.1	)%		(2.2	)%
Discount rate:
	Management assumption		11.2	%		12.6	%		14.0	%		15.4	%		16.8	%
	Total structural advisory fees	$	53,054		$	42,859		$	34,676		$	28,101		$	22,815
	Change in receivables balance		53.0	%		23.6	%					(19.0	)%		(34.2	)%

		Change in assumption								Change in assumption
								Receivables balance
		Down 2%			Down 1%					Up 1%			Up 2%
		(dollars in thousands)
Forward LIBOR rates:
	Total structural advisory fees	$	28,117		$	31,134		$	34,676	$	38,608		$	39,060
	Change in receivables balance		(18.9	)%		(10.2	)%				11.3	%		12.6	%

(1)

The percentage change in assumptions applies to future conditional default rates in the portfolio after taking into account actual defaults occurring in the portfolio through June 30, 2010. As a result, application of the nominal 10% or 20% variation results in a change in the management assumption that is less than 10% or 20% of the default rate.

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June 30, 2010, 2009 and 2008

(7) Property and Equipment

	June 30,
	2010			2009			Useful life
	(dollars in thousands)
Equipment	$	9,603		$	18,409		3 - 5 years
Software		34,670			34,287		3 years
Software under development		167			1,017
Leasehold improvements		12,180			12,692		lesser of 5 years or lease term
Capital leases (equipment, furniture and fixtures)		18,627			18,682		lease term
Furniture and fixtures		2,335			2,493		5 - 7 years
		77,582			87,580
Less accumulated depreciation and amortization		(69,496	)		(67,651	)
Total property and equipment, net	$	8,086		$	19,929

        We lease office space and equipment under non-cancelable operating leases expiring at various times through April 2014. Gross rent expense under operating leases, for the periods ended June 30, 2010, 2009 and 2008 was approximately $11.6 million, $8.7 million and $13.0 million, respectively. Rent expense was reduced by sublease revenue of $2.5 million, $2.8 million and $933 thousand for the years ended June 30, 2010, 2009 and 2008, respectively.

        The future minimum lease payments required under capital and operating leases for each of the five fiscal years subsequent to June 30, 2010 and thereafter are as follows:

Fiscal years ending June 30,	Capital leases			Operating leases
	(dollars in thousands)
2011	$	1,418		$	10,330
2012		—			9,312
2013		—			7,375
2014		—			5,897
2015 (none thereafter)		—			350
Total minimum lease payments		1,418		$	33,264
Less amounts representing interest		(22	)
Present value of future minimum lease payments, all current	$	1,396

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June 30, 2010, 2009 and 2008

(7) Property and Equipment (Continued)

        We are entitled to receive amounts under non-cancelable subleases of office space that extend through the four fiscal years subsequent to June 30, 2010, as follows:

Fiscal years ending June 30,	Sublease payments
	(dollars in thousands)
2011	$	2,539
2012		2,614
2013		2,635
2014 (none thereafter)		2,199
Total	$	9,987

(8) Loans Held to Maturity

        We hold portfolios of education loans and mortgage loans to maturity. The following table provides information on the carrying values, and implicit credit quality, of these portfolios:

		June 30,
		2010		2009
		(dollars in thousands)
Education loans held to maturity:
	Principal and interest	$	26,277	$	—
	Net carrying value		413		—
Mortgage loans held to maturity:
	Principal and interest	$	8,546	$	10,085
	Net carrying value		8,160		9,515
Principal and interest:
	Outstanding on education loans on non-accrual status	$	24,529	$	—
	Outstanding on mortgage loans on non-accrual status		1,245		1,418

        We do not have any loans greater than 90 days past due that are accruing interest.

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June 30, 2010, 2009 and 2008

(9) Deposits

        The following table summarizes our deposits held by Union Federal:

	June 30,
	2010							2009
	Year-end amount		Annual average balance		Weighted- average rate			Year-end amount			Annual average balance		Weighted- average rate
	(dollars in thousands)
Deposits:
Time and savings deposits	$	73,046	$	93,545		1.53	%	$	103,653	(1)	$	130,183		2.98	%
Money market accounts		35,650		45,053		1.45			49,045			48,076		2.95
Non-interest bearing deposits		36		852		—			1,764			3,482		—
	$	108,732						$	154,462

(1)

Time deposits at June 30, 2009 included brokered deposits of $25.0 million.

        At June 30, 2010, time deposits with maturities greater than one year were $2.4 million.

(10) Liabilities and Unused Lines of Credit

(a)   Education Loan Warehouse Facility

        In July 2007, UFSB-SPV, a subsidiary of Union Federal at that time, entered into a $300.0 million education loan warehouse facility with a third-party conduit lender. The facility served as a source of interim financing for education loan programs initially funded by Union Federal. UFSB-SPV used advances under the facility to fund the purchase of education loans from Union Federal. To secure its repayment obligations, UFSB-SPV granted a security interest to the conduit lender in certain collateral, including the purchased education loans and related interest and cash collected in connection with the loans. Neither FMD nor Union Federal is a borrower or co-borrower under the facility, and the facility was structured to generally limit the conduit lender's recourse to the assets of UFSB-SPV. Selected balance sheet information of UFSB-SPV is as follows:

	June 30,
	2010		2009
	(dollars in thousands)
Outstanding principal and interest of the collateral	$	273,409	$	261,923
Estimated fair value of the collateral (cash and education loans held for sale)		108,447		169,090
Education loan warehouse facility borrowings		218,059		230,137

        The TERI Reorganization, and subsequent TERI ratings downgrades, resulted in events of termination under the indenture relating to the facility. As a result, the facility termination date was declared and UFSB-SPV is no longer eligible for further borrowings under the facility. All outstanding borrowings under the facility became due on July 14, 2010. The assets of UFSB-SPV consist almost entirely of the purchased education loans, however, and such assets have an estimated fair value below the amount outstanding under the facility. UFSB-SPV continues to apply principal and interest

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June 30, 2010, 2009 and 2008

(10) Liabilities and Unused Lines of Credit (Continued)

payments received on the education loans to repay amounts outstanding under the facility. The conduit lender may foreclose on the collateral at any time.

        In April 2008, under a letter agreement, we agreed that UFSB-SPV would pay higher fees to the conduit lender in consideration for acknowledgement by the conduit lender that the interest on the notes issued under the facility would not increase to an alternative default rate set forth in the indenture unless and until the conduit lender delivered further notice. In April 2009, the conduit lender delivered notice to us and, as a result, the interest rate on the outstanding notes increased to prime plus 2.0%, beginning in the fourth quarter of fiscal 2009. UFSB-SPV paid lower program fees as a result of such election.

        In April 2009, Union Federal sold substantially all of its economic interest in UFSB-SPV to a newly formed subsidiary of FMD. Union Federal received $2.9 million in consideration for the sale and granted FMD its voting and management rights with respect to UFSB-SPV.

        In April 2010, we entered into agreements relating to the restructuring of the education loan warehouse facility of UFSB-SPV. As a result of the restructuring:

•

FMD assumed certain potential contingent liabilities of Union Federal, subject to a dollar cap, under the indenture relating to the facility;

•

FMD replaced Union Federal as the master servicer under the indenture;

•

indirectly contributed $6.5 million in cash, and education loans with an outstanding balance of approximately $6.9 million, and a fair value of $3.1 million, to UFSB-SPV;

•

First Marblehead Education Resources, Inc. (FMER), a subsidiary of FMD, was engaged as a special servicer for the loans held by UFSB-SPV, administering and overseeing the activities of third-party collection agencies with respect to the collection of delinquent and defaulted loans held by UFSB-SPV, and will be paid a fee for these services equal to reimbursement of costs;

•

The interest rate on outstanding advances under the facility decreased from prime plus 2.0% to (a) cost of funds (as specified in the indenture relating to the facility) plus 0.5% until April 16, 2011 and (b) cost of funds (as specified in the indenture relating to the facility) plus 3.0% thereafter;

•

All program fees were eliminated; and

•

The conduit lender released certain potential contingent liabilities of Union Federal and UFSB-SPV and permitted Union Federal to transfer the membership interests of UFSB-SPV to a non-bank subsidiary of FMD.

        The restructuring agreements were accounted for as a troubled debt restructuring in accordance with ASC 470-60, Debt-Troubled Debt Restructurings by Debtors. No gain or loss was recorded at the effective date of the restructuring agreements, and the revised interest rate is being applied to the carrying amount of the debt subsequent to the effective date.

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June 30, 2010, 2009 and 2008

(10) Liabilities and Unused Lines of Credit (Continued)

(b)   Unused Lines of Credit

        On October 15, 2009, Union Federal terminated a borrower-in-custody collateral pledge with the Federal Reserve Bank discount window due to the sale of approximately 88% of its education loan portfolio in October 2009. At June 30, 2010, we had $6.1 million available for borrowing under an unused line of credit with the Federal Home Loan Bank of Boston. There were no borrowings outstanding at June 30, 2010. As a requirement under the line of credit, we own $505 thousand of Federal Home Loan Bank stock included in other assets in the balance sheet.

(11) Fair Value of Financial Instruments

        A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

        Cash equivalents consist of money market funds with available quoted market prices on active markets that we classify as Level 1 of the valuation hierarchy.

        Investments held for sale are federal agency mortgage-backed securities that are marked to market using pricing from an independent third party and are classified as Level 2 in the hierarchy.

        Market prices are not available for education loans held for sale, additional structural advisory fee receivables, asset servicing fee receivables or residual receivables. See Note 6, "Service Receivables and Related Revenues," for a description of significant observable and unobservable inputs used to develop the estimated fair values of service revenue receivables. These assets are classified within Level 3 of the valuation hierarchy.

        The following table presents the financial instruments carried at fair value, by consolidated balance sheet caption, in accordance with the valuation hierarchy described above on a recurring and nonrecurring basis:

	June 30, 2010								June 30, 2009
Assets measured at fair value on a recurring and nonrecurring basis:	Level 1		Level 2		Level 3		Total carrying value		Level 1		Level 2		Level 3		Total carrying value
	(dollars in thousands)								(dollars in thousands)
Recurring:
Cash equivalents	$	217,076	$	—	$	—	$	217,076	$	142,723	$	—	$	—	$	142,723
Investments held for sale		—		4,471		—		4,471		—		8,450		—		8,450
Additional structural advisory fees		—		—		34,676		34,676		—		—		55,130		55,130
Asset servicing fees		—		—		5,780		5,780		—		—		2,385		2,385
Residuals		—		—		12,823		12,823		—		—		9,960		9,960
Non-recurring
Education loans held for sale		—		—		107,434		107,434		—		—		350,960		350,960
Total assets	$	217,076	$	4,471	$	160,713	$	382,260	$	142,723	$	8,450	$	418,435	$	569,608

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(11) Fair Value of Financial Instruments (Continued)

        The following table presents activity related to our financial assets categorized as Level 3 of the valuation hierarchy, valued on a recurring basis, for the fiscal years ended June 30, 2010 and 2009. All losses recorded during the periods presented relate to assets still held at the balance sheet date, with the exception of the Trust Certificate sold effective March 31, 2009. The residuals evidenced by the Trust Certificate had a carrying value of $134.5 million on the effective date of sale. No cash was received from this sale. There have been no transfers in or out of Level 3 of the hierarchy, nor between Levels 1 and 2, for the periods presented.

		Fiscal years ended June 30,
		2010										2009
		Fair Value, July 1, 2009		Realized and Unrealized Gains (Losses), Recorded in Service Revenues			Settlements			Fair Value, June 30, 2010		Fair Value, July 1, 2008		Realized and Unrealized Gains (Losses), Recorded in Service Revenues			Settlements			Fair Value, June 30, 2009
		(dollars in thousands)
Assets:
	Additional structural advisory fees	$	55,130	$	(19,825	)	$	(629	)	$	34,676	$	113,842	$	(57,157	)	$	(1,555	)	$	55,130
	Asset servicing fees		2,385		3,395			—			5,780		—		2,385			—			2,385
	Residuals		9,960		2,863			—			12,823		293,255		(283,295	)		—			9,960
Total assets:		$	67,475	$	(13,567	)	$	(629	)	$	53,279	$	407,097	$	(338,067	)	$	(1,555	)	$	67,475

        Fair value estimates for financial instruments not carried at fair value in our consolidated balance sheet are generally subjective in nature, and are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. We have elected not to apply the fair value provisions available under ASC 820-10, Fair Value Measurements and Disclosures, to these assets and liabilities. Disclosure of fair value estimates is not required for certain items, such as premises and equipment, intangible assets and income tax assets and liabilities.

        The short duration of many of our assets and liabilities result in a significant number of financial instruments for which fair value equals or closely approximates the value reported in our consolidated balance sheet. We believe that the carrying values of short-term investments, federal funds sold and deposits approximate fair value due to their short duration. The fair values of education and mortgage loans held to maturity are not materially different from their carrying values.

        UFSB-SPV's liability under the education loan warehouse facility of $218.1 million and $230.1 million at June 30, 2010 and 2009, respectively, is recorded in our balance sheet at the value of outstanding principal and interest. We believe that the fair value of the education loan warehouse facility is limited to the fair value of eligible assets used as collateral, in light of the structure of the facility. The estimated fair value of such assets was $108.4 million and $169.1 million at June 30, 2010 and 2009, respectively.

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(12) Commitments and Contingencies

(a)   TERI Reorganization

        TERI is a private, not-for-profit Massachusetts organization as described under section 501(c)(3) of the Internal Revenue Code. In its role as guarantor in the education lending market, TERI agreed to reimburse lenders or securitization trusts for unpaid principal and interest on defaulted loans. Historically, TERI was the exclusive third-party provider of borrower default guarantees for our clients' education loans. On April 7, 2008, TERI filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code (TERI Reorganization).

        As a result of the automatic stay under the Bankruptcy Code, TERI ceased purchasing defaulted loans, including defaulted loans from the NCSLT Trusts, in April 2008. Beginning in July 2008, TERI resumed paying its obligations under the guaranty agreements with respect to defaulted loans from the NCLST Trusts, but only using cash in the Pledged Account established for the benefit of the specific trust that owned the defaulted loan. Funds in the Pledged Accounts of certain trusts have been exhausted, or are expected to be exhausted in the near term, at which point such trust will have a general unsecured claim against TERI.

        In June 2008, the Bankruptcy Court granted parties rights to challenge the NCSLT Trusts' security interests in the collateral other than funds in the Pledged Accounts. In January 2009, the official committee of unsecured creditors (Creditors Committee) filed an adversary complaint in the Bankruptcy Court against the owner trustee and indenture trustee of 17 NCSLT Trusts, and against our subsidiary First Marblehead Data Services, Inc. (FMDS) as administrator of such trusts. The complaint generally alleged that the security interests granted by TERI to the NCSLT Trusts, excluding the security interests in the Pledged Accounts, were unperfected or may otherwise be avoided under the Bankruptcy Code. In particular, the complaint alleged that the NCSLT Trusts did not have enforceable rights to future recoveries on defaulted loans owned by TERI with an aggregate principal and accrued interest balance of more than $598.0 million as of June 30, 2010, or in amounts owed or transferred by TERI to Pledged Accounts after the filing of TERI's petition for reorganization totaling more than $47.0 million as of June 30, 2010. In February 2009, pending resolution of the issues raised previously in the Creditors Committee's complaint, the NCSLT Trusts generally suspended the transfer of defaulted loans to TERI and generally suspended requests for default claim payments from amounts in the Pledged Accounts.

        The Plan of Reorganization included a proposed settlement of the adversary complaint, as well as other provisions that would affect the claims of the NCSLT Trusts. Each of the NCSLT Trusts voted, or were deemed to have voted, in favor of the Plan of Reorganization in April 2010, thereby electing to accept settlement of the adversary proceeding and their respective claims. The Bankruptcy Court subsequently made findings at the confirmation hearing that the Plan of Reorganization met the requirements for confirmation under the Bankruptcy Code. Following such hearing, however, TERI and the Creditors Committee filed a motion to modify the Plan of Reorganization. In July 2010, the Bankruptcy Court denied the motion and also vacated the earlier findings that the Plan of Reorganization met the requirements for confirmation. The Bankruptcy Court ordered TERI and the Creditors Committee to file a fifth amended plan of reorganization prior to August 28, 2010, unless they could negotiate acceptable changes to the Plan of Reorganization.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(12) Commitments and Contingencies (Continued)

        On August 26, 2010, TERI and the Creditors Committee filed a second joint motion to modify the Plan of Reorganization (Modified Plan of Reorganization), approve revised disclosure materials and approve procedures by which creditors who previously voted on the Plan of Reorganization would have the opportunity to change their vote with respect to the Modified Plan of Reorganization. Each of FMD and FMER abstained from voting on the Plan of Reorganization and will not be eligible to vote with respect to the Modified Plan of Reorganization. FMD and FMER expect any objections to their respective unsecured claims against TERI to be resolved through litigation in the Bankruptcy Court unless a negotiated settlement is reached prior to litigation. In October 2008, we filed proofs of claim against TERI alleging damages and other claims in the aggregate contingent amount of $87.0 million, including a general unsecured claim of $16.0 million with regard to processing fees from TERI that were due but unpaid as of the Petition Date and claims for damages stemming from TERI's rejection of contracts with us. We do not have any receivables recorded on our balance sheet from TERI at June 30, 2010. Any amounts recovered from TERI or liabilities to TERI forgiven will be recorded as a gain in the period in which they are realized.

        On August 31, 2010, the Bankruptcy Court approved the disclosure materials and solicitation procedures, subject to entry of a formal order, and the solicitation of votes on the Modified Plan of Reorganization is expected to commence on or about September 13, 2010. As of September 2, 2010, the terms of the Modified Plan of Reorganization remain subject to change. The terms of the Modified Plan of Reorganization are summarized in "—Status of TERI Plan of Reorganization" below.

(b)   Performance Guaranty

        In connection with the sale by Union Federal of an education loan portfolio in October 2009, FMD delivered a performance guaranty (Performance Guaranty) pursuant to which FMD guarantees the performance by Union Federal of its obligations and agreements under the loan purchase and sale agreement relating to the transaction. The Performance Guaranty provides that FMD will be released from its obligations, without any action of the purchaser, upon (1) any merger or consolidation of Union Federal into another entity as a result of which a majority of the capital stock of Union Federal is converted into or exchanged for the right to receive cash, securities or other property or (2) a sale of all or substantially all of the assets of Union Federal, in either case after which transaction Union Federal is no longer a subsidiary of FMD. We are not aware of any contingencies existing at the balance sheet date that are both probable and estimable for which we would record a reserve, nor can we estimate a range of possible losses at this time.

(c)   Assumption of Potential Contingent Liabilities of Union Federal

        In April 2010, FMD and certain of its subsidiaries entered into agreements relating to the restructuring of the education loan warehouse facility (Facility) of UFSB-SPV. In connection with the restructuring, the conduit lender released any and all potential claims against Union Federal and UFSB-SPV pursuant to the indenture relating to the Facility based upon events arising prior to April 16, 2010, to the extent such claims would exceed $20.0 million in the aggregate (Liability Cap). Neither Union Federal nor UFSB-SPV would have any liability until the conduit lender's aggregate losses exceeded $3.5 million (Deductible), at which point Union Federal and UFSB-SPV would only be liable for amounts above the Deductible up to the Liability Cap. Neither the Liability Cap nor the

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(12) Commitments and Contingencies (Continued)

Deductible would apply, however, in cases of fraud, willful misconduct, gross negligence or third-party claims by or on behalf of borrowers against the conduit lender based on loan origination errors. In addition, the release is not deemed a waiver of rights previously reserved but not exercised by the conduit lender, except as specifically released pursuant to a settlement agreement.

        FMD assumed any remaining contingent liability of Union Federal and its affiliates, other than UFSB-SPV, under the Facility arising prior to April 16, 2010, subject to the Liability Cap discussed above. In addition, FMD assumed any contingent liability of Union Federal under the Facility arising prior to April 16, 2010 based on fraud, willful misconduct, gross negligence, third-party claims by or on behalf of borrowers against the conduit lender based on loan origination errors or rights not otherwise released by the conduit lender. We are not aware of any contingencies existing at the balance sheet date that are both probable and estimable for which we would record a reserve, nor can we estimate a range of possible losses at this time.

(d)   Agreements with Lender Clients

        Under the terms of loan purchase agreements entered into with lender clients prior to fiscal 2010, we generally had an obligation to use our best efforts to facilitate the purchase of the client's TERI-guaranteed education loans during a specified loan purchase period. The length of the loan purchase period varied by client and generally ranged from 195 days to 555 days following final loan disbursement. Under the terms of certain of our loan purchase agreements, if we failed to facilitate a purchase in breach of our obligations, our liability would be limited to liquidated damages of one percent of the total principal amount of the loans as to which the loan purchase period had expired. Those loan purchase agreements that limited our liability to liquidated damages generally provided that our obligation to close a securitization was subject to the condition that no "market disruption event" had occurred. Under certain of these loan purchase agreements, the TERI Reorganization constituted a "market disruption event," suspending our contractual obligation to close a securitization. Any liquidated damages would have been due at expiration of the relevant loan purchase period, which would not have occurred for a period of time after the market disruption event ceased. We expect TERI to reject its guaranty agreements in the context of the TERI Reorganization, pursuant to the Modified Plan of Reorganization or a successor plan. As of September 2, 2010, however, the Bankruptcy Court had not entered an order confirming the Modified Plan of Reorganization or any such successor plan. The rejection of TERI's guaranty agreements would terminate our purchase obligations under our outstanding loan purchase agreements. No amounts were accrued in the financial statements with respect to potential liabilities under these loan purchase agreements.

(13) Stockholders' Equity

(a)   Preferred Stock

        In December 2007, FMD entered into an investment agreement (Investment Agreement) with GS Parthenon A, L.P. and GS Parthenon B, L.P., affiliates of GS Capital Partners. Pursuant to the Investment Agreement, we issued 132,701 shares of newly designated Series B Non-Voting Convertible Preferred Stock, $0.01 par value per share (Series B Preferred Stock), at a purchase price of $1 thousand per share. The Series B Preferred Stock is convertible, at the option of the holders. The number of common shares issuable upon conversion is equal to the initial purchase price of the

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(13) Stockholders' Equity (Continued)

Series B Preferred Stock, divided by the conversion price of $15.00 per share. At June 30, 2010, the Series B Preferred Stock issued and outstanding is convertible into 8,846,733 shares of common stock. Dividends would be paid on the Series B Preferred Stock when, as and if, and in the same amounts (on an as-converted basis), declared on our common stock. Upon liquidation, dissolution or winding up of FMD, holders of Series B Preferred Stock would have the right to receive an amount equal to $0.01 per share of Series B Preferred Stock, plus the amount of any declared but unpaid dividends thereon. After payment of this amount, holders of the Series B Preferred Stock would be entitled to participate (on an as-converted basis) with common stock in the distribution of remaining assets.

(b)   2003 Employee Stock Purchase Plan

        In 2003, our Board of Directors and stockholders approved the 2003 employee stock purchase plan (ESPP). A total of 600,000 shares of common stock were authorized for issuance under the ESPP. The ESPP permitted eligible employees to purchase shares of our common stock at the lower of 85% of its fair market value at the beginning or at the end of each offering period. Participation was voluntary. Under the ESPP, 45,000 shares were issued during fiscal 2008. In April 2008, our Board of Directors, which administers the ESPP, terminated the offering period that began on January 1, 2008 and indefinitely suspended the ESPP. As a result, no shares were issued in fiscal 2010 or fiscal 2009 under the ESPP. At June 30, 2010, 406,000 shares were available for future purchase under the ESPP.

(c)   Treasury Stock

        Our Board of Directors has authorized the repurchase of up to 10,000,000 shares of common stock. As of June 30, 2010, we had repurchased an aggregate of 1,169,100 shares under this program at an average price, excluding commissions, of $36.17 per share. Shares repurchased under this program are generally bought in open market transactions. We did not repurchase any shares of common stock pursuant to this program during fiscal 2010 or fiscal 2009. Future repurchases pursuant to this program may require regulatory approval.

        Treasury stock was $186.2 million (8,239,000 shares) and $184.2 million (7,643,000 shares) at June 30, 2010 and 2009, respectively. The increase in shares is a result of common stock withheld from employees to satisfy statutory minimum withholding obligations as equity compensation awards vest.

(14) Administrative and Other Fees

        Administrative and other fees recognized in fiscal 2010 relate primarily to default prevention and trust administration services provided to the trusts we facilitated.

        In fiscal 2009 and fiscal 2008, administrative and other fees included fees received from TERI of $3.0 million and $126.5 million, respectively, related to loan origination, customer service, default processing, default prevention and administrative services provided under a master servicing agreement. We recognized TERI's reimbursement of our expenses for these services as revenue. In June 2008, in the context of the TERI Reorganization, the Bankruptcy Court entered an order approving a motion by TERI to reject the master servicing agreement effective as of May 31, 2008, but provided for a transition services agreement between TERI and us with a term through September 29, 2008. We do not expect to receive material processing fees from TERI in the future. In addition, we have filed a

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(14) Administrative and Other Fees (Continued)

general unsecured claim with regard to $16.0 million of processing fees not recognized in the statement of operations that were due from TERI, but unpaid as of the filing of TERI's bankruptcy petition.

(15) Net Interest Revenue

        The following table reflects the components of net interest income:

		Fiscal years ended June 30,
		2010		2009		2008
		(dollars in thousands)
Interest income
	Cash and cash equivalents	$	598	$	970	$	3,697
	Federal funds sold		3		469		1,761
	Short-term investments		201		—		—
	Investments held for sale		328		1,582		4,233
	Education loans held for sale		20,974		38,646		32,656
	Loans held to maturity		925		575		758
	Total interest income		23,029		42,242		43,105
Interest expense
	Time and savings account deposits		1,429		3,885		7,262
	Money market account deposits		651		1,419		240
	Warehouse line of credit		10,403		10,993		9,250
	Other short-term borrowings		—		128		—
	Other interest-bearing liabilities		675		714		731
	Total interest expense		13,158		17,139		17,483
Net interest income		$	9,871	$	25,103	$	25,622

(16) Stock-Based Compensation

        Stock-based compensation expense was $13.0 million, $7.3 million and $7.0 million for fiscal 2010, 2009 and 2008, respectively. Total tax expense recognized for stock compensation was $1.2 million and $2.2 million for fiscal 2010 and fiscal 2009, respectively. We recognized a tax benefit of $383 thousand in fiscal 2008. As of June 30, 2010, there was $16.9 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of approximately three years.

(a)   Stockholder Approved Plans

        We have stock awards outstanding under three stock-based incentive compensation plans, each approved by both our Board of Directors and stockholders in 1996 (1996 Plan), 2002 (2002 Plan) and 2003 (2003 Plan).

        Under the 1996 Plan, we granted either incentive stock options (pursuant to Section 422 of the Internal Revenue Code) or non-statutory stock options to our officers and employees, and

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(16) Stock-Based Compensation (Continued)

non-statutory stock options to consultants. The 1996 Plan expired as of June 30, 2010. As of June 30, 2010, 600 shares of common stock were issuable upon exercise of awards granted under the 1996 Plan.

        Under the 2002 Plan, we granted non-statutory stock options to non-employee members of our Board of Directors. In 2006, our Board of Directors suspended new awards under the 2002 Plan. As of June 30, 2010, 102,000 shares of common stock were issuable upon exercise of awards granted under the 2002 Plan.

        Under the 2003 Plan, our Board of Directors, or one or more sub-committees of our Board of Directors, may grant options or other stock based awards to employees, directors, consultants or advisors. As of June 30, 2010, 8,050,000 shares of common stock had been reserved for issuance under the 2003 Plan, and approximately 2,444,000 shares of common stock were issuable upon the exercise or vesting of awards granted under the 2003 Plan. At June 30, 2010, approximately 2,901,000 shares were available for future grant. We typically issue new shares of common stock as opposed to using treasury shares.

(b)   Stock Options

        The following table summarizes information about stock options outstanding at June 30, 2010:

Exercise prices	Number outstanding		Weighted-average remaining contractual term		Weighted-average exercise price		Number exercisable
	(shares in thousands)
$3.33		19		2.21	$	3.33		19
$6.00(1)		2,000		8.13		6.00		500
$8.10 - $10.00		30		3.19		8.48		30
$12.00(1)		2,000		8.13		12.00		2,000
$16.00(1)		2,000		8.13		16.00		2,000
$19.04		24		5.22		19.04		24
$32.97		30		4.22		32.97		30
$3.33 - $32.97		6,103		8.06		11.43		4,603

(1)

These options were not issued under any of our existing stockholder-approved incentive plans. Our Board of Directors elected Daniel Meyers as President and Chief Executive Officer and as a member of our Board of Directors, effective September 1, 2008. In connection with the election, our Board of Directors and a subcommittee of our Compensation Committee of our Board of Directors approved the grant in August 2008 (Grant Date) of stock options to Mr. Meyers to purchase (a) 2,000,000 shares of our common stock, at an exercise price of $6.00 per share, 25% of which vested and became exercisable in August 2009, with the remainder to vest and become exercisable in three equal installments on each of the second, third and fourth anniversaries of the Grant Date ($6.00 Stock Options); (b) 2,000,000 shares of our common stock, at an exercise price of $12.00 per share, that vested and became exercisable in full on November 30, 2008; and (c) 2,000,000 shares of our common stock, at an exercise price of $16.00 per share, that vested and became exercisable in full on November 30, 2008. Any unvested stock options will vest and become

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(16) Stock-Based Compensation (Continued)

exercisable in full (1) if the closing sale price of our common stock is at least 150% of the exercise price of the applicable option for a period of five consecutive trading days (assuming the trading on each day is not less than 90% of the average daily trading volume for the prior three months prior to such five day period), (2) in the event of Mr. Meyers's death or disability, as defined in the applicable option agreement or (3) in the event that Mr. Meyers' employment is terminated by us without Cause, as defined in the applicable option agreement, or by Mr. Meyers with Good Reason, as defined in the applicable option agreement. In addition, subject to certain conditions set forth in the option agreement, the $6.00 Stock Options may be exercised beginning 90 days after the Grant Date prior to vesting, provided that the unvested shares issued will be held in escrow by us and will be subject to a repurchase option by us. Each of the stock options will expire ten years from the Grant Date.

        The options exercisable at June 30, 2010 have no intrinsic value as the exercise price (weighted average of $13.20) is above market price. The weighted-average remaining contractual term of options exercisable is eight years. Options expire a maximum of ten years from the grant date.

        The following table presents stock option activity for the fiscal years ended June 30, 2010, 2009 and 2008:

		Number of options			Weighted- average exercise price per share
		(shares in thousands)
Outstanding options at June 30, 2007			236		$	11.08
	Exercised (aggregate intrinsic value of $142 thousand)		(5	)		3.33
	Forfeited		(8	)		3.33
Outstanding options at June 30, 2008			223			11.53
	Granted(1)		6,000			11.33
	Forfeited		(114	)		7.03
Outstanding options at June 30, 2009			6,109			11.42
	Exercised (aggregate intrinsic value of $13 thousand)		(6	)		0.67
Outstanding options at June 30, 2010			6,103			11.43

(1)

The following inputs were used to estimate the fair value of options granted to Mr. Meyers during fiscal 2009: dividend yield of 0.0%, expected volatility of 75.0%, risk-free interest rate of 3.31% and expected option lives of six years.

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(16) Stock-Based Compensation (Continued)

(c)   Stock Units

        Each stock unit, including both RSUs and director stock units, represents a contingent right to receive one share of our common stock upon vesting. Shares in respect of vested stock units are issued as soon as practicable after each vesting date.

        Pursuant to a directors' compensation program under the 2003 Plan, non-employee members of our Board of Directors are entitled to stock units for their service. Stock units granted to non-employee directors are fully vested immediately. For fiscal 2009 and 2008, each director received 3,000 stock units on the date of his initial election to our Board of Directors and an annual grant of 3,000 stock units on September 20 of each year if the non-employee director had then served as a member of our Board of Directors for at least 180 days. In May 2010, the director compensation program was amended to provide for the grant of 10,000 stock units upon initial election to our Board of Directors and an annual grant of 10,000 stock units on September 20 of each year, if the non-employee director has then served on our Board of Directors for at least 180 days. During fiscal 2010, 2009 and 2008, 38,000 stock units, 21,000 stock units and 21,000 stock units were granted to non-employee members of our Board of Directors.

        RSUs may be granted to employees and outside consultants. During fiscal 2010, approximately 4,331,000 RSUs were granted to employees and consultants, including executive officers, of which approximately 2,000,000 vested at the grant date, with the remainder to vest over the next three to four years. No RSUs were granted to employees in fiscal 2009. During fiscal 2008, 367,000 RSUs were granted to employees, which generally vested over four to five years.

        The following table presents stock unit activity, including both RSUs and director stock units, for the fiscal years ended June 30, 2010, 2009 and 2008:

		Number of stock units			Weighted- average grant date fair value per share
		(shares in thousands)
Outstanding stock units at June 30, 2007			841		$	27.79
	Granted		388			33.15
	Common stock issued at vest date		(212	)		42.14
	Forfeited		(295	)		38.08
Outstanding stock units at June 30, 2008			722			28.86
	Granted		21			3.30
	Common stock issued at vest date		(312	)		24.00
	Forfeited		(151	)		33.07
Outstanding stock units at June 30, 2009			280			30.07
	Granted		4,369			3.02
	Common stock issued at vest date		(2,201	)		4.91
	Forfeited		(4	)		12.25
Outstanding stock units at June 30, 2010			2,444			4.41

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(17) Defined Contribution Plans

        We sponsor a 401(k) retirement savings plan for the benefit of all full time employees. Eligible employees can join the plan after three months of employment. Investment decisions are made by individual employees. At our option, we can contribute to the plan for the benefit of employees. Employee and employer contributions vest immediately. We made contributions of $0.9 million, $1.1 million and $2.8 million during the fiscal years ended June 30, 2010, 2009 and 2008, respectively.

(18) General and Administrative Expenses

        The following table reflects components of general and administrative expenses:

		Fiscal years ended June 30,
		2010		2009		2008
		(dollars in thousands)
General and administrative expenses:
	Depreciation and amortization	$	13,359	$	17,800	$	19,633
	Third-party services		20,587		29,991		66,652
	Occupancy and equipment		17,078		16,699		28,752
	Marketing		80		3,482		100,754
	Other		6,960		12,466		38,648
Total		$	58,064	$	80,438	$	254,439

        Other expenses included goodwill impairment losses of $1.7 million and $3.2 million in fiscal 2009 and fiscal 2008, respectively. Depreciation and amortization expense included amortization of intangibles of $737 thousand, $775 thousand and $868 thousand in fiscal 2010, 2009 and 2008, respectively.

        Included in other expenses in fiscal 2010 and fiscal 2009 are fees of $796 thousand and $523 thousand, respectively, paid to Sextant Holdings, LLC (Sextant), under a time-sharing agreement for business-related use of a private aircraft. Under the time sharing agreement, the fees may not exceed the actual expenses of each specific flight as authorized by federal aviation regulations. The sole manager and member of Sextant is Daniel Meyers, our Chief Executive Officer, President and Chairman of the Board. Fees paid to Sextant are capped by our Board of Directors at $1.0 million per year.

(19) Income Taxes

        We are subject to U.S. federal income tax, as well as income tax in multiple U.S. state and local jurisdictions. During April 2010, the Internal Revenue Service commenced an audit of our tax returns for fiscal years 2007, 2008 and 2009. We cannot predict the timing or outcome of the audit at this time. Our state income tax returns for the year ended June 30, 2004, and state and federal income tax returns for the years ended June 30, 2005 and 2006, remain subject to examination.

        Income tax benefit for fiscal 2010 was $70.3 million. Income tax benefit for fiscal 2009 was $187.8 million. The lower overall benefit in fiscal 2010 is a result of lower pre-tax losses during fiscal 2010. During fiscal 2010, our effective tax rate, or the income tax benefit as a percentage of pre-tax loss, decreased to 32.6% from an effective tax rate of 34.1% for fiscal 2009.

125

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(19) Income Taxes (Continued)

        The following table reflects components of income tax expense (benefit) attributable to income from operations:

			Fiscal years ended June 30,
			2010			2009			2008
			(dollars in thousands)
Current:
	Federal		$	(43,533	)	$	(177,807	)	$	72,550
	State			2,004			13,497			12,933
		Total current tax expense (benefit)		(41,529	)		(164,310	)		85,483
Deferred:
	Federal			(24,695	)		(15,353	)		(199,976	)
	State			(4,096	)		(8,156	)		(37,387	)
		Total deferred tax benefit		(28,791	)		(23,509	)		(237,363	)
		Income tax benefit	$	(70,320	)	$	(187,819	)	$	(151,880	)

        As a result of the sale of the Trust Certificate, effective March 31, 2009, as well as our operating losses for fiscal 2009, we recorded income tax receivables during fiscal 2009 for federal and state income taxes paid on prior taxable income. During fiscal 2010, we received a total of $189.3 million in federal and state income tax refunds related to our income tax receivables.

        The following table reconciles the expected federal income tax expense (benefit) (computed by applying the federal statutory tax rate to income (loss) before taxes) to recorded income tax expense (benefit):

		Fiscal years ended June 30,
		2010			2009			2008
		(dollars in thousands)
Computed federal tax benefit		$	(75,545	)	$	(192,794	)	$	(135,435	)
State tax, net of federal benefit			(1,360	)		3,472			(15,895	)
Non-deductible compensation			3,275			913			297
Other			3,310			590			(847	)
	Income tax benefit	$	(70,320	)	$	(187,819	)	$	(151,880	)

126

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(19) Income Taxes (Continued)

        The following table reflects the tax effects of temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases that give rise to significant deferred tax assets and deferred tax liabilities:

		June 30,
		2010			2009
		(dollars in thousands)
Deferred tax assets:
	Residual fees, net	$	6,889		$	5,331
	Deferral of unrealized loss on loans held for sale		46,791			25,687
	Depreciation and amortization		5,269			3,202
	Deferred compensation		942			1,434
	Other		4,465			3,109
	Gross deferred tax assets		64,356			38,763
	Valuation allowance		(3,758	)		—
	Total net deferred tax asset		60,598			38,763
Deferred tax liabilities:
	Structural advisory fees		(13,840	)		(21,813	)
	Deferred recognition for tax purposes of intercompany income		(2,548	)		(2,887	)
	Asset servicing fees		(2,295	)		(939	)
	Total deferred tax liability		(18,683	)		(25,639	)
	Net deferred tax asset	$	41,915		$	13,124

        We have determined that a valuation allowance is necessary on certain deferred tax assets because it is more likely than not that these assets will not be realized through future reversals of existing temporary differences and available tax planning strategies. We review the criteria related to the recognition of deferred tax assets on a quarterly basis.

Unrecognized Tax Benefits

        As a result of the sale of the Trust Certificate effective as of March 31, 2009, the related unrecognized tax benefit increased significantly. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	(dollars in thousands)
Balance at June 30, 2008	$	6,438
Increase related to positions taken in prior years		4,864
Increase related to positions taken in current year		10,856
Balance at June 30, 2009		22,158
Increase related to positions taken in current year		8,778
Balance at June 30, 2010	$	30,936

127

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(19) Income Taxes (Continued)

        Included in the balance at June 30, 2010, are $20.1 million of net unrecognized tax benefits that, if recognized, would favorably affect our effective income tax rate. During the year ended June 30, 2010, we accrued approximately $1.7 million of interest. At June 30, 2010, we had approximately $3.8 million accrued for interest and no amount accrued for the payment of penalties. Included in the balance at June 30, 2009, are $14.4 million of net unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate. We recognize interest and penalties, if any, in income tax expense when incurred. During the year ended June 30, 2009, we accrued approximately $202 thousand of interest. At June 30, 2009, we had approximately $2.1 million accrued for interest and no amount accrued for the payment of penalties.

Tax Loss Carrybacks and Carryforwards

        In November 2009, the Worker, Homeownership and Business Assistance Act of 2009 (WHBAA) was signed into law. Pursuant to the WHBAA, we are allowed to carry back the taxable losses from either fiscal 2009 or 2010 for five years, instead of two years. We have estimated that taxable income in previous years will be sufficient to cover the taxable losses of both fiscal 2009 and fiscal 2010 regardless of which fiscal year is carried back. As a result of the WHBAA and pre-existing net operating loss carryback rules, we have recorded an income tax receivable of $42.1 million at June 30, 2010.

(20) Net Loss per Share

        The following table sets forth the computation of basic and diluted net loss per share of common:

		Fiscal years ended June 30,
		2010			2009			2008
		(dollars and shares in thousands, except per share data)
Net loss		$	(145,524	)	$	(363,020	)	$	(235,076	)
Net loss per share:
	Basic	$	(1.46	)	$	(3.66	)	$	(2.46	)
	Diluted		(1.46	)		(3.66	)		(2.46	)
Weighted average shares used in computing net loss per share:
	Basic		99,537			99,081			95,732
	Diluted		99,537			99,081			95,732
Anti-dilutive common stock equivalents			8,878			8,177			945

        As a result of the net losses available to stockholders for all years presented, common stock equivalents are considered anti-dilutive, and are, therefore, excluded from diluted weighted average shares outstanding. Common stock equivalents include RSUs, Series B Preferred Stock and stock options. For the majority of stock options outstanding, the conversion or exercise price exceeds fair market value at the report date.

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THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(21) Union Federal Regulatory Matters

(a)   Regulatory Capital Requirements

        Union Federal is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on our financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Union Federal must meet specific capital guidelines that involve quantitative measures of Union Federal's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors. Union Federal's equity capital was $44.4 million at June 30, 2010.

        Quantitative measures established by regulation to ensure capital adequacy require Union Federal to maintain minimum amounts and ratios of total capital and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations).

		Regulatory Guidelines
								June 30,
					Well Capitalized
		Minimum						2010			2009
Risk-based capital ratios:
	Tier 1 capital		4	%		6	%		124.83	%		37.86	%
	Total capital		8			10			125.47			37.91
Tier 1 leverage ratio			4			5			27.88			34.51

        As of June 30, 2010 and 2009, Union Federal was well capitalized under the regulatory framework for prompt corrective action.

        The OTS regulates all capital distributions by Union Federal directly or indirectly to us, including dividend payments. Union Federal is required to file a notice with the OTS at least 30 days before the proposed declaration of a dividend or approval of a proposed capital distribution by Union Federal's board of directors. Union Federal must file an application to receive the approval of the OTS for a proposed capital distribution when, among other circumstances, the total amount of all capital distributions (including the proposed capital distribution) for the applicable calendar year exceeds net income for that year to date plus the retained net income for the preceding two years.

        A notice or application to make a capital distribution by Union Federal may be disapproved or denied by the OTS if it determines that, after making the capital distribution, Union Federal would fail to meet minimum required capital levels or if the capital distribution raises safety or soundness concerns or is otherwise restricted by statute, regulation or agreement between Union Federal and the OTS or the Federal Deposit Insurance Corporation (FDIC), or a condition imposed by an OTS agreement. Under the Federal Deposit Insurance Act (FDIA), an FDIC-insured depository institution such as Union Federal is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become "undercapitalized" (as such term is used in the FDIA).

129

THE FIRST MARBLEHEAD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2010, 2009 and 2008

(21) Union Federal Regulatory Matters (Continued)

(b)   Supervisory Agreement and Order to Cease and Desist

        In July 2009, FMD entered into the Supervisory Agreement with the OTS and Union Federal entered into the Order. The OTS terminated the Supervisory Agreement and the Order, each in its entirety, in March 2010.

        In connection with the termination of the Supervisory Agreement, our Board of Directors adopted resolutions requiring FMD to support the implementation by Union Federal of its business plan, so long as Union Federal is owned or controlled by FMD, and to notify the OTS in advance of any distributions to our stockholders in excess of $1.0 million per fiscal quarter and any incurrence or guarantee of debt in excess of $5.0 million. Following termination of the Supervisory Agreement and the Order, respectively, FMD remains subject to extensive regulation, supervision and examination by the OTS as a savings and loan holding company, and Union Federal remains subject to extensive regulation, supervision and examination by the OTS and the FDIC.

(22) Subsequent Events

Monogram Loan Programs

        As of September 2, 2010, we had begun to perform services under our loan program agreement with SunTrust Bank, and we expect to begin performing services under our loan program agreement with Kinecta Federal Credit Union by September 30, 2010. The loan program agreements each relate to school-certified education loan programs to be funded by these clients through our Monogram product. We expect to facilitate up to an aggregate of $275.0 million in loans over the terms of the two loan programs.

        We will perform a range of services in support of the programs, including loan processing and management, and program administration services. We generally provide these services on a fee-for-service basis, although we are also entitled to a portion of the yield generated by the portfolio of program loans in connection with certain administration services and for providing credit enhancement.

        Under both loan program agreements, we provide credit enhancement in the form of participation accounts, which are deposit accounts funded by us based on credit mix and volume of disbursed program loans, up to a specified dollar limit. The participation accounts for each client serve as a first-loss reserve for defaulted program loans. We will not fund participation accounts in excess of the specified dollar limit in the applicable program agreements. To the extent that loan volumes decrease as a result of repayments or default experience is less than our funded amounts, we would be eligible to receive a monthly release of funds from the participation accounts beginning in July 2014, in the case of SunTrust Bank, and following expiration of the terms of our loan program agreement, in the case of Kinecta Federal Credit Union. As of September 2, 2010, we have provided $7.4 million (unaudited) in support of SunTrust Bank's Monogram-based loan program.

130

SUPPLEMENTARY DATA

UNAUDITED QUARTERLY INFORMATION

        The table below summarizes unaudited quarterly information for each of the three months in the fiscal years ended June 30, 2010 and 2009:

		Three months ended
		September 30, 2009			December 31, 2009			March 31, 2010			June 30, 2010
		(dollars in thousands, except per share data)
Total revenues		$	13,486		$	10,144		$	(16,816	)	$	9,457
Non-interest expenses			150,202			31,249			28,012			22,652
Income tax benefit			(42,650	)		(9,386	)		(15,439	)		(2,845	)
Net loss		$	(94,066	)	$	(11,719	)	$	(29,389	)	$	(10,350	)
Net loss per share:
	Basic	$	(0.95	)	$	(0.12	)	$	(0.30	)	$	(0.10	)
	Diluted		(0.95	)		(0.12	)		(0.30	)		(0.10	)

		Three months ended
		September 30, 2008			December 31, 2008			March 31, 2009			June 30, 2009
		(dollars in thousands, except per share data)
Total revenues		$	(84,904	)	$	(86,095	)	$	(130,616	)	$	11,609
Non-interest expenses			60,930			59,138			74,972			65,793
Income tax benefit			(52,938	)		(51,846	)		(64,934	)		(18,101	)
Net loss		$	(92,896	)	$	(93,387	)	$	(140,654	)	$	(36,083	)
Net loss per share:
	Basic	$	(0.94	)	$	(0.94	)	$	(1.42	)	$	(0.36	)
	Diluted		(0.94	)		(0.94	)		(1.42	)		(0.36	)

        Quarterly revenue, operating results and profitability vary on a quarterly basis. During fiscal 2010 and fiscal 2009, variability was largely due to changes in the assumptions used to value our service receivables and education loans held for sale, as well as the losses realized on sales of certain assets. To the extent demand grows for our Monogram product, we expect additional seasonality due to the timing of loan originations, and if applicable, due to the timing, size and structure of securitizations we might facilitate, if any. In fiscal 2010 and fiscal 2009, we did not facilitate any securitization transactions.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

Item 9A.    Controls and Procedures

Disclosure Controls and Procedures

        Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2010. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files

131

or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission (SEC). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2010, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

132

Management's Annual Report on Internal Control over Financial Reporting

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

        The management of The First Marblehead Corporation and subsidiaries (Company) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the company's principal executive and principal financial officers and effected by the company's board of directors, management and other personnel, 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 and includes those policies and procedures that:

•

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

•

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

•

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 2010. In making this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.

        Based on our assessment, management concluded that, as of June 30, 2010, the Company's internal control over financial reporting is effective based on those criteria.

        The Company's independent auditors have issued an attestation report on the Company's internal control over financial reporting. That report appears on page 134 of this annual report.

/s/ DANIEL MEYERS
Chief Executive Officer, President and
Chairman of the Board of Directors

/s/ KENNETH KLIPPER
Managing Director, Chief Financial Officer,
Treasurer and Chief Accounting Officer

133

Attestation Report of our Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

The First Marblehead Corporation:

        We have audited The First Marblehead Corporation's internal control over financial reporting as of June 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The First Marblehead Corporation's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management's report on internal control over financial reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, The First Marblehead Corporation maintained, in all material respects, effective internal control over financial reporting as of June 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

134

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The First Marblehead Corporation and subsidiaries as of June 30, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended June 30, 2010, and our report dated September 2, 2010 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Boston, Massachusetts
September 2, 2010

135

Change in Internal Control Over Financial Reporting

        No change in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, occurred during the fourth quarter of the fiscal year ended June 30, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

        Not applicable.

PART III

        Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, information required by Part III (Items 10, 11, 12, 13 and 14) is being incorporated by reference herein from our definitive proxy statement to be filed with the SEC within 120 days of the end of the fiscal year ended June 30, 2010 in connection with our 2010 annual meeting of stockholders, which we refer to below as our 2010 Proxy Statement.

Item 10.    Directors, Executive Officers and Corporate Governance

        The information required by this item with respect to our executive officers and code of ethics is included in Item 1 of this annual report.

        The information required by this item with respect to directors will be contained in our 2010 Proxy Statement under the caption "Discussion of Proposals—Proposal One: Election of Directors" and is incorporated in this annual report by reference.

        The information required by this item with regard to Section 16(a) beneficial ownership reporting compliance will be contained in our 2010 Proxy Statement under the caption "Other Information—Section 16(a) Beneficial Ownership Reporting Compliance" and is incorporated in this annual report by reference.

        The information required by this item with respect to corporate governance matters will be contained in our 2010 Proxy Statement under the caption "Information About Corporate Governance—Board Committees" and is incorporated in this annual report by reference. Complete copies of the audit committee charter, as well as our corporate governance guidelines and the charters of the compensation committee and nominating and corporate governance committees, are available on our website at www.firstmarblehead.com. Alternatively, paper copies of these documents may be obtained free of charge by writing to Investor Relations, The First Marblehead Corporation, The Prudential Tower, 800 Boylston Street, 34^th Floor, Boston, Massachusetts 02199 or e-mailing Investor Relations at info@fmd.com.

Item 11.    Executive Compensation

        The information required by this item will be contained in our 2010 Proxy Statement under the captions "Information About Corporate Governance" and "Information About Our Executive Officers" and is incorporated in this annual report by this reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        The information required by this item with regard to security ownership of certain beneficial owners and management will be contained in our 2010 Proxy Statement under the caption "Other Information—Principal Stockholders" and is incorporated in this annual report by reference.

136

        The information required by this item with regard to securities authorized for issuance under equity compensation plans will be contained in our 2010 Proxy Statement under the caption "Information About Corporate Governance" and is incorporated in this annual report by reference.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

        The information required by this item with regard to certain relationships and related-person transactions will be contained in our 2010 Proxy Statement under the caption "Information About Our Executive Officers" and is incorporated in this annual report by reference.

        The information required by this item with regard to director independence will be contained in our 2010 Proxy Statement under the caption "Information About Corporate Governance" and is incorporated in this annual report by reference.

Item 14.    Principal Accountant Fees and Services

        The information required by this item will be contained in our 2010 Proxy Statement under the caption "Discussion of Proposals—Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm" and is incorporated in this annual report by reference.

PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)

The following documents are filed as part of this annual report:

(1)

Financial Statements.

        The consolidated financial statements are included as Item 8 herein and are filed as part of this annual report. The consolidated financial statements include the reports made in Item 9A herein.

(2)

Financial Statement Schedules.

        None.

(3)

Exhibits.

        The exhibits set forth on the Exhibit Index following this annual report are filed as part of this annual report. This list of exhibits identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit to this annual report.

137

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE FIRST MARBLEHEAD CORPORATION
By:	/s/ DANIEL MEYERS Daniel Meyers Chief Executive Officer, President and Chairman of the Board of Directors
Date:	September 2, 2010

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature	Title(s)	Date
/s/ DANIEL MEYERS Daniel Meyers	Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer)	September 2, 2010
/s/ KENNETH KLIPPER Kenneth Klipper	Managing Director, Chief Financial Officer, Treasurer and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)	September 2, 2010
/s/ STEPHEN E. ANBINDER Stephen E. Anbinder	Director	September 2, 2010
/s/ NANCY Y. BEKAVAC Nancy Y. Bekavac	Director	September 2, 2010
/s/ WILLIAM R. BERKLEY William R. Berkley	Director	September 2, 2010
/s/ DORT A. CAMERON III Dort A. Cameron III	Director	September 2, 2010

138

Signature	Title(s)	Date
/s/ HENRY CORNELL Henry Cornell	Director	September 2, 2010
/s/ GEORGE G. DALY George G. Daly	Director	September 2, 2010
/s/ PETER S. DROTCH Peter S. Drotch	Director	September 2, 2010
/s/ THOMAS P. EDDY Thomas P. Eddy	Director	September 2, 2010
/s/ WILLIAM D. HANSEN William D. Hansen	Director	September 2, 2010

139

EXHIBIT INDEX

Number			Description
	3.1	(1)	Restated Certificate of Incorporation of the Registrant, as amended
	3.2	(2)	Amended and Restated By-laws of the Registrant
	4.1	(3)	Investment Agreement, dated as of December 21, 2007, among the Registrant, GS Parthenon A, L.P. and GS Parthenon B, L.P.
	4.2	(4)	Amendment No. 1 dated as of January 30, 2008, to the Investment Agreement, dated as of December 21, 2007, among the Registrant, GS Parthenon A, L.P. and GS Parthenon B, L.P.
	4.3	(5)	Amendment No. 2, dated August 18, 2008, to the Investment Agreement, dated as of December 21, 2007, among the Registrant, GS Parthenon A, L.P. and GS Parthenon B, L.P.
	4.4	(3)	Amended and Restated Registration Rights Agreement, dated as of December 21, 2007, among the Registrant, GS Parthenon A, L.P., GS Parthenon B, L.P. and the other holders named therein
	4.5	(6)	Indenture, dated July 18, 2007, among UFSB Private Loan SPV, LLC, CIESCO, LLC, Citicorp North America, Inc., U.S. Bank National Association and Union Federal Savings Bank, as amended by Amendment No. 1 to Indenture, Limited Waiver and Acknowledgement dated April 15, 2009, among UFSB Private Loan SPV, LLC, CIESCO, LLC, Citicorp North America, Inc., U.S. Bank National Association and Union Federal Savings Bank, as amended by Amendment No. 2 to Indenture dated April 16, 2010, among UFSB Private Loan SPV, LLC, CIESCO, LLC, Citicorp North America, Inc., U.S. Bank National Association, the Registrant and Union Federal Savings Bank
	4.6	(6)	Settlement Agreement and Release, dated April 16, 2010, among UFSB Private Loan SPV, LLC, CIESCO, LLC, Citicorp North America, Inc., U.S. Bank National Association, the Registrant, The National Collegiate Funding II, LLC, The National Collegiate Student Loan Trust 2009-1 and Union Federal Savings Bank
	10.1	(2)#	2002 Director Stock Plan
	10.2	(2)#	2003 Employee Stock Purchase Plan
	10.3	(7)#	2003 Stock Incentive Plan, as amended
	10.4	(1)#	Executive Incentive Compensation Plan
	10.5	(8)#	Summary of non-employee director compensation arrangements
	10.6	(9)#	Form of Non-statutory Stock Option Agreement evidencing grants under the 2002 Director Stock Plan
	10.7	(10)#	Forms of Incentive Stock Option Agreement and Non-statutory Stock Option Agreement evidencing grants under the 2003 Stock Incentive Plan
	10.8	(11)#	Form of Restricted Stock Unit Agreement evidencing grants under the 2003 Stock Incentive Plan
	10.9	(12)	Form of Invention, Non-disclosure, Non-competition and Non-solicitation Agreement

140

Number			Description
	10.10	(5)#	Employment Agreement, dated as of August 18, 2008, between the Registrant and Daniel Meyers
	10.11	#	First Amendment to Employment Agreement, dated as of May 17, 2010, between the Registrant and Daniel Meyers
	10.12	(5)#	Indemnification Agreement, dated August 18, 2008, between the Registrant and Daniel Meyers
	10.13	#	First Amendment to Indemnification Agreement, dated as of July 22, 2010, between the Registrant and Daniel Meyers
	10.14	(11)#	Non-Statutory Stock Option Agreement for $6.00 stock options between the Registrant and Daniel Meyers
	10.15	(11)#	Non-Statutory Stock Option Agreement for $12.00 stock options between the Registrant and Daniel Meyers
	10.16	(11)#	Non-Statutory Stock Option Agreement for $16.00 stock options between the Registrant and Daniel Meyers
	10.17	#	Letter Agreement, dated February 25, 2005, between the Registrant and Kenneth Klipper, as supplemented
	10.18	(13)#	Letter Agreement, dated September 11, 2008, between the Registrant and Jack L. Kopnisky
	10.19	(14)#	Letter Agreement, dated September 30, 2008, between the Registrant and Anne P. Bowen
	10.20	(14)#	Letter Agreement, dated September 30, 2008, between the Registrant and Greg D. Johnson
	10.21	(14)#	Letter Agreement, dated October 3, 2008, between the Registrant and John A. Hupalo
	10.22	#	Letter Agreement, dated September 22, 2008, between the Registrant and Seth Gelber, as supplemented
	10.23	#	Letter Agreement, dated September 22, 2008, between the Registrant and Gary Santo, as supplemented
	10.24	#	Letter Agreement, dated July 22, 2010, between the Registrant and Stein Skaane
	10.25	(8)#	Separation and Transition Services Agreement, dated May 17, 2010, between the Registrant and Peter B. Tarr
	10.26	(15)	Time Sharing Agreement, dated February 4, 2009, between the Registrant and Sextant Holdings, LLC
	10.27	(11)	Indenture of Lease, dated September 5, 2003, between the Registrant and BP Prucenter Acquisition LLC, as amended
	10.28	(11)	Commercial Lease, dated August 13, 2004, between the Registrant and Cabot Road Partners, LLC, as amended
	10.29	(16)	Purchase Agreement, dated as of March 31, 2009, among the Registrant, VCG Owners Trust and VCG Securities LLC
	10.30	(16)	Letter Agreement, dated as of March 31, 2009, delivered by Vanquish Advisors LLC to the Registrant

141

Number			Description
	10.31	(16)	Asset Services Agreement, dated as of March 31, 2009, among the Registrant, First Marblehead Education Resources, Inc., VCG Owners Trust and VCG Securities LLC
	10.32	(16)	Data Sharing and License Agreement, dated as of March 31, 2009, between the Registrant and VCG Owners Trust
	10.33	(16)	Indemnification Agreement, dated as of March 31, 2009, between the Registrant, VCG Owners Trust and VCG Securities LLC
	10.34	(17)	Loan Purchase and Sale Agreement, dated October 13, 2009, between Union Federal Savings Bank and Wells Fargo Bank, N.A.
	10.35	(17)	Performance Guarantee, dated October 16, 2009, delivered by the Registrant to Wells Fargo Bank, N.A.
	10.36	(18)††	Amended and Restated Private Student Loan Servicing Agreement, dated as of September 28, 2006, between the Registrant and Pennsylvania Higher Education Assistance Agency
	10.37	(11)††	Amendments to Amended and Restated Private Student Loan Servicing Agreement, dated as of September 28, 2006, between the Registrant and Pennsylvania Higher Education Assistance Agency
	10.38	††	Private Student Loan Monogram Program Agreement, dated as of February 5, 2010, between the Registrant and Pennsylvania Higher Education Assistance Agency
	10.39	††	Loan Program Agreement, dated as of April 20, 2010, among the Registrant, First Marblehead Education Resources, Inc. and SunTrust Bank
	10.40	††	Certificate of Satisfaction and First Amendment to Loan Program Agreement, dated as of July 15, 2010, among the Registrant, First Marblehead Education Resources, Inc. and SunTrust Bank
	21.1		List of Subsidiaries
	23.1		Consent of KPMG LLP
	31.1		Chief Executive Officer—Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2		Chief Financial Officer—Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1		Chief Executive Officer—Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2		Chief Financial Officer—Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

142

Number			Description
	99.1	(19)	Static pool data as of June 30, 2010
	99.2	(19)	Supplemental presentation dated June 30, 2010

(1)

Incorporated by reference to the exhibit to the Registrant's annual report on Form 10-K filed with the SEC on August 29, 2008.

(2)

Incorporated by reference to the exhibits to the Registrant's registration statement on Form S-1 (File No. 333-108531).

(3)

Incorporated by reference to the exhibits to the Registrant's current report on Form 8-K filed with the SEC on December 27, 2007.

(4)

Incorporated by reference to the exhibit to the Registrant's current report on Form 8-K filed with the SEC on February 4, 2008.

(5)

Incorporated by reference to the exhibits to the Registrant's current report on Form 8-K filed with the SEC on August 18, 2008.

(6)

Incorporated by reference to the exhibits to the Registrant's current report on Form 8-K filed with the SEC on April 20, 2010.

(7)

Incorporated by reference to the exhibit to the Registrant's current report on Form 8-K filed with the SEC on October 31, 2005.

(8)

Incorporated by reference to the exhibits to the Registrant's current report on Form 8-K filed with the SEC on May 19, 2010.

(9)

Incorporated by reference to the exhibits to the Registrant's annual report on Form 10-K filed with the SEC on September 15, 2004 (File No. 001-31825).

(10)

Incorporated by reference to the exhibits to the Registrant's annual report on Form 10-K filed with the SEC on September 7, 2005.

(11)

Incorporated by reference to the exhibits to the Registrant's annual report on Form 10-K filed with the SEC on September 3, 2009.

(12)

Incorporated by reference to the exhibit to the Registrant's quarterly report on Form 10-Q filed with the SEC on November 8, 2005.

(13)

Incorporated by reference to the exhibit to the Registrant's current report on Form 8-K filed with the SEC on September 17, 2008.

(14)

Incorporated by reference to the exhibits to the Registrant's current report on Form 8-K filed with the SEC on October 6, 2008.

(15)

Incorporated by reference to the exhibit to the Registrant's quarterly report on Form 10-Q filed with the SEC on February 9, 2009.

(16)

Incorporated by reference to the exhibits to the Registrant's current report on Form 8-K filed with the SEC on April 6, 2009.

(17)

Incorporated by reference to the exhibits to the Registrant's current report on Form 8-K filed with the SEC on October 16, 2009.

(18)

Incorporated by reference to the exhibit to the Registrant's quarterly report on Form 10-Q filed with the SEC on November 8, 2006.

143

(19)

Incorporated by reference to the exhibits to the Registrant's current report on Form 8-K filed with the SEC on August 16, 2010.

††

Confidential treatment has been granted or requested for certain provisions of this Exhibit pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.

#

This Exhibit is a management contract or compensatory plan or arrangement.

144

EX-10.11

Exhibit 10.11

FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

This FIRST AMENDMENT (the “Amendment”) is entered into as of May 17, 2010 (the “Amendment Effective Date”) by and between The First Marblehead Corporation, a Delaware corporation (the “Corporation”), and Daniel Maxwell Meyers (the “Executive”) with regard to that certain Employment Agreement made as of August 18, 2008 by and between the Corporation and the Executive (the “Agreement”).  Capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Agreement.

WITNESSETH

WHEREAS, the Corporation and the Executive desire to amend certain terms of the Agreement as set forth herein.

NOW, THERFORE, in consideration of the mutual covenants and agreements contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Corporation and the Executive hereby agree to amend certain provisions of the Agreement as follows:

1.Section 3(a) of the Agreement is amended by deleting it in its entirety and substituting therefor the following:

“(a)Base Salary.

(i)Effective as of the Amendment Effective Date, and except as otherwise set forth in Section 3(a)(ii) or Section 3(a)(iii) hereof, the Corporation shall pay the Executive an annual base salary at the rate of Eight Hundred Thousand Dollars ($800,000) for all services rendered by the Executive under this Agreement.  Such base salary shall be paid to the Executive in periodic installments in accordance with the Corporation’s customary payroll practices.

(ii)For the period beginning on the Commencement Date up to and through May 16, 2010, the Executive’s base salary was $1.00 per year (the “Original Base Salary”) and the Corporation accrued an amount at the rate of $1,000,000 per fiscal year, without interest (which amount was prorated for (1) the Corporation’s 2009 fiscal year to reflect the portion of such fiscal year that the Executive was employed by the Corporation and (2) the Corporation’s 2010 fiscal year to reflect the portion of such fiscal year that the Executive received the Original Base Salary) (the “Accrued Compensation”).  Subject to the next sentence of this Section (3)(a)(ii), the Accrued Compensation will be paid to the Executive on the earlier of (x) such date that the Compensation Committee, in its sole discretion, determines that all or a portion of such Accrued Compensation will be paid (provided that such payment may only be made if it would not be in violation of Section 409A (as defined below), or (y) at such time that that the Corporation first generates for a fiscal year (after taking into account accrual and payment of the Accrued Compensation) (A) positive cash flow from operations, and (B) profit from operations (the financial results set forth in subsections (A) and (B) are collectively referred to herein as the “Targeted Financial Results”), and will be considered earned by the Executive on the date that it is payable as provided herein.  Accrued Compensation paid to the Executive pursuant to Subsection 3(a)(ii)(y) above will be paid on the fifth business day following

the date that the Corporation publicly announces its financial results for the fiscal year reflecting achievement of such Targeted Financial Results, provided that the Executive continues to be employed by the Corporation on such date.  Executive will be entitled to receive a base salary at the rate of $1,000,000 per fiscal year effective as of the first day of the fiscal year in which the Accrued Compensation is payable to the Executive pursuant to Section 3(a)(ii)(y) above, it being understood that such amount will be paid to the Executive in periodic installments in accordance with the Corporation’s customary payroll practices.

(iii)The base salary in effect at any given time is referred to herein as the “Base Salary.”  Any additional changes to the Base Salary shall be reasonably acceptable to the Executive and the Compensation Committee.”

2.Section 6(b)(ii) of the Agreement is amended by deleting the parenthetical phrase “(as defined in Section 6(d))” in its entirety and substituting therefor the following: “(determined as set forth in Section 6(c)).”

3.Any reference in the Agreement to “your,” “Employee” or “Employees” shall refer to the Executive, except that in the last sentence of Section 8, the reference to “such Employee” shall be amended to “such employee.”

4.Any reference in the Agreement to the “Letter Agreement” or “this letter” shall refer to the Agreement.

5.Except as specifically amended by this Amendment, the Agreement shall remain in full force and effect in accordance with its terms.

6.This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

[Remainder of page intentionally blank]

IN WITNESS WHEREOF, the parties have executed and delivered this First Amendment to the Employment Agreement as of the date first above written.

THE FIRST MARBLEHEAD CORPORATION
By:	/s/ William R. Berkley
	William R. Berkley
	Lead Director
/s/ Daniel Maxwell Meyers
Daniel Maxwell Meyers

EX-10.13

Exhibit 10.13

FIRST AMENDMENT TO INDEMNIFICATION AGREEMENT

This FIRST AMENDMENT (the “Amendment”) is entered into as of July 22, 2010 by and between The First Marblehead Corporation, a Delaware corporation (the “Company”), and Daniel Maxwell Meyers (the “Indemnitee”) with regard to that certain Indemnification Agreement dated as of August 18, 2008 by and between the Company and the Indemnitee (the “Agreement”).  Capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Agreement.

WITNESSETH

WHEREAS, the Agreement does not expressly restrict the Company from making a “prohibited indemnification payment” as such term is defined in 12 C.F.R. §359.1(l) (a “Prohibited Indemnification Payment”); and

WHEREAS, no insured depository institution or depository institution holding company is permitted to make or agree to make any Prohibited Indemnification Payment, except as provided in 12 C.F.R. §359.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Indemnitee hereby agree to amend certain provisions of the Agreement as follows:

1.Section 4 of the Agreement is amended, effective as of August 18, 2008, by adding a new subsection (d):

“(d)Regulatory Prohibition.  The Company and Indemnitee hereby acknowledge and agree that notwithstanding anything to the contrary contained herein, for so long as the Company is a depository institution or depository institution holding company: (i) the Company shall not make or agree to make to Indemnitee any “prohibited indemnification payment” (as that term is defined in 12 C.F.R. § 359.1(l)), except as provided in any provision of 12 C.F.R. § 359 (the “Regulation”) or any regulation adopted by the Federal Deposit Insurance Corporation (or any other federal regulatory agency with responsibility for the application of such regulations) after the date of the Amendment that provides additional or broader exceptions to the definition of “prohibited indemnification payment” or to a similar or successor term within such regulation, and (ii) as used herein, the terms “Indemnifiable Expenses,” “Indemnifiable Liabilities” and “Indemnifiable Amounts” shall exclude any such “prohibited indemnification payment” to the extent required by the Regulation.”

2.Except as specifically amended by this Amendment, the Agreement shall remain in full force and effect in accordance with its terms.

3.This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

[Remainder of page intentionally blank]

IN WITNESS WHEREOF, the parties have executed and delivered this First Amendment to the Indemnification Agreement as of the date first above written.

THE FIRST MARBLEHEAD CORPORATION
By:	/s/ Gregory M. Woods
	Gregory M. Woods
	Managing Director
/s/ Daniel Meyers
Daniel Meyers

EX-10.17

Exhibit 10.17

	First Marblehead Corporation
	The Prudential Tower
	800 Boylston Street - 34th Floor
	Boston, MA 02199-8157
	Tel 617.638.2000 or 800.895.4283
	Fax 617.638.2100 or 866.255.4583
	230 Park Avenue, 10th Floor
	New York, NY 10169
	Tel 212.808.7225
	Fax 212.808.7226

February 25, 2005

Kenneth Klipper

[address]

Dear Ken:

The First Marblehead Corporation (FMC) is pleased to offer you the position of Senior Vice President, Finance reporting to Donald Peck, Executive Vice President and Chief Financial Officer.

Your direct annual compensation will be $270,000, paid on a semi-monthly basis at a rate of $11,250, (gross) per pay period. You will also be eligible to participate in the Company’s incentive bonus plan. Under this plan you are eligible for a bonus of up to 50% of earned salary for the performance year. This is a discretionary plan which provides rewards for Company performance and your personal contribution to it. First Marblehead aligns the performance review and bonus cycle with the business fiscal year ending June 30. Your first performance review under these plans will be June, 2005. The effective date for merit increase and any bonus awards you become eligible for is September 1. Any awards for fiscal year 2005 will be pro-rated from your start date. You will also participate in the First Marblehead long term incentive program. It is our intention to award you a grant of 4,000 Restricted Stock Units subject to the terms and conditions of the plan and Board of Director approval. Each Restricted Stock Unit represents the right to receive one share of common stock of the Company. Restricted Stock Units vest at one third on the third anniversary of the grant date, one third on the fourth anniversary of the grant date and the final third on the fifth anniversary of the grant date. Instruments of grant and plan documents will be provided to you after Board approval. Please note that this letter does not constitute an employment contract or a contract for a specific term of employment and that the employment relationship is at will.

As a condition of hire, First Marblehead requires that all employees sign an Invention and Non-Disclosure/Non-Compete Agreement (enclosed). Due to the nature of our business, this offer is contingent on satisfactory results of a credit check the company runs on prospective employees to make sure they are not in default on any student loans. Also, as required by the Immigration Reform and Control Act of 1976, you will be expected to provide proof of eligibility to work in the United States.

We offer a comprehensive benefits program. You may select health coverage through an HMO or PPO from Blue Cross/Blue Shield, as well as dental coverage through Delta Dental Premier. The company subsidizes the cost of these plans at a rate of 80% for family and 90% for individuals. In addition, FMC provides Group Life Insurance at two times your base salary as well as Short Term and Long Term Disability coverage at no cost to you. You are eligible for coverage on the first of the month following your first day of employment. Other benefits include a 401 K plan with a dollar-for-dollar match up to 6% of salary contributed and the Company’s employee stock purchase program subject to the eligibility requirements of these plans. We offer accrual of vacation up to fifteen days, eight paid holidays, two floating holidays and five sick days per year.

This is an exciting time for First Marblehead and your addition to our management team is most welcome. Please acknowledge this offer by signing one copy of this offer letter and returning it to me. This offer is made today and will expire on March 4, 2005. We look forward to hearing from you.

Sincerely,

/s/ Robin L. Camara
Robin L. Camara
Senior Vice-President, Human Resources
	/s/ Kenneth Klipper
	KENNETH KLIPPER

Encls:	Invention and Non-Disclosure/Non-Compete Agreement
	Copy of this Offer Letter

cc: Don Peck

September 1, 2010

Kenneth S. Klipper

c/o The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199

Dear Ken:

Reference is made to that certain letter agreement dated February 25, 2005 (the “Offer Letter”) between The First Marblehead Corporation (“First Marblehead”) and you.  This letter sets forth certain additional provisions relating to your employment with First Marblehead, which provisions supplement or supersede, as applicable, the terms of the Offer Letter.

In consideration for your continued service to First Marblehead, and affirmation of your obligations under that certain Invention, Non-Disclosure, Non-Competition and Non-Solicitation Agreement that you executed on February 28, 2005:

·Your direct annual base compensation will be $390,000, less all applicable taxes and withholdings, paid on a semi-monthly basis at a rate of $16,250 (gross) per pay period.

·Any cash bonus under First Marblehead’s discretionary incentive bonus plan will be paid to you no later than March 15th of the calendar year following the calendar year in which such cash bonus was earned.

·In the event that your employment is terminated by First Marblehead for a reason other than “Cause” (as defined below), subject to the execution and non-revocation (if applicable) by you of a waiver and release acceptable to First Marblehead (the “Release”) within 60 days following your termination of employment, First Marblehead will provide you with the Severance Benefits (as defined below).

·Following the consummation of a Reorganization Event (as defined below), in the event that you terminate your employment for Good Reason (as defined below) on or prior to the second anniversary date of the date of consummation of such Reorganization Event, and subject to the execution and non-revocation (if applicable) by you of the Release within 60 days following your termination of employment, First Marblehead will provide you with the Severance Benefits.  For the avoidance of doubt, unless a Reorganization Event is consummated in the future, you will not be entitled to Severance Benefits in the event that you terminate your employment for Good Reason.

800 BOYLSTON STREET · 34TH FLOOR · BOSTON, MASSACHUSETTS 02199 · TEL: 617.638.2000

·The Severance Benefits will begin on the first payroll period after the Release becomes binding; provided that if the 60th day following your termination date occurs in the calendar year following your termination, then the Severance Benefits will commence no earlier than the first payroll period that is after January 1 of such subsequent calendar year (the “Payment Start Date”).

·The payment of any severance amounts pursuant to this Offer Letter shall be subject to the terms and conditions set forth in Appendix A.

For purposes of the foregoing:

·The term “First Marblehead” shall include The First Marblehead Corporation and any successor following a Reorganization Event.

·The term “Cause” shall mean, as determined by First Marblehead in its sole discretion, (i) the willful failure by you to perform your employment duties that has continued more than thirty days following written notice from First Marblehead of such non-performance, (ii) any act of dishonesty, fraud, willful misconduct, gross negligence or disobedience on your part in the performance of your employment duties, or (iii) your conviction of a felony involving moral turpitude.

·The term “Severance Benefits” shall mean (i) severance pay in the form of continuation of your base salary at the then-current annualized rate, in accordance with First Marblehead’s normal payroll procedures, and less all applicable state and federal taxes, for the six month period commencing on the Payment Start Date (the “Severance Period”), and (ii) payment on your behalf during the Severance Period of the share of the premiums then paid by First Marblehead for group medical insurance for active and similarly situated employees who receive the same type of coverage, provided you are eligible for and elect to continue group medical insurance pursuant to the federal “COBRA” law, 29 U.S.C. § 1161 et seq.

·The term “Reorganization Event” shall mean a Reorganization Event as defined in First Marblehead’s 2003 Stock Incentive Plan, as amended, provided that such event also constitutes a change in ownership or effective control of First Marblehead or a change in ownership of a substantial portion of First Marblehead’s assets for purposes of Section 409A of the Internal Revenue Code of 1986, as amended.

·The term “Good Reason” shall mean any significant diminution in your title, authority, or responsibilities from and after such Reorganization Event or any material reduction in the annual cash compensation payable to you from and after such Reorganization Event or the relocation of the place of business at

which you are principally located to a location that is greater than 50 miles from its location immediately prior to such Reorganization Event, provided that such diminution, reduction or relocation is not cured within 30 days of written notice to First Marblehead from you.

Except as modified by this letter, all other terms and conditions of your Offer Letter shall remain in full force and effect.  In particular, your employment with First Marblehead remains at-will, meaning that either you or First Marblehead may terminate the employment relationship at any time, for any reason or no reason, with or without Cause and with or without notice.

Please note that First Marblehead’s obligations under this letter agreement may be subject to regulatory review and approval. You acknowledge that the provisions of this letter agreement shall not be binding on First Marblehead unless and until all required regulatory approvals have been received.

Please acknowledge your acceptance of the foregoing by signing in the space provided below and returning the signed letter to me.

Very truly yours,

/s/ Jo-Ann Burnham
Jo-Ann Burnham
Managing Director, Human Resources
	AKNOWLEDGED AND AGREED
	/s/ Kenneth S. Klipper
	Kenneth S. Klipper

Appendix A

Compliance with Section 409A

Subject to the provisions in this Appendix A, any severance payments or benefits under your offer letter shall begin only upon the date of your “separation from service” (determined as set forth below) which occurs on or after the date of termination of your employment.  The following rules shall apply with respect to distribution of the payments and benefits, if any, to be provided to you under your offer letter.

1.             It is intended that each installment of the severance payments and benefits provided under your offer letter shall be treated as a separate “payment” for purposes of Section 409A of the Internal Revenue Code and the guidance issued thereunder (“Section 409A”).  Neither you nor the Company shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A.

2.             If, as of the date of your “separation from service” from the Company, you are not a “specified employee” (within the meaning of Section 409A), then each installment of the severance payments and benefits shall be made on the dates and terms set forth in your offer letter.

3.             If, as of the date of your “separation from service” from the Company, you are a “specified employee” (within the meaning of Section 409A), then:

a.             Each installment of the severance payments and benefits due under your offer letter that, in accordance with the dates and terms set forth herein, will in all circumstances, regardless of when the separation from service occurs, be paid within the short-term deferral period (as defined in Section 409A) shall be treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A; and

b.             Each installment of the severance payments and benefits due under your offer letter that is not described in paragraph 3(a) above and that would, absent this subsection, be paid within the six-month period following your “separation from service” from the Company shall not be paid until the date that is six months and one day after such separation from service (or, if earlier, your death), with any such installments that are required to be delayed being accumulated during the six-month period and paid in a lump sum on the date that is six months and one day following your separation from service and any subsequent installments, if any, being paid in accordance with the dates and terms set forth herein; provided, however, that the preceding provisions of this sentence shall not apply to any installment of severance payments and benefits if and to the maximum extent that such installment is deemed to be paid under a separation pay plan that does not provide for a deferral of compensation by reason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntary separation from service).  Any installments that qualify for the exception under Treasury Regulation Section 1.409A-

1(b)(9)(iii) must be paid no later than the last day of the second taxable year following the taxable year in which the separation from service occurs.

4.             The determination of whether and when your separation from service from the Company has occurred shall be made in a manner consistent with, and based on the presumptions set forth in, Treasury Regulation Section 1.409A-1(h).  Solely for purposes of this paragraph 4, “Company” shall include all persons with whom the Company would be considered a single employer as determined under Treasury Regulation Section 1.409A-1(h)(3).

5.             All reimbursements and in-kind benefits provided under your offer letter shall be made or provided in accordance with the requirements of Section 409A to the extent that such reimbursements or in-kind benefits are subject to Section 409A, including, where applicable, the requirements that (i) any reimbursement is for expenses incurred during your lifetime (or during a shorter period of time specified in your offer letter), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred and (iv) the right to reimbursement is not subject to set off or liquidation or exchange for any other benefit.

6.             Notwithstanding anything herein to the contrary, the Company shall have no liability to you or to any other person if the payments and benefits provided in your offer letter that are intended to be exempt from or compliant with Section 409A are not so exempt or compliant.

EX-10.22

Exhibit 10.22

The First Marblehead Corporation

September 22, 2008 (as amended)

Seth Gelber

[address]

Dear Seth;

The First Marblehead Corporation (FMC) is pleased to offer you the position of Senior Vice President — Corporate Business Development reporting to Dan Meyers, Chief Executive Officer.

Your direct annual compensation will be $360,000 annualized paid on a semi-monthly basis at a rate of $15,000, (gross) per pay period. You also will be eligible to participate in the Company’s incentive bonus plan. Under this plan your bonus target is 50% of earned salary for the performance year, provided the Company meets its annual performance criteria set forth in the incentive bonus plan and your individual performance meets and exceeds standards. Actual awards have a range of 0% to 100% of earned salary based on performance. First Marblehead aligns the performance review and bonus cycle with the business fiscal year ending June 30. Bonus awards are paid in September. Per the terms of the plan, you must be active on the date the bonus awards are made in order to be eligible for any payment.

You also will participate in the First Marblehead long term incentive program. At the next regularly scheduled meeting of the Compensation Committee of the Board of Directors but no later than 90 days following your start date FMC will award you Restricted Stock Units subject to the terms and conditions of the plan. Each Restricted Stock Unit represents the right to receive one share of common stock of the Company on vesting. Restricted Stock Units vest at one third on the third anniversary of the grant date, one third on the fourth anniversary of the grant date and the final third on the fifth anniversary of the grant date. Instruments of grant and plan documents will be provided to you at the time of your award. Thereafter, you will be eligible for annual awards each August based on performance with a target up to 75% of base salary in the form of Restricted Stock Units. The annual awards have a vesting schedule of 25% on the second, third and fourth anniversary of the grant. Although it is our hope to have a long and mutually advantageous relationship, in the event you are involuntarily terminated by the Company without cause, FMC will provide you with continuation of salary and medical and dental benefits (at then active rates) for the six (6) months immediately following your termination date. For purpose of this agreement cause shall mean (1) the willful failure by the Executive to perform his duties hereunder which has continued for more than 30 days following written notice from the company of such non-performance, (2) any act of dishonesty, intentional fraud or willful misconduct on the part of the Executive in the performance of his duties or (3) the Executives conviction of a felony involving moral turpitude. Please note that this letter does not constitute an employment contract or a contract for a specific term of employment and that the employment relationship is at will. The company acknowledges that per the terms of the First Marblehead Code of Conduct you have disclosed the work you may perform for Sextant and agrees this may continue as long as the time is reasonable, there is no direct conflict of interest that prevents you from performing your Company duties and responsibilities honesty and objectively and you act in the best interests of First Marblehead.

The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199

Phone 800.895.4283

www.firstmarblehead.com

Creating Solutions for Education Finance

As a condition of hire, First Marblehead requires that all officers sign an Invention, Non-Disclosure, Non-Competition and Non-Solicitation Agreement (enclosed). Due to the nature of our business, this offer is contingent on satisfactory results of a background check which a third party agency, HireRight runs on prospective employees. The type of information which is collected by this agency includes that pertaining to an individual’s past employment, education, criminal record and credit history. After completing and returning the enclosed authorization form, you will receive an email with instructions on how you can provide HireRight with the information necessary to begin the process. Also, as required by the Immigration Reform and Control Act of 1976, you will be expected to provide proof of eligibility to work in the United States.

We offer a comprehensive benefits program. You may select health coverage through an HMO or PPO from Blue Cross/Blue Shield, as well as dental coverage through Delta Dental Premier. The company subsidizes the cost of these plans at a rate of 80% for family and 90% for individuals. You are eligible for health and dental coverage on the first of the month following your first day of employment. In addition, First Marblehead provides Group Life Insurance at two times your base salary as well as Short Term and Long Term Disability coverage at no cost to you. You are eligible for this coverage on your first day of employment.

Other benefits include a 401K plan with a dollar-for-dollar match up to 6% of salary contributed and the Company’s employee stock purchase program subject to the eligibility requirements of these plans. We offer accrual of vacation up to twenty days, eight paid holidays, two floating holidays and five sick days per year.

This is an exciting and challenging time for First Marblehead and your addition to our senior management team is most welcome. Please acknowledge this offer by signing one copy of this offer letter, the Invention, Non-Disclosure, Non-Competition and Non-Solicitation Agreement, as well as the Authorization for Employment Background Check and returning them to me. This offer is made today and will expire on September 29, 2008.

We look forward to hearing from you.
Sincerely,
/s/ Robin Camara
Robin Camara
Senior Vice President – Human Resources
	/s/ Seth Gelber	9/22/08
	Seth Gelber	Date
Encls: Copy of this Offer Letter

The First Marblehead Corporation

December 22, 2008

Seth Gelber

c/o The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199

Dear Seth,

This letter will supplement your offer letter dated September 22, 2008 (as amended), by adding thereto the following provision:

If and to the extent any portion of any payment, compensation or other benefit provided to you in connection with your employment termination is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and you are a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by First Marblehead in accordance with its procedures, by which determination you agree to be bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of “separation from service” (as determined under Code Section 409A) (the “New Payment Date”), except as Code Section 409A may then permit. The aggregate of any payments that otherwise would have been paid to you during the period between the date of separation from service and the New Payment Date shall be paid to you in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule. First Marblehead makes no representations or warranty and shall have no liability to you or any other person if any provisions of or payments, compensation or other benefits under this agreement are determined to constitute nonqualified deferred compensation subject to Code Section 409A but do not to satisfy the conditions of that section.

Please acknowledge your acceptance of the foregoing additional provision by signing in the space provided below and returning the signed letter to me no later than December 31, 2008.

Very truly yours,
/s/ Jo-Ann Burnham
Jo-Ann Burnham
Managing Director – Human Resources
	AKNOWLEDGED AND AGREED
	/s/ Seth Gelber
	Seth Gelber

The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199

Phone 800.895.4283

www.firstmarblehead.com

Creating Solutions for Education Finance

EX-10.23

Exhibit 10.23

The FirstMarbleheadCorporation

September 22, 2008

Gary Santo

[address]

Dear Gary;

The First Marblehead Corporation (FMC) is pleased to offer you the position of Senior Vice President — Capital Markets reporting to Dan Meyers, Chief Executive Officer.

Your direct annual compensation will be $360,000 annualized paid on a semi-monthly basis at a rate of $15,000, (gross) per pay period. You also will be eligible to participate in the Company’s incentive bonus plan. Under this plan your bonus target is 50% of earned salary for the performance year, provided the Company meets its annual performance criteria set forth in the incentive bonus plan and your individual performance meets and exceeds standards. Actual awards have a range of 0% to 100% of earned salary based on performance. First Marblehead aligns the performance review and bonus cycle with the business fiscal year ending June 30. Bonus awards are paid in September. Per the terms of the plan, you must be active on the date the bonus awards are made in order to be eligible for any payment.

You also will participate in the First Marblehead long term incentive program. At the next regularly scheduled meeting of the Compensation Committee of the Board of Directors but no later than 90 days following your start date FMC will award you Restricted Stock Units subject to the terms and conditions of the plan. Each Restricted Stock Unit represents the right to receive one share of common stock of the Company on vesting. Restricted Stock Units vest at one third on the third anniversary of the grant date, one third on the fourth anniversary of the grant date and the final third on the fifth anniversary of the grant date. Instruments of grant and plan documents will be provided to you at the time of your award. Thereafter, you will be eligible for annual awards each August based on performance with a target up to 75% of base salary in the form of Restricted Stock Units. The annual awards have a vesting schedule of 25% on the second, third and fourth anniversary of the grant. Although it is our hope that we will have a long and mutually advantageous relationship, in the event you are involuntarily terminated by the Company without cause, FMC will provide you with continuation of salary and medical and dental benefits (at then active rates) for the six (6) months immediately following your termination date. For purposes of this agreement cause shall mean (1) the willful failure by the Executive to perform his duties hereunder which has continued more than 30 days following written notice from the Company of such non-performance. (2) any act of dishonesty, intentional fraud or willful misconduct on the part of the Executive in the performance of his duties or (3) the Executives conviction of a felony involving moral turpitude. Please note that this letter does not constitute an employment contract or a contract for a specific term of employment and that the employment relationship is at will.

The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199

Phone 800.895.4283

www.firstmarblehead.com

Creating Solutions for Education Finance

As a condition of hire, First Marblehead requires that all officers sign an Invention, Non-Disclosure, Non-Competition and Non-Solicitation Agreement (enclosed). Due to the nature of our business, this offer is contingent on satisfactory results of a background check which a third party agency, HireRight, runs on prospective employees. The type of information which is collected by this agency includes that pertaining to an individual’s past employment, education, criminal record and credit history. After completing and returning the enclosed authorization form, you will receive an email with instructions on how you can provide HireRight with the information necessary to begin the process. Also, as required by the Immigration Reform and Control Act of 1976, you will be expected to provide proof of eligibility to work in the United States.

We offer a comprehensive benefits program. You may select health coverage through an HMO or PPO from Blue Cross/Blue Shield, as well as dental coverage through Delta Dental Premier. The company subsidizes the cost of these plans at a rate of 80% for family and 90% for individuals. You are eligible for health and dental coverage on the first of the month following your first day of employment. In addition, First Marblehead provides Group Life Insurance at two times your base salary as well as Short Term and Long Term Disability coverage at no cost to you. You are eligible for this coverage on your first day of employment.

Other benefits include a 401K plan with a dollar-for-dollar match up to 6% of salary contributed and the Company’s employee stock purchase program subject to the eligibility requirements of these plans. We offer accrual of vacation up to twenty days, eight paid holidays, two floating holidays and five sick days per year.

This is an exciting and challenging time for First Marblehead and your addition to our senior management team is most welcome. Please acknowledge this offer by signing one copy of this offer letter, the Invention, Non-Disclosure, Non-Competition and Non-Solicitation Agreement, as well as the Authorization for Employment Background Check and returning them to me. This offer is made today and will expire on September 29, 2008.

We look forward to hearing from you.
Sincerely,
/s/ Robin Camara
Robin Camara
Senior Vice President – Human Resources
	/s/ Gary F. Santo, Jr.	9-22-08
	Gary Santo	Date
Encls: Copy of this Offer Letter

The First Marblehead Corporation

December 22, 2008

Gary Santo

c/o The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199

Dear Gary,

This letter will supplement your offer letter dated September 22, 2008, by adding thereto the following provision:

If and to the extent any portion of any payment, compensation or other benefit provided to you in connection with your employment termination is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and you are a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by First Marblehead in accordance with its procedures, by which determination you agree to be bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of “separation from service” (as determined under Code Section 409A) (the “New Payment Date”), except as Code Section 409A may then permit. The aggregate of any payments that otherwise would have been paid to you during the period between the date of separation from service and the New Payment Date shall be paid to you in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule. First Marblehead makes no representations or warranty and shall have no liability to you or any other person if any provisions of or payments, compensation or other benefits under this agreement are determined to constitute nonqualified deferred compensation subject to Code Section 409A but do not to satisfy the conditions of that section.

Please acknowledge your acceptance of the foregoing additional provision by signing in the space provided below and returning the signed letter to me no later than December 31, 2008.

Very truly yours,
/s/ Jo-Ann Burnham
Jo-Ann Burnham
Managing Director – Human Resources
	AKNOWLEDGED AND AGREED
	/s/ Gary F. Santo, Jr.
	Gary Santo

The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199

Phone 800.895.4283

www.firstmarblehead.com

Creating Solutions for Education Finance

EX-10.24

Exhibit 10.24

July 26, 2010

BY EMAIL

Gregory Woods, Esq.

General Counsel

THE FIRST MARBLEHEAD CORPORATION

800 Boylston Street, 34th Floor

Boston, MA  02199-8157

RE:	Letter Agreement for Resignation of Stein Skaane
	from The First Marblehead Corporation

Dear Mr. Woods:

This letter serves to confirm the terms and conditions pertaining to the resignation of Stein Skaane (hereinafter, “Employee”) from any office, directorship or other position that he holds with The First Marblehead Corporation and its affiliates (hereinafter, collectively, the “Company”), including First Marblehead Data Services, Inc. and The National Collegiate Funding II, LLC.   The Effective Date of his resignation shall be July 22, 2010 (hereinafter, the “Effective Date”).

As an inducement to the execution and delivery of this resignation letter, its exhibits and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and shall be conclusively presumed, the parties hereby accept the terms and conditions stated herein below and incorporate by reference the various exhibits as expressly stated.  It is the intention of each signatory that this resignation letter tendered by the Employee and its acceptance by the Company shall be deemed a contract enforceable pursuant to the laws of the Commonwealth of Massachusetts, that the exhibits be deemed an integral part of this letter agreement, that each signatory possesses the requisite authority to sign the same and its exhibits, and that each of this resignation letter and its exhibits is the product of a negotiation by each party with the advice of independent counsel such that neither party shall be entitled to any presumption or disadvantage as being the author or drafter of the same.

Reference is made to that certain Non-Disparagement Agreement attached hereto and incorporated herein as Exhibit A.  Each of the Employee and the Company will cause originals of the same to be properly executed in duplicate and thereafter delivered to the other party.  Each

party shall be bound and shall otherwise comply with the terms and conditions expressly stated therein.

By no later than the end of the current payroll period, the Employee will be paid by the Company for unused and accrued vacation in the gross amount of $23,661.72 which amounts to a net payment after taxes of $15,669.94.  Effective as of the Effective Date, the Employee shall be considered to have elected to continue receiving group medical and dental insurance pursuant to the federal “COBRA” law, 29 U.S.C. § 1161 et seq.  During the period from the Effective Date through December 31, 2010, the Company shall continue to pay the share of the premium for such coverage that is paid by the Company for active and similarly-situated employees who receive the same type of coverage paid in accordance with the Company’s regular payroll practice for group medical and dental insurance (the “Company Contribution”).  The remaining balance of any premium costs, and all premium costs after December 31, 2010, shall be paid by the Employee on a monthly basis for as long as, and to the extent that, the Employee remains eligible for COBRA continuation (the “Employee Contribution”).  Notwithstanding anything to the contrary herein, the Company’s obligation to pay the Company Contribution is expressly conditioned on the timely payment by the Employee of the Employee Contribution. All other benefits, including life insurance and long-term disability, will cease upon the Effective Date subject to any conversion rights that may otherwise exist under any applicable policy.  The Employee acknowledges and agrees that he is not entitled to, and shall not, receive any severance benefits from the Company, other than payment for his final wages, reimbursement of business expenses and any unused vacation time accrued through the Effective Date, and further acknowledges and agrees that he shall have no claim to any non-vested ownership interest in the Company contractual or otherwise, including, but not limited to, claims to stock, restricted stock units or stock options.

The Employee and Company acknowledge and affirm their respective obligations under, and shall continue to be bound by the terms and conditions of, the Invention, Non-Disclosure, Non-Competition and Non-Solicitation Agreement dated September 12, 2005 (the “Non-Competition Agreement”), including obligations of the Employee to keep confidential and not disclose any and all non-public information concerning the Company that he acquired during the course of his employment with FMC, including any non-public information concerning the Company’s business affairs, prospects and financial condition.  The parties agree and acknowledge that a true and accurate copy of the Non-Competition Agreement is attached hereto as Exhibit B.

The Employee hereby covenants that he will return to the Company all keys, files, records (and copies thereof), equipment (including, but not limited to, computer hardware, software and printers), identification and any other Company-owned property in his possession or control.  He also represents that he has left intact all electronic First Marblehead documents, including but not limited to, those that the Employee developed or helped develop during his employment.  The Employee further confirms that he has cancelled, or has provided all information necessary for the Company to cancel, all accounts for his benefit, if any, in the Company’s name, including but not limited to, credit cards, telephone charge cards, cellular phone and/or pager accounts and computer accounts.  The Company confirms it will pay in a timely manner all outstanding business-related balances incurred by the Employee prior to the Effective Date, and close out any credit cards issued by the Company to the Employee in a

timely manner.  Additionally, the Company will deliver the Employee’s personal property promptly.  The Employee shall reimburse the Company promptly for outstanding charges, if any, incurred by the Employee that are not business-related.

The Company may file this resignation letter, including any exhibits, with any regulatory or self-regulatory entity having jurisdiction over the Company, including but not limited to the U.S. Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Securities and Exchange Commission.

Each party represents to the other that this letter agreement shall be binding upon and shall inure to the benefit of their respective heirs, successors and assigns.

Effective as of July 22, 2010.

THE COMPANY:		EMPLOYEE:
THE FIRST MARBLEHEAD CORPORATION		STEIN SKAANE
By:	/s/ Daniel Meyers	By:	/s/ Stein Skaane
	Daniel Meyers		Stein Skaane
Chairman and Chief Executive Officer
Duly Authorized

NON-DISPARAGEMENT AGREEMENT

THIS NON-DISPARAGEMENT AGREEMENT (“Agreement”) is made as of this 22nd day of July, 2010 (the “Effective Date”), by and between Stein Skaane (the “Employee”) and THE FIRST MARBLEHEAD CORPORATION, a Delaware corporation having a place of business at 800 Boylston Street, 34th Floor, Boston, Massachusetts 02199-8157 (“FMC” and together with its subsidiaries and affiliates, including any securitization trust facilitated by FMC, “First Marblehead”).

WHEREAS, the Employee serves as an employee and executive officer of FMC pursuant to that certain letter agreement dated September 4, 2001; and

WHEREAS, the parties desire to set forth certain terms and conditions relating to the resignation of the Employee’s employment and positions with First Marblehead.

NOW, THEREFORE, in consideration of the exchange of promises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties, intending to be legally bound hereby, agree to the terms and conditions of this Agreement as follows:

1.Employee Non-Disparagement. The Employee shall not make any false, disparaging or derogatory statements to any individual, media outlet, industry group, financial institution or current or former employee, consultant, client or customer of First Marblehead regarding: (a) First Marblehead, (b) any current, former or future director, officer, employee, agent or representative of First Marblehead (each, a “Person”), (c) the business affairs and financial condition of First Marblehead or (d) the circumstances surrounding the resignation of the Employee’s employment and positions with First Marblehead; provided, however, that nothing herein shall prevent the Employee from complying with requirements of law.

2.First Marblehead Non-Disparagement. FMC shall instruct its directors and those of its officers who have knowledge of this Agreement not to make any false, disparaging or derogatory statements to any individual, media outlet, industry group, financial institution or current or former employee, consultant, client or customer of First Marblehead regarding the circumstances surrounding the Employee’s resignation of his employment and positions with First Marblehead; provided, however, that nothing herein shall prevent First Marblehead or any Person from complying with requirements of law.

3.Choice of Law. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Massachusetts without reference to the conflict of law provisions thereof. The parties hereby irrevocably submit to and acknowledge and recognize the jurisdiction of the courts of the Commonwealth of Massachusetts, or if appropriate, a federal court located in the Commonwealth of Massachusetts (which courts, for purposes of this Agreement, are the only courts of competent jurisdiction), over any suit, action or other proceeding arising out of, under or in connection with this Agreement or the subject matter hereof.

4.Counterparts. For the convenience of the parties, this Agreement may be executed by facsimile and in counterparts, each of which shall be deemed to be an original, and both of which, taken together, shall constitute one agreement binding on both parties.

IN WITNESS WHEREOF, the parties hereto have executed this Non-Disparagement Agreement as of the day and year first written above.

THE FIRST MARBLEHEAD CORPORATION
By:	/s/ Daniel Meyers	By:	/s/ Stein Skaane
	Daniel Meyers		Stein Skaane
	Chairman and Chief Executive Officer

 FirstMarblehead

INVENTION, NON-DISCLOSURE, NON COMPETITION AND NON-SOLICITATON AGREEMENT

This Agreement is made between The First Marblehead Corporation, a Delaware corporation (hereinafter referred to collectively with its subsidiaries as the “Company”), and “Stein Skaane” (the “Employee”).

Employee name

In consideration of the employment or the continued employment of the Employee by the Company, the Company and the Employee agree as follows:

1. Proprietary Information

a) The Employee agrees that all information, whether or not in writing, of a confidential nature concerning the Company’s business (collectively, “Proprietary Information”) is and shall be the exclusive property of the Company. The Employee will not disclose any Proprietary Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of his/her duties as an employee of the Company) without written approval by an officer of the Company, either during or after his/her employment with the Company, unless and until such Proprietary Information has become public knowledge without fault by the Employee.

b) The Employee agrees that all materials containing Proprietary Information, whether created by the Employee or others, which shall come into his/her custody or possession, shall be and are the exclusive property of the Company to be used by the Employee only in the performance of his/her duties for the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Employee shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) termination of his/her employment. After such delivery, the Employee shall not retain any such materials or copies thereof or any such tangible property.

c) The Employee agrees that his/her obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b)

above, and his/her obligation to return materials and tangible property, set forth in paragraph (b) above, also extends to such types of information, materials and tangible property of customers of the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Employee.

2. Developments

a) The Employee will make full and prompt disclosure to the Company of all inventions, improvements, discoveries, methods, developments, software, and works of author ship, whether patentable or not, which are created, made, conceived or reduced to practice by him/her or under his/her direction or jointly with others during his/her employment by the Company, whether or not during normal working hours or on the premises of the Company (all of which are collectively referred to in this Agreement as “Developments”).

b) The Employee agrees to assign and does hereby assign to the Company (or any person or entity designated by the Company) all his/her right, title and interest in and to all Developments and all related patents, patent applications, copyrights and copyright applications. However, this paragraph 2(b) shall not apply to Developments which do not relate to the business or research and development conducted or planned to be conducted by the Company at the time such Development is created, made, conceived or reduced to practice and which are made and conceived by the Employee not during normal working hours, not on the Company’s premises and not using the Company’s tools, devices, equipment or Proprietary Information. The Employee understands that, to the extent this Agreement shall be construed in accordance with the laws of any state which precludes a requirement in an employee agreement to assign certain classes of inventions made by an employee, this paragraph 2(b) shall be interpreted not to apply to any invention which a court rules and/or the Company agrees falls within such classes.

c) The Employee agrees to cooperate fully with the Company, both during and after his/her employment with the Company, with respect to the procurement, maintenance and enforcement of copyrights, patents and other intellectual property rights (both in the United States and foreign countries) relating to Developments. The Employee shall sign all papers which the Company may deem necessary or desirable in order to protect its rights and interests in any Development. The Employee further agrees that if the Company is unable, after reasonable effort, to

secure the signature of the Employee on any such papers, any executive officer of the Company shall be entitled to execute any such papers as the agent and the attorney-in-fact of the Employee, and the Employee hereby irrevocably designates and appoints each executive officer of the Company as his/her agent and attorney-in-fact to execute any such papers on his/her behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Development, under the conditions described in this sentence.

3. Other Agreements

The Employee hereby represents that, except as the Employee has disclosed in writing to the Company, the Employee is not bound by the terms of any agreement with any previous employer or other party to refrain from using or disclosing any trade secret or confidential or proprietary information in the course of his/her employment with the Company, to refrain from competing, directly or indirectly, with the business of such previous employer or any other party or to refrain from soliciting employees, customers or suppliers of such previous employer or other party. The Employee further represents that his/her performance of all the terms of this Agreement and the performance of his/her duties as an employee of the Company do not and will not breach any agreement with any prior employer or other party to which the Employee is a party (including without limitation any nondisclosure or non-competition agreement), and that the Employee will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others.

4. Non-Competition and Non-Solicitation

While the Employee is employed by the Company and for a period of one year after the termination or cessation of such employment for any reason, the Employee will not directly or indirectly:

a) Engage in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) that is competitive with the Company’s business, including but not limited to any business or enterprise that develops, manufactures, markets, licenses, sells or provides any product or service that competes with any product or service developed,

manufactured, marketed, licensed, sold or provided, or planned to be developed, manufactured, marketed, licensed, sold or provided, by the Company while the Employee was employed by the Company; or

b) Either alone or in association with others (i) solicit, or permit any organization directly or indirectly controlled by the Employee to solicit, any employee of the Company to leave the employ of the Company, or (ii) solicit for employment, hire or engage as an independent contractor, or permit any organization directly or indirectly controlled by the Employee to solicit for employment, or hire or engage as an independent contractor, any person who was employed by the Company at any time during the term of the Employee’s employment with the Company; provided, that this clause (ii) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminated for a period of six months or longer.

5. No Employment Contract

The Employee understands that this Agreement does not constitute a contract of employment and does not imply that his/her employment will continue for any period of time.

6. Miscellaneous

a) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

b) If the Employee violates the provisions of Section 4, the Employee shall continue to be bound by the restrictions set forth in Section 4 until a period of one year has expired without any violation of such provisions.

c) If any restriction set forth in Section 4 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may he enforceable.

d) This Agreement supersedes all prior agreements, written or oral, between the Employee and the Company relating to the subject matter

of this Agreement. This Agreement may not be modified, changed or discharged in whole or in part, except by an agreement in writing signed by the Employee and the Company. The Employee agrees that any change or changes in his/her duties, salary or compensation after the signing of this Agreement shall not affect the validity or scope of this Agreement.

e) This Agreement will be binding upon the Employee’s heirs, executors and administrators and will inure to the benefit of the Company and its successors and assigns.

f) No delay or omission by the Company in exercising any right under this Agreement will operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion is effective only in that instance and will not be construed as a bar to or waiver of any right on any other occasion.

g) The restrictions contained in this Agreement are necessary for the protection of the business and goodwill of the Company and are considered by the Employee to be reasonable for such purpose. The Employee agrees that any breach of this Agreement is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Employee agrees that the Company, in addition to such other remedies which may be available, shall have the right to specific performance of the provisions of this Agreement and shall have the right to obtain an injunction from a court restraining such a breach or threatened breach, and the Employee hereby waives the adequacy of a remedy at law as a defense to such relief.

h) This Agreement is governed by and will be construed as a sealed instrument under and in accordance with the laws of the

Commonwealth of Massachusetts (without reference to the conflicts of laws provisions thereof). Any action, suit, or other legal proceeding which is commenced to resolve any matter arising under or relating to any provision of this Agreement shall be commenced only in a court of the Commonwealth of Massachusetts (or, if appropriate, a federal court located within Massachusetts), and the Company and the Employee each consents to the jurisdiction of such a court.

THE EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.

THE FIRST MARBLEHEAD CORPORATION

Date:	9/8/05
By:	/s/ Robin Camara
Print Name: Robin Camara
Title: Senior Vice President, Human Resources
EMPLOYEE
Date:	9/12/05
Employee Signature:		/s/ Stein Skaane

EX-10.38

Exhibit 10.38

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission.  Asterisks denote omissions.

PRIVATE STUDENT LOAN MONOGRAM PROGRAM AGREEMENT

BETWEEN

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY

AND

THE FIRST MARBLEHEAD CORPORATION

THIS PRIVATE STUDENT LOAN PROGRAM AGREEMENT (this “Agreement”) is made and dated as of February 5, 2010, by and between the Pennsylvania Higher Education Assistance Agency (d/b/a American Education Services), a public corporation and governmental instrumentality organized under the laws of the Commonwealth of Pennsylvania, 1200 North Seventh Street, Harrisburg, Pennsylvania 17102 (“Servicer”) and The First Marblehead Corporation, having an address at 800 Boylston Street, 34th Floor, Boston, Massachusetts 02199 (“FMC”).

RECITALS

WHEREAS, Servicer was created by the Commonwealth of Pennsylvania by the Act of August 7, 1963, P.L. 549 for the purpose of improving higher educational opportunities and to that end Servicer is empowered to make, guarantee, undertake commitments to make or acquire and participate with lending or postsecondary institutions in the making of loans, servicing of loans, or otherwise providing loans of money to students; and

WHEREAS, Servicer has developed its loan servicing system (the “Loan Servicing System”) for the purpose of servicing Student Loans (as defined herein); and

WHEREAS, Servicer has developed various web-based products (“PHEAA Web-based Products”), which provide on-line automated capabilities to enhance services rendered to student borrowers; and

WHEREAS, Servicer has developed support services (“Support Services”) to enhance the Loan Servicing System and the PHEAA Web-based Products (collectively the “PHEAA System”), to include technical support, help desk, communications support, and information technology staff time; and

WHEREAS, the Servicer has expertise in the business of servicing private student loans and other education loans for lenders; and

WHEREAS, certain financial institutions (the “Lender Participants”) and FMC have created a group of education loan programs (“Programs”), and FMC and the Lender Participants are responsible for structuring and assisting in implementing the Programs; and

WHEREAS, the Lender Participants and FMC desire to utilize the expertise of the Servicer to service such education loans on behalf of the Lender Participants and the Lender Participants desire to have FMC or an affiliate thereof provide Administrator Services (as defined below) in connection with a Private Student Loan Servicing Agreements among Servicer, each Lender Participant, and FMC (the “Lender Participant Servicing Agreements”); and

WHEREAS, Servicer and FMC will work collaboratively on future refinements and enhancements to the servicing procedures for the Programs; and

WHEREAS, Servicer and FMC desire to set forth certain terms and conditions related to FMC’s role in providing Administrator Services;

NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally

bound, Servicer and FMC (hereinafter, the “Parties”) do hereby agree to the following:

SECTION 1.  DEFINITIONS

1.01“Account” means the Student Loans collectively of an individual Borrower owned by an Owner and for which FMC (and its affiliates) serves as Program Administrator, which are serviced pursuant to the Lender Participant Servicing  Agreements.

1.02“Administrator Services” means the services provided by FMC or its affiliates, and includes, but is not limited to post-disbursement portfolio administration, as further described in this Agreement.

1.03“Agreement” means this Private Student Loan Program Agreement, including each Schedule provided for herein and each amendment hereafter adopted.

1.04“Borrower” means an individual who is the maker of a Credit Agreement and who obtains a Student Loan. “Borrower” includes both the primary obligor and any Cosigner.

1.05“Business Days” means a day of the year other than a Saturday or Sunday, or a day on which the Servicer or FMC is required or authorized by law to remain closed, and on which either does remain closed.

1.06“Change of Control” means the sale to any other entity, individual or group of all or substantially all of the entity’s assets used to perform the Services.

1.07“Cosigner” means an individual who is the maker of a Credit Agreement as a cosigner on a Student Loan.

1.08“Credit Agreement” shall mean the promissory note or credit agreement executed by a Borrower evidencing a Student Loan.

1.09“Customer Service Schedule” means the schedule of that name attached hereto and as amended by agreement of the Parties.

1.10“Effective Date” means the date this Agreement has been executed by all Parties and is approved as to form and legality by the Office of Attorney General of the Commonwealth of Pennsylvania.

1.11“Fee Schedule” means the schedule of that name attached hereto and as amended by agreement of the Parties.

1.12“FMC” means The First Marblehead Corporation in its capacities as “FMC” and “Program Administrator” (as defined herein).

1.13“FMC Administrator Loans” shall have the meaning assigned to it in Section 2.02.

1.14“FMER” means First Marblehead Education Resources, Inc., an affiliate of FMC.

1.15“Lender Participant” means a financial institution which is a lender in one or more of the Programs.

1.16“Milestone” shall have the meaning given to it in Section 4.02(d).

1.17“Private Student Loan” or “PSL” means an education loan funded by a Lender Participant to finance the costs of higher education (or private K-12 education) that is not guaranteed by the United States Department of Education nor by any state or agency of any state.

1.18“Program Administrator” means FMC (and its affiliate FMER) in its performance of Administrator Services as set forth in this Agreement.

1.19“Remedial Action Plan” has the meaning given to it in Section 4.03(d).

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1.20“Service”, “Services”, “Serviced”, “Servicing” shall mean to perform, the terms and conditions of the Credit Agreements, the Servicing Guidelines, and the terms and conditions of this Agreement: duties, obligations, and procedures that are required of Servicer hereunder and under the Lender Participant Servicing Agreements in connection with Student Loans.

1.21“Servicing Guidelines” means, as applicable, the Servicing Guidelines for one or more Private Student Loan programs that have been issued by a Lender Participant and approved by FMC and Servicer attached to and made part of each Lender Participant Servicing Agreement, all as may amended by the Parties pursuant to the terms thereof.

1.22“Service Level Schedule” means the Service Level Schedule attached hereto, as amended by agreement of the parties.

1.23“Statement of Work” means the document that includes, without limitation, the requirements for FMC-requested changes to the Loan Origination System or procedures, as well as the identified persons working on the project, time estimates for completion, the costs for the project and any recurring fees thereafter.

1.24“Student Loan” means any of, and “Student Loans” means all, the Private Student Loans executed by a Borrower, funded by a Lender Participant, administered by Program Administrator, and Serviced by the Servicer pursuant to a Lender Participant Servicing Agreement.

1.25“System Access Schedule” means the schedule of that name attached hereto and as amended by agreement of the Parties.

SECTION 2.  SCOPE OF AGREEMENT

2.01Services.  The Servicer agrees, in consideration of certain fees, to perform the Services set forth in this Agreement, including each Schedule (including without limitation the Service Level Schedule and the Customer Service Schedule) attached hereto, and any additional Services which FMC or Lender Participant requests and the Servicer agrees to provide with respect to the Servicing of Student Loans in accordance with the Servicing Guidelines, for which account information and/or documentation shall be delivered to the Servicer.

2.02Role of FMC as Program Administrator.

Servicer acknowledges that FMC (including its affiliates), may enter Lender Participant Servicing Agreements from time to time with Servicer and Lender Participants to act as Program Administrator with respect to Private Student Loans.

Servicer hereby authorizes FMC to offer Servicer’s post-disbursement servicing and FMC’s administration services to prospective Lender Participants. Upon the execution and effectiveness of a Lender Participant Servicing Agreement, Servicer shall (a) perform all services set forth in such Lender Participant Servicing Agreement for the Private Student Loans owned by the Lender Participant (the “FMC Administrator Loans”), and (b) where appropriate, communicate with Program Administrator on behalf of the Lender Participant for the Student Loans so owned and identified. Without limiting the foregoing, Servicer shall provide the Services (as set forth in this Agreement and/or required by the Servicing Guidelines) to Lender Participant and Program Administrator, including but not limited to:

i.product set-up and conversion;

ii.loan document custodial services;

iii.remote system access;

iv.reports, records, and other documents and data;

v.customer service;

vi.borrower billing and correspondence;

vii.collection of borrower payments;

viii.privacy policy distribution;

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ix.due diligence and default prevention (except as set forth in Section 4.21);

x.governmental reporting and reporting to consumer reporting agencies; and

xi.copies of required notices, including but not limited to notices of failed standards, security breaches, and OFAC violations.

SECTION 3.  TERM OF AGREEMENT

This Agreement shall commence on the Effective Date and shall continue for a period of three (3) years, and thereafter for so long as any Lender Participant Servicing Agreement shall remain in effect, unless this Agreement is terminated by either party pursuant to Section 14. With respect to product setup and conversion services, this Agreement shall continue for a period of three (3) years from the date first set forth above, unless earlier terminated by either Party pursuant to the provisions of this Agreement, and shall automatically renew for an additional one (1) year period, unless terminated by any Party by written notice of non-renewal to the other given at least one hundred and eighty (180) days prior to the end of the then current term.  The fees charged for the Services shall be subjected to annual adjustment under the terms and conditions of Section 5.05.

SECTION 4.  SERVICING DUTIES

4.01Servicing Duties.  Servicer shall provide and perform the Services in full compliance with: the terms of this Agreement and the Servicing Guidelines.  The Lender Participant shall be responsible for the legal compliance of the content of the Program Guidelines, Credit Agreements, privacy policies and disclosures and notices required by state law.

4.02Product Setup and Conversion.Servicer agrees to perform product set-up and conversion Services with respect to any FMC Administrator Loans which shall include, without limitation, the following:

(a)Credit Agreement Forms.  Servicer shall promptly review Credit Agreement forms that are proposed by Lender Participant (or Program Administrator on behalf of Lender Participant) and, after mutual resolution of any comments thereon that affect the Servicing of such forms, accept such forms for purposes of product set-up and conversion.

(b)Servicing System Adaptation.  Servicer shall promptly review education loan product terms and pricing matrices proposed by Lender Participant (or Program Administrator on behalf of Lender Participant) for the launch of new products and shall establish appropriate Servicing matrices and programs to support such product terms and pricing as of a mutually agreed product launch date. The parties shall publish a mutually agreeable program launch date for each program. For new loan programs, where changes do not require system changes other than table set-up, Servicer shall make every effort to meet live program dates requested by FMC, which date shall be no less than thirty (30) days, but not more than sixty (60) days from the date Servicer accepts (such acceptance not to be unreasonably withheld) the product and pricing matrix (or similar document containing the same information) for such program; provided, however, that the Servicer agrees to use commercially reasonable efforts to complete the set-up process in a shorter time frame on a case-by-case basis in order to accommodate the business needs of Lender Participant. For existing loan programs, where changes do not require system changes other than table set-up, Servicer shall make every effort to meet live program dates requested by FMC, which date shall be no less than fourteen (14) days, but not more than thirty (30) days from the date Servicer accepts (such acceptance not to be unreasonably withheld) the product and pricing matrix (or similar document containing the same information) for modifications to such program. Lender Participant (and Program Administrator on its behalf) shall have the right to audit Servicer’s Servicing matrices and program setup as set forth in Section 4.02(d) below.

(c)Conversion.  Servicer agrees to accurately convert all FMC Administrator Loan origination data provided by Program Administrator, which is necessary for servicing hereunder onto the PHEAA System. Servicer shall also, in a timely manner, return to the Servicer Relations Group at Program Administrator all loan files sent to the Servicer in error. Upon the identification of files which were sent in error, Servicer shall have no responsibility for such files other than the return of such files to Program Administrator or

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Lender Participant.

(d)Periodic Audit. Servicer agrees that, no more than twice per calendar year, and no less than thirty (30) days after receipt of written notice, it shall cooperate with audits by Lender Participant or Program Administrator of the product set-up and conversion Services and communication and other protocols necessary for the efficient and accurate performance thereof. If any audit reveals any failure to adequately perform any such matter, Servicer shall within thirty (30) days of its receipt of the results of such audit, publish a remedial action plan that includes a schedule of tasks and objectives to be completed (each such task or objective, a “Milestone”) and provides for reports to Program Administrator or Lender Participant with respect to each Milestone (“Remedial Action Plan”). Upon completion of the Remedial Action Plan, Program Administrator or Lender Participant may, at a time mutually agreeable to the Parties, perform an additional audit to validate successful completion of the Remedial Action Plan.

4.03System Changes.  The Servicer has the right to change any part or all of its equipment, the PHEAA System, computer programs, and its procedures relating to the manner of or the methodology used in servicing the Student Loans, subject to the following:

(a)In no event shall such change abrogate or in any way modify the obligations of the Servicer to Service the Student Loans in full compliance with all applicable federal and state laws and regulations, the terms and conditions of the Credit Agreements, the Servicing Guidelines, or the terms of this Agreement.

(b)The Parties agree that they shall make reasonable efforts to provide information about the nature and effect of changes that the Parties reasonably believe may affect the operations or processes of the other(s) and shall determine the extent to which the other Parties need to be involved in the testing of changes to its own system.  The parties shall discuss proposed implementation dates for system changes and shall make best efforts to avoid implementation dates that will have a material adverse impact on the operations of the other party.

(c)Collaborative Efforts for Refinements and Enhancements and Statements of Work

(i)Servicer and FMC will meet, not less than quarterly, for the purpose of discussing future enhancements to the functions performed by Servicer consistent with the Program Guidelines.

(ii)For any enhancement, modification, or change to the PHEAA System or to the procedures necessary for the Servicer to fulfill their obligations under this Agreement, a Statement of Work will be negotiated and executed to outline the requirements, expectations and fees.

4.04System Access.   Servicer shall, upon the agreement of each Lender Participant, provide FMC as Program Administrator and FMER as agent for Program Administrator with web-based access to Student Loan files, or portions thereof, in accordance with the terms of the System Access Schedule, which shall set forth, without limitation, the type of access and/or online services that must be available to each type of user and the minimum user access security requirements that must be implemented on Servicer’s PHEAA System.  Servicer shall at all times maintain the security of user access to the PHEAA System in conformity with the security provisions of the System Access Schedule, which shall include, without limitation, Servicer’s review of the individual user access rights of Servicer employees and other users no less frequently than every six months.

4.05System Parameters.  The Servicer is responsible for designing, implementing and maintaining the PHEAA System in order to remain in compliance with the requirements of this Agreement.

4.06Training.Servicer will assume responsibility, at its expense, for training of its staff to meet the requirements of this Agreement, including all Schedules hereto.

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SECTION 5.  CHARGES AND PAYMENTS

5.01Fees.The Servicer shall provide all aspects of the Services at its sole cost and expense, except as otherwise provided in this Agreement, and shall be compensated for the Servicing of Student Loans as set forth this Agreement, including without limitation the Fee Schedule.

5.02Rate Changes Other than Annual Adjustments.  To the extent that an increase occurs in the costs incurred by the Servicer in providing the Services hereunder due to: (a) changes in the Servicing Guidelines, this Agreement, or any Lender Participant Servicing Agreement, (b) legislative and regulatory changes beyond the control of the Servicer which pertain to the manner of Servicing of the Student Loans in accordance with this Agreement or any Lender Participant Servicing Agreement, (c) changes in United States Postal Service postage rates, or (d) material changes requested by a Lender Participant or Program Administrator in the Services provided herein, the Servicer shall have the right to make a compensating increase to the Servicing fees set forth herein and in the Fee Schedule.

Such increase shall be limited to Servicer’s actual incremental cost increase resulting from such changes.  Servicer shall give Program Administrator and affected Lender Participants sixty (60) days prior written notice before implementing any such increase in Servicing fees pursuant to this Section. Such notice shall set forth the basis of, as well as the computation used in determining, any increase.

5.03Invoices.  Servicer agrees that invoices for its Services shall be rendered to FMC, based on the Services provided pursuant to each of the Lender Participant Servicing Agreements.  All invoices shall be sent to FMC as Program Administrator. FMC shall, as Program Administrator, forward to each Lender Participant an invoice for the Services of the Servicer and its services as the Program Administrator, and shall provide a copy of such invoice to Servicer. Under the terms of the Lender Participant Servicing Agreement, the Lender Participant shall remit payment to Servicer for the Services and the services of the Program Administrator. Servicer shall hold in trust for Program Administrator and, within ten (10) Business Days after receipt from Lender Participant, forward to Program Administrator the balance of the fees which were remitted by Lender Participant to Servicer which are in excess of the invoiced amounts for each Lender Participant. Any disputes that arise related to the payments remitted by the Lender Participants and/or the invoices rendered by FMC to each Lender Participant, in addition to reconciliation of payments and invoices, shall be resolved by FMC. In the event that the Servicer’s fees in the monthly invoice exceed the monthly fees to be paid to the Servicer in the Lender Participant Servicing Agreement (“Excess Monthly Charges”), FMC shall pay the Excess Monthly Charges to the Servicer on or before the invoice payment date, and FMC shall be responsible for recoupment of the payment of Excess Monthly Charges from the Lender Participant.

5.04Adjustments to Programs. Servicer and Program Administrator, on behalf of the Lender Participants, shall discuss future enhancements to the Services, the PHEAA System, and the Servicing Guidelines as identified in Section 4.03(c).

5.05Annual Adjustment of Fees.  On or before the end of the ninth month after the Effective Date of this Agreement, and annually thereafter, Servicer may propose new fees to be effective upon the anniversary of the Effective Date.  Servicer shall provide documentation to FMC to justify any increase in fees.  The increased fee can be based on additional costs documented by Servicer to service the loans and/or equal to the percentage increase in the U. S. Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers, U. S. City Average (CPI/W) for the most recent twelve (12) month period available at the time of each proposed adjustment.  Such increase shall be effective upon the anniversary of the Effective Date.  Consent to increases to fees based on the documented costs of the Servicer will not be unreasonably withheld.  Any annual adjustment of fees shall be agreed upon mutually by both parties.

5.06Audit Follow-Up. In the event that any financial audit conducted pursuant to any Lender Participant Servicing Agreement reveals that any charges or expenses have been overbilled or underbilled, then adjustments in fees and invoices shall be made as necessary on a prospective basis in future months to correct errors or maintain compliance with the Fee Schedule, this Agreement, or the Lender Participant Servicing Agreement, or Servicer or FMC shall render a payment to the other party as necessary to correct the discrepancy.

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SECTION 6.  LIABILITY

Servicer agrees to pay FMC for any claim, loss, liability or expense, including reasonable attorney’s fees (collectively referred to herein as “Loss”), which arises out of or relates to the Servicer’s acts or omissions with respect to the Services provided to Program Administrator under this Agreement, where the final determination of liability on the part of the Servicer to Program Administrator is established by the Commonwealth’s Board of Claims, a court of law with competent jurisdiction over the Servicer or by way of settlement agreed to by the Servicer. Further, nothing herein shall be read or construed as a waiver of the sovereign immunity of the Commonwealth of Pennsylvania, except to the extent authorized by the laws of said Commonwealth.

The Commonwealth of Pennsylvania has created the Board of Claims, pursuant to the provisions of the act of May 20, 1937, P.L. 728, as amended by the act of October 5, 1978, Act No. 260, 72 P.S. 4651-1 et seq., for the adjustment of claims arising from contracts entered into by the Commonwealth or an agency of the Commonwealth. Subject to the statutory jurisdictional requirements, any and all claims against Servicer respecting any matter pertaining to this Agreement or any part thereof may be instituted in the Board of Claims.

Program Administrator agrees to pay Servicer for any Loss arising out of or relating to Program Administrator’s acts or omissions with respect to the Student Loans covered by this Agreement, where the final determination of liability on the part of Program Administrator is established by a court of law or by way of settlement agreed to by Program Administrator.

This provision shall not be construed to limit the Servicer’s or Program Administrator’s rights, obligations, liabilities, claims or defenses which arise as a matter of law or pursuant to any other provision of this Agreement.

SECTION 7. ASSIGNMENT

This Agreement and all the rights and obligations of any Party hereunder may not, without the prior written consent of the other Parties, which consent shall not be unreasonably withheld, be assigned or subcontracted by any Party.  Any successor must acquire substantially all of the assets or business of a Party, and have the ability to perform the duties and obligations under the terms and conditions hereof.

SECTION 8.TERMINATION

8.01Termination by Owner/FMC.  This Agreement may be terminated at the option of Program Administrator upon the occurrence of any of the following:

(a)The Servicer’s failure to perform or observe any of the provisions or covenants of this Agreement and its referenced schedules, in any material respect;

(b)If the Servicer shall (i) discontinue business, or (ii) generally not pay its debts as such debts become due, or (iii) make a general assignment for the benefit of creditors, or (iv) admit by answer, default or otherwise the material allegations of petitions filed against it in any bankruptcy, reorganization, insolvency or other proceedings (whether federal or state), relating to relief of debtors, or (v) suffer or permit to continue unstayed and in effect for thirty (30) consecutive days, any judgment, decree or order, entered by a court of competent jurisdiction, which approves a petition seeking its reorganization or appoints a receiver, custodian, trustee, interim trustee or liquidator for itself or all or a substantial part of its assets, or (vi) take or omit any action in order thereby to effect any of the foregoing;

(c)If Servicer is the subject of a Change of Control, Program Administrator shall have the right to terminate this Agreement upon a minimum of thirty (30) Business Days prior written notice. Such right of termination may be exercised any time beginning upon the earlier of consummation of the Change of Control transaction or public announcement that such a transaction is pending.

In the event of an event of default as set forth in Section 8.01(a) above, the Servicer shall have the right to cure any such breach or error to Program Administrator’s full satisfaction within thirty (30) days of written notice from Program Administrator.

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8.02Termination by the Servicer. This Agreement may be terminated at the option of the Servicer upon the occurrence of any of the following:

(a)Program Administrator’s failure to perform or observe any of the provisions or covenants of this Agreement and its referenced schedules, in any material respect; or

(b)If Program Administrator shall (a) discontinue business, or (b) generally not pay its debts as such debts become due, or (c) make a general assignment for the benefit of creditors, or (d) admit by answer, default or otherwise the material allegations of petitions filed against it in any bankruptcy, reorganization, insolvency or other proceeding (whether federal or state) relating to relief of debtors, or (e) suffer or permit to continue unstayed and in effect for thirty (30) consecutive days, any judgment, decree or order, entered by a court of competent jurisdiction, which approves a petition seeking its reorganization or appoints a receiver, custodian, trustee, interim trustee or liquidator for itself or all or a substantial part of its assets, or (f) take or omit any action in order thereby to effect any of the foregoing.

In the event of an event of default as set forth in Section 8.02(a), Program Administrator shall have the right to cure any such breach or error to Servicer’s full satisfaction within thirty (30) days of written notice from Servicer.

8.03Effect of Termination.  With respect to FMC Administrator Loans, without the taking of any action by Servicer or Lender Participants, this Agreement confers the rights and remedies of FMC as Program Administrator upon each Lender Participant in the event that the loan program agreement between FMC and the Lender Participant governing FMC’s role as Program Administrator is terminated.

SECTION 9.  MISCELLANEOUS PROVISIONS

9.01Notices.  All notices, approvals, consents, requests or other written communications regarding this Agreement are to be addressed as noted below.

If to FMC:	General Counsel
	The First Marblehead Corporation
	The Prudential Tower
	800 Boylston Street, 34th Floor
	Boston, Massachusetts 02199-8157
If to Servicer:	General Counsel
	Pennsylvania Higher Education Assistance Agency
	1200 North Seventh Street
	Harrisburg, Pennsylvania 17102

9.02Relationship.  The Parties to this Agreement intend that the Servicer shall render the Services contemplated by this Agreement as an independent contractor.  The Servicer and its employees, agents, and servants are not to be considered agents or employees of FMC, for any purpose whatsoever.

9.03Non-Exclusive Agreement.  Nothing contained herein shall be construed to create an exclusive arrangement as to Servicer or FMC. The parties understand and agree that they each may enter into other agreements in connection with the servicing of Private Student Loans in the future.

9.04Survival.  The obligations and duties of each Party under Section 6 (Liability) shall survive the termination or expiration of this Agreement.

9.05Entire Understanding.  This Agreement, including without limitation all Schedules attached hereto, along with the Lender Participant Servicing Agreements, represent the entire understanding of the parties with respect to the subject matter hereof, and supersede all previous discussions and correspondence with respect thereto, and no representations, warranties or agreements, express or implied, of any kind with respect to such subject matter have been made by any Party to the other, except as expressly set forth herein or in such other agreements.

9.06Interpretation of Documents.  In the event of a conflict between this Private Student Loan Program Agreement and a Schedule attached hereto, this Agreement shall control.

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9.07Cooperation.  FMC and the Servicer agree that they will cooperate fully with one another in order to carry out the terms and provisions of the Agreement during the term of this Agreement.  Cooperation under this Section shall include, but not be limited to, each Party using reasonable means to ensure successful, normal, daily processing of Student Loans and related operations and functions.  Each Party agrees to support the reasonable routine efforts of the other Party and to work to resolve any disputes which may arise during such periods referenced above, and to continue to work together in a professional, business-like manner during all phases, functions and processes defined in this Agreement.

9.08Authorization. Each of the undersigned represents that he or she has the authority to execute this Agreement on behalf of the respective Party.

9.09Amendments; Changes; Modifications.  This Agreement (a) may be amended, supplemented, or modified only by written instrument duly executed by the Parties; (b) such written instrument shall be incorporated into this Agreement; and (c) shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

9.10No Waiver.Any failure by FMC or the Servicer to insist upon the strict performance by the other of any of the terms and provisions of this Agreement shall not be deemed to be a continuing waiver of any such terms and provisions, and notwithstanding any such failure, such Party shall have the right thereafter to insist upon the resumption of strict performance by the other of any and all of the terms and provisions hereof.  The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law.

9.11Law Governing.  This Agreement is being delivered in and shall be construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to any principles of conflict of laws.

9.12Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one of and the same document.

9.13Unenforceability.  If any provision of this Agreement shall be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect or impair the validity or enforceability of the remaining provisions of this Agreement, which shall remain in full force and effect, and the Parties hereto shall continue to be bound thereby.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the month, day and the year first-above written.

PENNSYLVANIA HIGHER EDUCATION	THE FIRST MARBLEHEAD
ASSISTANCE AGENCY	CORPORATION
/s/ James L. Preston	/s/ Stein Skaane
Name: James L. Preston	Name: Stein Skaane
Title: President and CEO	Title: Managing Director
Approved as to form and legality	Approved as to form and legality

9

/s/ Jason Swartley	/s/ Robert A. Mulle
PHEAA General Counsel	Deputy Attorney General

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INDEX TO SCHEDULES

Fee Schedule

System Access Schedule

Customer Service Schedule

Service Level Schedule

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FEE SCHEDULE FOR

PRIVATE STUDENT LOAN MONOGRAM PROGRAM AGREEMENT

DATED FEBRUARY 5, 2009

BETWEEN

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY,

AND

THE FIRST MARBLEHEAD CORPORATION (“AGREEMENT”)

The fee for the Services provided by Servicer, together with services provided by FMC as Program Administrator, shall be payable to Servicer by the Lender Participants as set forth in this Fee Schedule and Section 5 of the Agreement.

I.DEFINITIONS:

Capitalized terms used in this Fee Schedule have the meanings assigned to them in the Agreement. In addition to the words and terms elsewhere defined in this Agreement, the following terms shall have the following meanings unless the Agreement indicates a contrary meaning or intent:

A.An “Account” is to refer to the Credit Agreements collectively of an individual Borrower of a particular Student Loan type in the same status.

B.An “Interim Account” is to refer to Credit Agreements collectively of an individual Borrower that constitute (1) an In-School (Enrolled) Account, or (2) a Grace Account.

C.A “Repayment Account” is to refer to the Credit Agreements of an individual Borrower under the terms of which the repayment period has commenced, but which is not an In-School (Enrolled) Account.

D.An “In-School (Enrolled) Account” is to refer to the Credit Agreements collectively of an individual Borrower with respect to which principal and interest payments are deferred because the Borrower is enrolled at an eligible institution, whether before of after the repayment period begins.

E.A “Grace Account” is to refer to the Credit Agreements collectively of an individual Borrower (1) with respect to which the Borrower has ceased to be enrolled at an eligible institution, and (2) under the terms of which the repayment period has not yet commenced.

F.“Standard Conversion” means the conversion of a Borrower’s Account from data provided in hard-copy format or by electronic means.

G.“On-System Conversion” means the conversion of a Borrower’s account that the Servicer is currently Servicing for an owner or holder other than the proposed new owner or holder.

II.SERVICING FEES:

1.Monthly Servicing Fees—Interim Account Status:

The Servicing fee for Student Loans in Interim Account status shall be payable by the Owner on a pro-rated monthly basis and shall be equal to [**] basis points per annum based upon the ending principal balance of the Student Loans at month end.

([**] x ending principal balance at month end divided by [**])

2.Monthly Servicing Fees—Repayment Account Status (other than Student Loans in Owner-caused Cure status):

(a) Ending Principal Balance < $[**]. If the ending principal balance of the Student Loans (including Student

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Loans in Interim Account status and Repayment Account status) at month end is less than [**] ($[**]), then the Servicing fee for loans in Repayment Account status shall be payable by the Owner on a pro-rated monthly basis and shall be equal to [**] basis points per annum based upon the ending principal balance of the Student Loans at each month end.

([**] x ending principal balance at month end divided by [**])

(b) Ending Principal Balance > or Equal to $[**] and < or Equal to $[**]. If the ending principal balance of the Student Loans (including Student Loans in Interim Account status and Repayment Account status) at month end is [**] dollars ($[**]) or more, but less than or equal to [**] dollars ($[**]), then the Servicing fee for loans in Repayment Account status shall be payable by the Owner on a pro-rated monthly basis and shall be equal to [**] basis points per annum based upon the ending principal balance of the Student Loans at each month end.

([**] x ending principal balance at month end divided by [**])

(c) Ending Principal Balance > $[**]. If the ending principal balance of the Student Loans (including Student Loans in Interim Account status and Repayment Account status) at month end is greater than [**] dollars ($[**]), then the Servicing fee for loans in Repayment Account status shall be payable by the Owner on a pro-rated monthly basis and shall be equal to (i) for the first $[**] of the ending principal balance of the Student Loans, [**] basis points per annum based upon the ending principal balance of the Student Loans at each month end; and (ii) for the ending principal balance of the Student Loans in excess of $[**], [**] basis points per annum based upon the ending principal balance of the Student Loans at each month end.

For the first $[**]:

[**] x ending principal balance at month end divided by [**])

For amounts in excess of $[**]

([**] x ending principal balance at month end divided by [**])

(d) Loans in Repayment over 120 Months. Notwithstanding subsections (a), (b), and (c) above, the Servicing fee for loans in Repayment Account status shall be [**] basis points for all Student Loans that have been Serviced by Servicer for over 120 months that are not thirty (30) or more days delinquent.

(e) Delinquent Accounts. Notwithstanding subsections (a), (b), (c), and (d) above, the Servicing fee for loans in Repayment Account status shall be [**] basis points for all Student Loans thirty (30) days or more delinquent until the Student Loan is outsourced for collections, and for Student Loans outsourced for collections as of the end of the month, the Servicing fee for loans in Repayment Account status shall be [**] basis points.

([**] x ending principal balance of Student Loans 30 or more days delinquent divided by [**])

([**] x ending principal balance of Student Loans outsourced for collections divided by [**])

III.CONVERSION FEES

1.Interim Account—External

a.	Initial Exam:	$[**] per loan
b.	Serial Exam:	$[**] per loan
c.	Abbreviated Note Exam:	$[**]per loan

2.Interim Account—On System

a.	Full Note Exam:	$[**] per loan
b.	Waived Exam:	[**]

3.Repayment Account: Quote

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4.Reconversion Fee: $[**] per loan

5.Rehabilitation Reconversion Fee $[**] per loan

IV.DUE DILIGENCE/PRE-CLAIMS/CLAIMS PROCESSING

1.Skip Trace

a.	Placement:	[**]
b.	Locate:	$[**] per loan

2.Late Fees:[**]% of all collected late fee revenue on delinquent accounts

3.Third Party Referral (referral to third party under contract with the Servicer for core/collection after successful location):$[**] per Borrower per bond issue

4.Claim Processing:The Owner shall pay a claim processing fee of $[**] for each defaulted Student Loan per claim package filed. Claim processing shall include, without limitation, presentation to Insurer of all documentation required under the Servicing Guidelines, in the form required thereunder.  Servicer will provide DDB Certification and Closed School Certification at no charge.

V.CURE SERVICING—Owner-Caused Cures

1.Monthly fee	$[**] per account
2.Skip Tracing—Locate	$[**] per account
3.Third Party Referral	$[**] per account
4.Guaranty Reinstated/Default Claim Paid	$[**] per account
5.Correction of Owner Error	$[**] per error

VI.MISCELLANEOUS FEES

1.Deconversion to Owner	$[**] per loan
2.Return of Records to Owner	$[**] per loan
3.Early Termination	$[**] per Account
4.Ad Hoc Projects/Reporting (fees to be pre-identified by the Servicer and billed as identified)

a.	Computer Programmer	$[**]/hour
b.	Computer Analyst	$[**]/hour
c.	CPU Run Time	$[**]/hour
d.	Staff Services	$[**]/hour
e.	Legal Services	$[**]/hour
f.	GLB extract files	[**] for no charge
		$[**] for each in excess of [**]

5.Securitization (Financing, Bond Issue)

a.	Set-up Fee	$[**] per financing (includes [**] hours of legal services per financing)
b.	Financing Legal Services	$[**]/hour (in excess of [**] hours per financing)
c.	Post Closing, Loan Transfer within a financing	$[**] per Borrower per transfer

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6.Mailings

	a.	GLB privacy notices	$[**] per notice
	b.	IRS Forms 1098/1099	$[**] per notice
	c.	Other mailings or notices/ Special delivery notices	Quote
7.Basic Monthly Reporting			[**]
8.SAS 70 Audit			[**]
9.Lender’s Audit Guide			[**]
10.Borrower Incentive Programs			Quote

VII.ANNUAL ADJUSTMENT OF FEES

On or before the end of the ninth month after the Effective Date of this Agreement, and annually thereafter, Servicer may propose new fees to be effective upon the anniversary of the Effective Date.  Servicer shall provide documentation to FMC to justify any increase in fees.  The increased fee can be based on additional costs documented by Servicer to service the loans and/or equal to the percentage increase in the U. S. Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers, U. S. City Average (CPI/W) for the most recent twelve (12) month period available at the time of each proposed adjustment.  Such increase shall be effective upon the anniversary of the Effective Date.  Consent to increases to fees based on the documented costs of the Servicer will not be unreasonably withheld.  Any annual adjustment of fees shall be agreed upon mutually by both parties.

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PRIVATE STUDENT LOAN MONOGRAM PROGRAM AGREEMENT

BETWEEN

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY

AND

THE FIRST MARBLEHEAD CORPORATION

SYSTEM ACCESS SCHEDULE

All system access shall be limited to view only option.

1. Lender Participant and Program Administrator.

Servicer shall provide Program Administrator, upon approval by the Lender Participants, with web-based, view-only Account access, which shall include the ability to view loan servicing screens including but not limited to Borrower information,  Account history and due diligence records.

Individual users shall obtain remote access within five (5) Business Days of receipt of notice and additional necessary information from Program Administrator, as applicable that such individual requires remote access.

2. FMC/FMDS/FMER/FMLOS USER ACCESS SECURITY REQUIREMENTS

The Servicer Relations group of Program Administrator will be responsible for notifying the Servicer to add and delete Program Administrator and FMER employees who need, or no longer need, access as appropriate.  On a quarterly basis, Servicer will provide Program Administrator with a report of Program Administrator and FMER employees who have system access to Borrower information.  Program Administrator shall be responsible for the accuracy of such reports and shall be liable for the inaccuracy thereof in accordance with Section 6 (Liability) of this Agreement.

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PRIVATE STUDENT LOAN MONOGRAM PROGRAM AGREEMENT

BETWEEN

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE-AGENCY

AND

THE FIRST MARBLEHEAD CORPORATION

CUSTOMER SERVICE SCHEDULE

1. Call Monitoring.

Servicer shall monitor on a monthly basis a minimum of [**]% of the calls received per customer service representative for quality.

2. Customer Service Hours of Operation

The Servicer shall maintain minimum customer service hours of operation Monday through Friday.  The Servicer and the Program Administrator shall agree on these minimum hours of operation.  Program Administrator, at the direction of a Lender Participant, reserves the right to request an increase and/or decrease in these hours upon written notice to Servicer, and Servicer agrees to accommodate such requests to the extent feasible under the circumstances.

3. Collections Hours of Operation

Servicer shall maintain minimum hours of operations for collection activities.  The Servicer and the Program Administrator shall agree on these minimum hours of operation.  Program Administrator, at the direction of a Lender Participant, reserves the right to request an increase and/or decrease in these hours upon written notice to Servicer, and Servicer agrees to accommodate such requests to the extent feasible under the circumstances.

4. Borrower Satisfaction Surveys

The Servicer shall work with Program Administrator to develop telephonic borrower satisfaction surveys to measure the customer experience through various channels including mail, internet, and Voice Response Unit.  If surveys demonstrate customer service issues that require remedial action, Servicer shall collaborate with Program Administrator to resolve such issues.

5. Borrower Correspondence/Complaints

All correspondence received by Servicer relating to individual Borrower Accounts shall be maintained by the Servicer and shall be made available to Program Administrator during Servicer’s normal business hours.  Servicer shall be responsible for handling all customer service complaints.  Copies of escalated customer complaints from Borrowers and Servicer’s response thereto are to be forwarded to Program Administrator on a weekly basis.  Complaints with respect to Student Loans and/or Borrowers received from any regulatory body or federal or state agency shall be handled as exceptions and, if allowed, Service shall contact Program Administrator immediately.

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PRIVATE STUDENT LOAN MONOGRAM PROGRAM AGREEMENT

BETWEEN

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE-AGENCY

AND

THE FIRST MARBLEHEAD CORPORATION

SERVICE LEVEL AGREEMENTS

Servicer agrees to adhere to the Service Level Agreement (SLA) outlined below.

The Servicer will provide Program Administrator with monthly reports setting forth Servicer’s performance relative to the below SLA for the month covered by the report, the month prior to the month covered by the report, and the Servicer’s year-to-date average performance level through the month covered by the report. These reports will be made available to Program Administrator no later than fifteen (15) Business Days following the last day of the month covered by the report.

I.Customer Service Standards:

Telephone and Internet Chat Standards:

·Average Speed of Answer: [**] seconds or less.

·Abandonment Percentage: Average not greater than [**]%.

·Call Blockage: [**]% or less.

·Call Quality Assessment: Average rating not less than [**]% - utilizing Servicer’s evaluation form as set forth and incorporated herein at Exhibit 1.

·Borrower Satisfaction:  Average rating in annual survey not less than [**]%.

Correspondence Standards

·Mail sorted and distributed within:  Servicer’s Service Objective:  [**]% within one Business Day not to exceed two Business Days on average.

·General Borrower correspondence answered within [**] Business Days of receipt on average — Servicer’s Service Objective: [**] days.  During peak processing months of January through March, August, and October, correspondence answered within [**] Business Days of receipt on average.  (This standard shall not apply to any correspondence involving death, disability, or bankruptcy Accounts.)

·Borrower Email Correspondence:  Answered within an average of [**] Business Days of receipt.

·School Correspondence: Answered within [**] Business Days of receipt on average — Servicer’s Service Objective: [**] days.  During peak processing months of January through March, July, and September school correspondence answered within [**] Business Days of receipt on average.

·Clearinghouse Correspondence (Manual Processing Only):  Answered within [**] Business

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Days of receipt on average — Servicer’s Service Objective: [**] days.  During peak processing months of January through March, June, and October through November Clearinghouse correspondence answered within [**] Business Days of receipt on average.

·Deferment Processing: Processed within [**] Business Days of receipt on average — Servicer’s Service Objective: [**] days.  During peak processing months of February and August through November deferments processed within [**] Business Days of receipt on average.

·Forbearance Processing: Processed within [**] Business Days of receipt on average — Servicer’s Service Objective: [**] days.  During peak processing months of January through March,  August, November through December forbearances processed within [**] Business Days of receipt on average.

·Miscellaneous Account Reviews and adjustments completed within [**] Business Days of receipt on average — there are exceptions to this process.

II.Payment Processing

·Non-Exception Loan Payments: Posted within an average of [**] Business Day of receipt — [**]% of the time.

·Exception Loan Payments: Processed/resolved within an average of [**] Business Days of receipt — [**]% of the time

III.Fraud Prevention

Fraud notification to Program Administrator within [**] Business Days of initial notification.

IV.System Requirements

·System Availability (scheduled CICS system up time): [**]% or better.  This standard shall not include the measurement for web based applications, batch processes, or scheduled CICS down time including but not limited to Sunday maintenance.

·Screen Navigation - Servicer shall provide an average internal CICS response time of less than [**]. This measurement shall only be applicable to Servicer’s provision of screen navigation and shall not be impacted nor include measurement relative to users’ internet based access to the screens because AES/PHEAA has no ability to control response times for users’ ISP connections or internal network performance. Servicer shall report the internal average response time on a monthly basis for the CICSL0PA system including the availability percentage for that system for normal scheduled hours of usage.

V.Conversion

·Servicer shall convert all FMC Administrator Student Loan origination data necessary for servicing hereunder onto its Servicing System within [**] days of receipt of complete Student Loan files containing critical and non-critical documentation from FMER.

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EX-10.39

Exhibit 10.39

Confidential Materials omitted and filed separately with the
Securities and Exchange Commission.  Asterisks denote omissions.

LOAN PROGRAM AGREEMENT

This Loan Program Agreement (the “Agreement”) is entered into this 20th day of April, 2010 (the “Execution Date”), by and among First Marblehead Education Resources, Inc., a Delaware corporation having its principal offices at One Cabot Road, Medford, Massachusetts 02155 (“FMER”), The First Marblehead Corporation, a Delaware corporation having its principal offices at 800 Boylston Street, 34th Floor, Boston, Massachusetts 02199 (“FMC”), and SunTrust Bank, a Georgia state-chartered banking corporation having an office located at 1001 Semmes Avenue, Richmond, Virginia 23224 (“SunTrust”).  FMER, FMC and SunTrust are hereinafter collectively referred to as the “Parties” and each individually as a “Party”.

WHEREAS, FMER and/or FMC are in the business of providing private student loan outsourcing solutions, such as program design, marketing, processing, underwriting, origination and/or portfolio administration services, to banks and other financial institutions;

WHEREAS, FMC desires to provide certain credit enhancement with respect to Loans (as defined below) originated under this Agreement;

WHEREAS, SunTrust desires to retain FMER to provide the student loan outsourcing solutions as set forth in this Agreement; and

WHEREAS, the Parties will enter into a Servicing Agreement executed and effective in 2010, with the Pennsylvania Higher Education Assistance Agency (the “Servicing Agreement”).

NOW THEREFORE, in consideration of the promises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE 1.DEFINITIONS; RULES OF CONSTRUCTION

1.1Definitions.  Capitalized terms used in this Agreement have the meanings set forth below.

“Additional Institution” means a post-secondary educational institution located in a SunTrust Sales State that has a cumulative cohort default rate of over [**]% in the past two cohort years, as reported by the U.S. Department of Education, but which shall nevertheless be treated as an Eligible Institution under this Agreement, under the terms set forth in Section 2.8.1.  The list of Additional Institutions as of the Execution Date is set forth in the Program Guidelines.

“Advertising Firms” has the meaning set forth in Section 2.7.1 herein.

“Affiliate” means, with respect to an entity, another entity that at the time in question, directly or indirectly, owns or controls, is owned or controlled by, or is under common ownership or common control with the first entity.  For purposes of this Agreement, “control” shall mean the power to direct the management or affairs of an entity, the terms “common control” and “controlled by” shall have meanings correlative to the foregoing, and “ownership” shall mean the beneficial ownership of more than fifty per cent (50%) of the equity securities of the entity.

“Applicant” means all co-applicants for a Loan under the Program Guidelines, including any proposed Borrower and any proposed Cosigner who begins an Application, regardless of whether the Application is complete.

“Applicant Information” has the meaning set forth in Section 3.8.5.2 herein.

“Application” means a consumer’s application, whether in whole or in part, for a Loan under this Program and originated via FMC’s or FMER’s URI/URL or the SunTrust URI/URL.

“Application and Solicitation Disclosure” means the disclosure required by 12 C.F.R. § 226.47(a) and Section 128(e)(1) of the federal Truth-in-Lending Act.

“Approval Disclosure” means the disclosure required by 12 C.F.R. § 226.47(b) and Section 128(e)(2) of the federal Truth-in-Lending Act.

“Approved Collectors” means a subcontracted collection agency used by FMER and identified on Schedule 2 to Exhibit D.

“Article 9” has the meaning set forth in Section 7.1.10 herein.

“Average Daily Balance” means the average daily principal (including financed fees) and accrued interest balance of all Loans in a Pool during a given calendar month, as reported by the Servicer as of the last day of such month.

“Books and Records” means all books and records necessary to service and collect the Loans and specifically relating to the Loans, including:  Applications, statements, credit and collection files, file maintenance data, Credit Agreements, disclosure statements, credit information files, correspondence, whether in documentary form or on magnetic tape, computer disk or other form, and any other records that evidence ownership or relate to servicing, administering or enforcing the Loans.  “Books and Records” shall not include general corporate financial and other records, income tax returns, specific files of individual employees or other corporate records not specifically relating to the Loans or which relate to the Loans with respect to which information relating to the Loans cannot reasonably be extracted.

“Borrower” means the individual person, or all individual persons collectively, including all Student Borrowers and Cosigners, who execute a Credit Agreement individually or, in the case of multiple Borrowers, severally and jointly, for the purpose of obtaining a Loan from SunTrust under the Program, and who have proceeds disbursed under the Credit Agreement.

“Business Day” means any day other than (a) a Saturday or a Sunday, or (b) a day on which banking institutions in the State of Georgia are authorized or obligated by law or executive order to be closed.

“CDAs” has the meaning set forth in Section 3.6.3.3 herein.

“Change in Control” means any of the following with respect to any of the Parties:  (1) the acquisition or a series of acquisitions within six (6) months of each other by any other entity, individual or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of beneficial ownership (as defined in Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of the common stock and/or other securities which have more than fifty percent (50%) of the combined voting power of the securities entitled to vote in the election of directors of such Party; or (2) the sale of all or substantially all of the assets of such Party to any other entity, individual or group; or (3) the reorganization, merger or consolidation of such Party in which the shareholders of such Party immediately before such event will not immediately thereafter own more than fifty percent (50%) of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated Party’s voting securities.  A “Change in Control” shall not include any transactions with an entity that is an Affiliate of such Party immediately prior to such transaction.

2

“Charged Off Loan” means a Loan that is at least [**] days delinquent in principal and interest or interest only or partial interest payments or that has experienced an event of default, as set forth in the Program Guidelines.

“Collegiate Custom Choice” means the product sourced through the FMC URI/URL.

“Combination Program” means a private student loan program that offers [**] to Applicant(s) simultaneously when the Applicant(s) is/are configuring a loan by selecting specific loan terms and parameters.

“Commodity Vendors” has the meaning set forth in Section 2.7.3 herein.

“Compensation Schedule” means the schedule attached hereto as Exhibit B, showing FMC’s compensation for each Pricing Segment.

“Confidential Business Information” has the meaning set forth in Section 14.2.3 herein.

“Consumer Information” means (a) “nonpublic personal information” as such term is defined by the Privacy Requirements; and (b) any personally identifiable information or records in any form (oral, written, graphic, electronic, machine-readable, or otherwise) relating to a consumer, including a consumer’s name, address, telephone number, Social Security number, e-mail address, account number, loan payment or transactional account history, account status; and the fact that the consumer has a relationship with SunTrust.

“Cosigner” means a person other than the Student Borrower who executes a Credit Agreement with a Student Borrower and thereby assumes joint and several liability for the Loan.

“Costs and Fees” has the meaning set forth in Section 17.3 herein.

“Credit Agreement” means the loan request and credit agreement, or other form of consumer debt instrument, evidencing a Borrower’s obligation to repay the Loan, in the form attached to the Program Guidelines.

“Damages” has the meaning set forth in Section 16.1 herein.

“Default Prevention Services” means the services described in Section 4.6 herein.

“Delinquent Loan” means any Loan other than a Charged Off Loan with respect to which any payment is [**] days or more past due.

“Disbursed Loan Amount” means the total principal balance (including financed fees) of Loans actually disbursed to the Borrower’s Eligible Institution, by means of electronic transfer or paper check, net of post-disbursement cancellations whether in whole or part, and subject to the Program Guidelines.

“Disbursement Date” means the date or dates on which Loan funds are transmitted to the Student Borrower’s Eligible Institution or to the CDA, which date shall be no earlier than the end of the cancellation period set forth in the Final Disclosure in accordance with the Requirements of Law.

“Disclosing Party” has the meaning set forth in Section 14.2.5 herein.

“Early Awareness Services” means the services described in Section 4.5 herein.

“Effective Date” means the date established in the Effective Date Communication pursuant to Section 18.1.1 of this Agreement.

“Effective Date Communication” has the meaning set forth in Section 18.1.1 herein.

“Effectiveness Conditions” has the meaning set forth in Section 18.1.1 herein.

3

“Eligible Institution” means a post secondary educational institution approved by SunTrust for receipt of Loan funds in conformity with Program Guidelines and included in the list of Eligible Institutions adopted as of the Execution Date in Section 2.8 and set forth in the Program Guidelines.

“Execution Date” has the meaning set forth in the first paragraph of this Agreement.

“Expected Charged Off Loan Volume” means, as established by the Parties from time to time, (a) initially, the Expected Loan Volume that is expected to become a Charged Off Loan, and (b) for each calendar quarter after Loan origination begins, the total principal (including financed fees) and accrued interest on the Disbursed Loan Amount that is expected to default (within the meaning set forth in the Program Guidelines).  The Expected Charged Off Loan Volume shall change each quarter during the Term to reflect the distribution of the Disbursed Loan Amount in Loan pricing tiers.

“Expected Loan Volume” means the total principal amount (including financed fees) of Loans expected to be funded by SunTrust for the related Pool during each 12-month period subsequent to the Effective Date of this Agreement.

“Final Disclosure” means the disclosure required by 12 C.F.R. § 226.47(c) and Section 128(e)(4) of the federal Truth-in-Lending Act.

“Final Services Termination Period” has the meaning set forth in Section 18.1.2.

“Fixed Rate Loan” means any Loan with respect to which the interest rate for such Loan is determined in relation to a specific fixed rate for the term of the Loan.

“FM Indemnified Party” means FMC, FMER, each Affiliate of FMC, each Affiliate of FMER, and each of the respective current, former and future officers, directors and employees of any of the foregoing.

“FMC Custom Model Property” means, for the purposes of this Agreement, FMC’s custom and proprietary score model and all deliverables, materials, software, flowcharts, ideas, concepts, designs, and reports or other analyses which relate to FMC’s custom and proprietary score model including any modifications, enhancements or derivative works thereof.

“FMC Intellectual Property”, as used in Section 16.2 and Section 16.3 only, has the meaning set forth in Section 16.2 herein.

“FMC Materials” means all promotional material prepared by FMC in providing Production Support Services, including responses to Eligible Institutions’ requests for proposals, printed materials, brochures, email content, television and radio content, telemarketing scripts, fliers, inserts and any web sites or web pages promoting Program Loans.

“FMC Production Support Services Activities” has the meaning set forth in Section 2.3.

“FMC Production Support Services Work Product” has the meaning set forth in Section 2.3.

“FMC Sales States” has the meaning set forth in Section 2.2.1 and listed in Schedule 1 to Exhibit E hereto.

“FMC Share of Portfolio Yield” means, for any given month, the aggregate total for all Pricing Segments of the amount to be earned by FMC for the Loans in each Pricing Segment, calculated as (a) the amount of the margin earned by FMC for the Loans in each Pricing Segment as shown on the Compensation Schedule, divided by the Borrower margin in each such Pricing Segment, multiplied by (b) the Monthly Accrued Interest less, with respect to Variable Rate Loans, interest accrued attributable to the LIBOR index.

4

“FMC URI/URL” means a dedicated web link obtained and maintained by FMC which tracks consumer traffic and loan application requests resulting from FMC’s marketing efforts in connection with the Program.

“FMC Website” means the FMC-created and managed website separate and apart from the SunTrust Website used to direct potential Borrowers to the Program online application.

“FMER Funding Account” means an account in FMER’s name maintained at a FDIC-insured depository institution, into which FMER will deposit Loan funds for disbursement after receiving them from the SunTrust Disbursement Account via automated clearinghouse debit.

“Force Majeure Event” has the meaning given such term in Section 19.11 herein.

“Forward Looking Materials” has the meaning set forth in Section 4.1.3.

“Fraud Database Data” has the meaning set forth in Section 3.10.2.

“Governmental Authority” means the federal government of the United States, any state government, or any political subdivision of either, or any agency, court or body of the federal government of the United States, of any state, or of any other political subdivision of either, exercising executive, legislative, judicial, regulatory or administrative functions.

“Indemnified Party” means a SunTrust Indemnified Party or a FM Indemnified Party, as applicable.

“Indemnifying Party” means a Party that is obligated to indemnify an Indemnified Party pursuant to the provisions of Section 16 herein.

“Information Security Program” means the written policies and procedures adopted and maintained to (a) ensure the security and confidentiality of Consumer Information; (b) protect against any anticipated threats or hazards to the security or integrity of Consumer Information; and (c) protect against unauthorized access to or use of Consumer Information that could result in substantial harm or inconvenience to SunTrust or any consumer.

“Initial Participation Account Deposit” means [**] percent ([**]%) of the product of the Expected Loan Volume for the Pool, multiplied by the Participation Percentage.

“Initial Vendors” means the vendors shown on Schedule 4 to Exhibit D.

“Insurance Requirements” has the meaning set forth in Section 10.1 herein.

“Intellectual Property” has the meaning set forth in Section 11.1 herein.

“Interagency Guidelines” means the applicable Interagency Guidelines Establishing Information Security Standards and codified at 12 C.F.R. Parts 30, 208, 211, 225, 263, 308, 364, 568, and 570.

“Loan” means a loan of funds, including all disbursements thereof and financed fees, made by SunTrust to a Borrower under the Program.

“Loan Origination Fee” means a fee that is:  (i) charged by SunTrust to the Borrower of a Loan; (ii) equal to the amount set forth in the Pricing Schedule; and (iii) financed as a part of the Loan amount.

“Loan Processing Fees” means that fee set forth in Section 6.3.1 herein.

“Loan Processing Services” means those services set forth in Article 3 herein.

“Marketers” has the meaning set forth in Section 2.7.1 herein.

“MG Private Student Loan Trust 2010-1” means the trust to be established by FMC to purchase and hold Charged Off Loans.

5

“Monthly Accrued Interest” means, for each calendar month, the amount of interest that accrues on all outstanding Loans in a given Pricing Segment during such month.

“Notice” has the meaning set forth in Section 17.1 herein.

“NPPI” has the meaning set forth in Section 14.2.4 herein.

“OFAC” has the meaning set forth in Section 3.8.1 herein.

“Online Application System” means the internet-based system used by FMER for the (a) intake of Application information from Applicants, (b) rendering and reporting of credit decisions on Applications, (c) delivery of Credit Agreements and disclosures required by Requirements of Law, including Truth-in-Lending Disclosures, and (d) loan status information and details.

“Outstanding Loan Volume” means, with respect to any Pool, the amount of Loan volume that remains outstanding to SunTrust, and is not a Charged Off Loan for which a payment from the Participation Account has previously been made, as reflected on the Servicer’s servicing system and reported by the Servicer to SunTrust and FMC on a monthly basis.

“Participation Account” means an interest-bearing account held by SunTrust for the benefit of FMC and SunTrust at SunTrust, which account shall hold Participation Account Deposits made by FMC and shall be subject to the terms of this Agreement.

“Participation Account Administrative Fee” for each month during the Term, means [**]% multiplied by the Average Daily Balance, divided by [**].  During the Term, the Participation Account Administrative Fee shall be modified quarterly as set forth in Section 7.1.5 of the Agreement to reflect the extent to which the distribution of the Disbursed Loan Amount among pricing tiers changes the Projected Default Rate for the Pool.

“Participation Account Deposits” has the meaning set forth in Section 7.1.1 herein.

“Participation Account Excess Percentage” has the meaning set forth in Section 7.1.6 herein.

“Participation Account Payment” means the payments which are made by SunTrust to FMC from the Participation Account pursuant to Section 7.1.6.

“Participation Cap” shall mean [**] dollars ($[**]), inclusive of the amount of the Initial Participation Account Deposit for each Pool, plus any amount over [**] dollars ($[**]) associated with the credit enhancement of Loans funded pursuant to Sections 7.1.11 and 18.4.

“Participation Interest” means the Participation Percentage multiplied by Expected Loan Volume. During the Term, the Participation Interest shall be modified quarterly as set forth in Sections 7.1.1 and 7.1.3 of the Agreement to reflect the extent to which the distribution of the Disbursed Loan Amount among Borrower pricing tiers changes the Projected Default Rate for the Pool.

“Participation Percentage” means an amount equal to [**] times the Projected Default Rate.

“Person” means a natural person, a partnership, a corporation, a limited liability company, a joint stock company, a business trust or other entity or association.

“Personnel” means the employees, contractors, subcontractors, and agents of a Party.

“Pool” means Loans funded during a 12-month period commencing on the Effective Date of this Agreement or any anniversary thereof.

“Portfolio Management Services” means Default Prevention Services and Early Awareness Services and all other services to be provided pursuant to Sections 4.4 through and including 4.8 herein.

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“Portfolio Yield” means the sum of Monthly Accrued Interest for all Loans for which are not Charged Off Loans.

“Pricing Schedule” means the loan pricing for each Pricing Segment set forth in the Program Guidelines, including the Borrower loan pricing portion which SunTrust may modify from time to time, subject to the provisions of Section 3.7.

“Pricing Segment” means each of the [**] discrete interest rate and fee combinations shown in the Pricing Schedule, with, as of the Execution Date, [**] discrete interest rate and fee combinations for Fixed Rate Loans and [**] discrete interest rate and fee combinations for Variable Rate Loans, along with each discrete interest rate and fee combination shown in the Pricing Schedules adopted after the Execution Date.

“Privacy Notice” means SunTrust’s privacy policy adopted pursuant to Regulation P.

“Privacy Requirements” means (a) Title V of the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq.; (b) federal regulations implementing such act and codified at 12 C.F.R. Parts 40, 216, 332, and 573; (c) Interagency Guidelines; and (d) other applicable federal and state laws, rules, regulations, and orders relating to the privacy and security of Consumer Information.

“Production Support Plan” means the FMC plan for selling the Program to Eligible Institutions in the FMC Sales States, as set forth in Schedule 2 to Exhibit E attached hereto, as modified by written agreement of SunTrust and FMC from time to time.

“Production Support Reports” has the meaning set forth in Section 2.5 herein.

“Production Support Services” means the support services to be provided pursuant to Article 2 herein.

“Program” means SunTrust’s loan program as described in the Program Guidelines.

“Program Administration Services” means Program analytics and development, administration of post-disbursement loan servicing, and Participation Account administration services to be provided pursuant to Sections 4.1, 4.2, and Article 7 of the Agreement.

“Program Administration Services Fee” means the fee paid to FMC pursuant to Section 6.5 hereof calculated as the FMC Share of Portfolio Yield, less the Program Support Services Fee, less the Participation Account Administration Fee.

“Program Guidelines” means the Program Guidelines attached to the Agreement as Exhibit F, which include loan origination guidelines, underwriting guidelines, product terms and features, Borrower fees, Borrower Credit Agreements, Servicing Guidelines, Applicant disclosures and forms of Truth-in-Lending Disclosure Statements and other disclosures required by Requirements of Law.

“Program Support Services” means those services set forth in Article 4 herein.

“Program Support Services Fee” means the fee paid to FMC pursuant to Section 6.4.1 hereof.

“Projected Default Rate” means a percentage, the numerator of which shall be the Expected Charged Off Loan Volume and the denominator of which shall initially be the Expected Loan Volume. Each calendar quarter during the Term, the Projected Default Rate shall be modified by using as the denominator Disbursed Loan Amount as of quarter-end.

“Proprietary Information” has the meaning set forth in Section 14.2.1 herein.

“Purchase Price” has the meaning set forth in Section 5.2 herein.

“Purchased Loan” has the meaning set forth in Section 5.1 herein.

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“Receiving Party” has the meaning set forth in Section 14.2.6 herein.

“Recoveries” shall mean amounts received by FMC, FMER, or any of their Affiliates from or on behalf of Borrowers in payment of principal of, interest on, and late fees with respect to, Charged Off Loans with respect to which SunTrust has received funds from the Participation Account, net of collection fees and attorneys’ fees.

“Regulation P” means such regulation as is set forth at 12 C.F.R Part 216.

“Requirements of Law” means, with respect to any Party, any certificate of incorporation, articles of association and, as applicable, by-laws or other organizational or governing documents of such Party, and each of the following, in each case to the extent applicable to and binding on such Party, its property or, in connection with this Agreement, its agents: (a) any federal, state, county or local law, ordinance, statute, rule, regulation, judgment, order, decree, injunction, permit, issuance or other determination or finding of any Governmental Authority or self-regulatory organization or final and binding determination of any arbitrator applicable to or binding upon such Party or to which such Party is subject, and (b) any treaty, rule or regulation, regulatory guidance or determination of (or agreement with) an arbitrator or Governmental Authority (including usury laws, the Federal Truth in Lending Act; Regulation B and Regulation Z of the Board of Governors of the Federal Reserve System; the Equal Credit Opportunity Act; the Privacy Requirements; the Fair Credit Reporting Act; the Fair and Accurate Credit Transactions Act; the federal Fair Debt Collections Practices Act; the USA PATRIOT Act; the Bank Secrecy Act and other state and federal laws or regulations relating to anti-money laundering compliance; federal and state and local tax laws, rules and regulations; and rules and regulations relating to consumer protection, installment sales, telemarketing, unfair and deceptive trade practices and collections, as each is amended from time to time).

“Roster Date” means, for any particular Loan, the date that is at least one Business Day prior to a scheduled Disbursement Date for such Loan, and shall be the date on which FMER provides to SunTrust a disbursement roster listing the Disbursement Date and disbursement amount for such Loan.

“Sanctions” has the meaning set forth in Section 3.8.1 herein.

“Security Systems” has the meaning set forth in Section 15.3.1 herein.

“Servicer” means Pennsylvania Higher Education Assistance Agency, (d/b/a American Education Services), a public corporation and governmental instrumentality organized under the laws of the Commonwealth of Pennsylvania, 1200 North Seventh Street, Harrisburg, Pennsylvania 17102, or another loan servicer mutually acceptable to SunTrust and FMC.

“Services” means Production Support Services, Loan Processing Services and Program Support Services, as well as any additional services agreed to by the Parties in writing to be performed under the Agreement.

“Servicing Agreement” refers to the Servicing Agreement that will be entered into or to be entered into by and among Servicer, SunTrust and FMC with respect to servicing of Loans, as amended from time to time.

“Servicing Guidelines” means the document by that name included as part of the Servicing Agreement among the Parties and the Servicer.

“Student Borrower” means the individual person who is enrolled at an Eligible Institution at the time of Application, executes a Credit Agreement for the purpose of obtaining a Loan from SunTrust under the Program, and who has proceeds disbursed under the Credit Agreement.

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“Subcontractor” means any third party retained by FMC and/or FMER, as applicable, and approved by SunTrust in conformity with the requirements of this Agreement to perform part of the Services.

“SunTrust Disbursement Account” means an account maintained at SunTrust into which SunTrust deposits Loan funds for disbursement.

“SunTrust Indemnified Party” means SunTrust and its Affiliates, and each of their respective current, former and future officers, directors and employees.

“SunTrust Marks” means the trade names, trademarks, logos or service marks of SunTrust and its Affiliates set forth in Exhibit G, any trade names, trademarks, logos or service marks used by SunTrust or any of its Affiliates in connection with its full-service retail banking business, and any other trade names, trademarks, logos or service marks that are used by SunTrust or any of its Affiliates to identify itself to the public in connection with educational loans, including the “Custom Choice” mark.

“SunTrust Materials” means all promotional materials that include SunTrust Marks and subject to SunTrust written approval, including responses to Eligible Institutions’ requests for proposals, printed materials, brochures, email content, television and radio content, telemarketing scripts, fliers, inserts and any web sites or web pages promoting Loans.

“SunTrust Portfolio Income” means the portion of the Portfolio Yield due to SunTrust, which shall be equal to the Portfolio Yield, less the FMC Share of Portfolio Yield.

“SunTrust Sales States” has the meaning set forth in Section 2.2.1 herein and listed in Schedule 1 of Exhibit E hereto.

“SunTrust URI/URL” means a SunTrust dedicated web link obtained and maintained by SunTrust which tracks consumer traffic and loan application requests resulting from SunTrust’s marketing efforts in connection with the Program.

“SunTrust Website” means the SunTrust-created and managed website used to direct potential Borrowers to the Program online application.

“Term” has the meaning set forth in Section 18.1.2 herein.

“Third-Party Offers” has the meaning set forth in Section 4.3.1 herein.

“Title X” means Title X of the Higher Education Opportunity Act of 2008, P.L. 110-315, 122 Stat. 3478, and its implementing regulations duly adopted by federal regulatory agencies, including but not limited to the Federal Reserve Board’s Regulation Z.

“Trade Secrets” has the meaning set forth in Section 14.2.2 herein.

“Transition Period” has the meaning set forth in Section 18.3.2 herein.

“Truth-in-Lending Disclosure Statements” shall mean the forms of private student loan application and solicitation disclosures, approval disclosures, and final disclosures required by Title X, as approved by SunTrust.

“USA Patriot Act” has the meaning set forth in Section 3.8.4 herein.

“Variable Rate Loan” means any Loan with respect to which the interest rate for such Loan is determined in relation to a published rate index and changes on a monthly basis in accordance with the terms of the Program Guidelines and the Credit Agreements.

“Volume Threshold” has the meaning set forth in Section 2.8.1.

1.2Certain Rules of Construction.  Except as otherwise explicitly specified to the contrary,

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1.2.1References to a Section, Exhibit or Schedule means a Section of, or Schedule or Exhibit to, this Agreement,

1.2.2The words “including,” “include” and “includes” will be construed as “including without limitation,” “include without limitation” or “includes without limitation,” as applicable,

1.2.3References to a particular statute or regulation include all rules and regulations promulgated thereunder and any applicable predecessor or successor statute or regulation, in each case as amended or otherwise modified from time to time,

1.2.4Words in the singular or plural form include the plural and singular form, respectively,

1.2.5Where specific language is used to clarify or illustrate by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict the construction of the general statement which is being clarified or illustrated,

1.2.6Any article, section, subsection, paragraph or subparagraph headings contained in this Agreement and the recitals at the beginning of this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement (other than with respect to any defined terms contained in the recitals),

1.2.7The word “or” whenever used in this Agreement is used in the inclusive sense of “and/or” and not the exclusive sense of “either/or,”

1.2.8All references to “the Agreement” or “this Agreement” in this Agreement shall mean “this Agreement as amended,”

1.2.9Whenever the words “herein,” “hereto,” “hereof” or “hereunder” or “this Agreement” are used in this Agreement, they shall be deemed to refer to this Agreement as a whole including Exhibits and Schedules hereto, and not to any specific section nor to exclude any Exhibits or Schedules hereto, and

1.2.10Any reference made in this Agreement to a statute or statutory provision shall mean such statute or statutory provision as it has been amended through the date as of which the particular portion of the Agreement is to take effect, or to any successor statute or statutory provision relating to the same subject as the statutory provision so referred to in this Agreement, and to any then-applicable rules or regulations promulgated thereunder, unless otherwise provided.

ARTICLE 2.PRODUCTION SUPPORT SERVICES.

2.1Use of SunTrust Marks.  SunTrust hereby grants to each of FMC and FMER a limited, royalty-free, nonexclusive license to use the SunTrust Marks during the Term as necessary to solicit Loans until the termination date of this Agreement and pursuant to the provisions of this Agreement, to use the SunTrust Marks on and in connection with SunTrust Materials and in connection with the ongoing origination services.  Each of FMC and FMER acknowledges and agrees that (i) it is not acquiring any right, title or interest in the SunTrust Marks and that the SunTrust Marks, all rights therein, and the goodwill associated therewith, are, and shall remain, the exclusive property of SunTrust; (ii) it shall take no action that would reasonably be expected to adversely affect SunTrust’s exclusive ownership of the SunTrust Marks or the goodwill associated with the SunTrust Marks; and (iii) any and all goodwill arising from use of the SunTrust Marks by FMC and/or FMER shall inure to the benefit of SunTrust.  Nothing herein shall give FMC or FMER any right, title, or interest of any kind in or to the SunTrust

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Marks, except the right to use the SunTrust Marks in accordance with this Agreement, and neither FMC nor FMER shall contest the validity of, or SunTrust’s title in and to, the SunTrust Marks.  In the event of any changes to the SunTrust Marks, FMC and/or FMER shall promptly make necessary changes to the SunTrust Materials.  Except as expressly permitted by this Agreement, neither FMC nor FMER shall have the right to, and nothing in this Agreement or any other signed and written agreement among the Parties shall be construed to give FMC or FMER the right to, and FMC and FMER shall not, other than the use of the SunTrust Marks in the specific manner as approved pursuant to the terms of this Agreement, use any marks, symbols, copyrights, logos, designs, representations, ideas or other proprietary designations or properties owned, developed, created by or licensed to SunTrust or any Affiliates of SunTrust, including the use of SunTrust Marks on or in conjunction with any goods or products of FMC or FMER not related to the Program or this Agreement.  FMC shall bear the costs of all FMC Materials, whether or not such FMC Materials use SunTrust Marks.  Neither of FMC nor FMER shall authorize use of, transfer, assign, lease or sub-license in whole or in part any SunTrust Marks without SunTrust’s prior written consent.

2.2Sales Support and Restrictions on Marketing of the Program.

2.2.1 FMC shall develop and implement a strategy and plan to generate interest among Eligible Institutions in the FMC Sales States (as defined below) to participate in the Program.  FMC and SunTrust agree that, except as otherwise approved by the other Party, such Party shall solicit interest from Eligible Institutions with respect to the Program only in the respective states set forth with respect to such Party on Schedule 1 to Exhibit E attached hereto (“FMC Sales States” and “SunTrust Sales States,” respectively). Each Party may solicit potential Applicants via direct mail, telephone solicitation, and the internet, but shall do so with respect to the Program only in the FMC Sales States and SunTrust Sales States, respectively, provided, however, that (a) with respect to solicitation through the internet, FMC and SunTrust may each satisfy its respective obligations pursuant to this subsection by using its commercially reasonable efforts to geoblock potential Applicants with Internet Protocol (IP) addresses associated with a location outside of their respective sales states, in each case to the extent that geoblocking is available with respect to IP addresses associated with such locations through the exercise of the commercially reasonable efforts of such Party, and (b) unsolicited Applicants may apply for Loans through either the FMC URI/URL or the SunTrust URI/URL.  Notwithstanding the foregoing, each of the Parties may solicit potential Applicants with respect to the Program through the use of direct mail, telephone solicitation or internet to existing customers as of the Execution Date of such Party or an Affiliate thereof regardless of where such customers of such Party or its Affiliates may be located.  Nothing in this Agreement shall be construed to restrict in any way any Party’s marketing and sales of other financial or educational loan products other than the Program.

In FMC Sales States, FMC shall interact directly with Eligible Institutions as set forth in Production Support Plan. FMC shall also:

(i) Where the “SunTrust” name is to be used in FMC Materials promoting the Program, consult with SunTrust on the preparation of such materials (including brochures, advertisements, mailings, announcements, and web site content) and comply with the provisions of Section 2.6 applicable to the approval of such materials by SunTrust and the preparation and use of such materials by FMC;

(ii) Submit a monthly status report that details FMC’s progress at Eligible Institutions;

(iii) Submit standardized request for proposals template language (and any changes to previously approved template language) to SunTrust for approval; and

(iv) Provide daily processing support for SunTrust staff and Eligible Institution support staff via a toll-free telephone number generally from 9:00 am to 8:00 pm EST or EDT, as applicable.

2.2.2. With respect to sales and promotional activities in SunTrust Sales States, FMC shall:

(i) Participate in meetings with Eligible Institutions as requested by SunTrust;

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(ii) Contact Eligible Institutions to capture processing preferences upon request from SunTrust;

(iii) Handle Eligible Institution contacts with respect to product set-up, product detail, and time frames, as requested by SunTrust;

(iv) Attend internal SunTrust meetings as requested to conduct product training for SunTrust staff; and

(v) Where the “SunTrust” name is to be used in SunTrust Materials promoting the Program, if requested by SunTrust, consult with SunTrust on the preparation of such materials (including brochures, advertisements, mailings, announcements, and web site content).

2.2.3With respect to national conferences (e.g., NASFAA) during the Term, FMC shall exhibit under its own name, and offer Collegiate Custom Choice materials at its booth at such conferences.  In the event that a financial aid officer from an Eligible Institution located in a SunTrust Sales State requests information from a representative of FMC at FMC’s booth at such a conference, FMC will direct such request to SunTrust.  If a financial aid officer from an Eligible Institution located in a FMC Sales State requests information from SunTrust, SunTrust will direct such request to FMC.

2.2.4If during the Term FMC exhibits at a state specific conference in a SunTrust School Sales State or the regional SASFAA conference, FMC will not offer Collegiate Custom Choice materials at its booth, provided, however, that at EASFAA conferences, FMC shall offer Collegiate Custom Choice materials regardless of the state in which such EASFAA conferences are held.

2.2.5With respect to the Program, FMC and SunTrust shall each respond to requests for proposals only from Eligible Institutions in the FMC Sales States and the SunTrust Sales States, respectively; provided, however, that with respect to requests for proposals received by any Party from any and all Eligible Institutions outside the FMC Sales States and the SunTrust Sales States, FMC or SunTrust may respond to such requests for proposals as mutually agreed by the Parties on a case-by-case basis.  If the Parties cannot reach agreement about which Party will respond to such a request for proposal, then no Party shall respond to that request for proposal.

2.3FMC Production Support Services Research; Ownership.

FMC may use the data collected in activities conducted pursuant to Section 2.2.1 (“FMC Production Support Services Activities”) to prepare deliverables, materials, ad copy, software, flowcharts, ideas, concepts, designs, and reports or other analyses with respect to the results of those FMC Production Support Services Activities (“FMC Production Support Services Work Product”), including reports or studies regarding marketing trends, the effectiveness of content and media and of techniques for utilizing each of these, provided, however, that such FMC Production Support Services Work Product does not include Consumer Information, which may be used to perform analysis but shall not be included in reports or studies except on an aggregated and de-identified basis.  Such reports or studies may include comparative analyses of the capacity of experimental marketing techniques to reach customers not found through customary means (e.g., compare online responders to purchased target marketing direct mail lists).  FMC may use FMC Production Support Services Work Product for any lawful purpose, including in support of other loan programs, during the Term and following termination of the Agreement.  FMC may disclose FMC Production Support Services Work Product to SunTrust and SunTrust may use any FMC Production Support Services Work Product disclosed to it for any lawful purpose during the Term and following termination of the Agreement.

2.4Ownership.  All Applications and related Credit Agreements created under the Program and this Agreement for Applicants and Borrowers through the SunTrust URI/URL shall be owned by SunTrust and shall not constitute property of FMC.  SunTrust hereby authorizes FMC as its agent, to the extent permitted by Requirements of Law, to use data collected from Applications and Loan inquiries to conduct activities under this Article 2, including, with respect to Applications and Loan inquiries received through

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the FMC URI/URL, retaining sources of customer lists and comparing such lists with data obtained from partial or completed Applications, subject in all cases to the confidentiality and information security provisions of this Agreement and Requirements of Law; provided, however, FMC shall not use information obtained or derived from Applications through the FMC URI/URL to solicit individuals for financial services other than Loans under the Program Guidelines.  It shall not be deemed to be a breach of the foregoing prohibition for FMC to undertake marketing and solicitation activities for any product or service directed to the general public or based on marketing lists derived from generally available data (such as credit bureau reporting data) or from any source other than SunTrust; provided, however, that during the Term and for three (3) years following the termination of this Agreement FMC shall not: (a) use such marketing lists obtained by FMC in performance of its obligations pursuant to this Agreement that are based on or derived from Applications sourced through the SunTrust URI/URL or (b) undertake marketing activities specifically or primarily targeted to Applicants in SunTrust Sales States.

2.5Production Support Reports.  In connection with the activities of SunTrust under this Agreement, SunTrust may provide to FMC quarterly, a report and analysis of the nature and effectiveness of its marketing activities under the Production Support Plan (the “Production Support Reports”).  SunTrust may also develop from time to time various reports which may contain detailed metrics, including, those set forth in the Production Support Plan, analyses, studies and summaries of marketing results relating to its activities under the Production Support Plan.

2.6FMC Materials.  FMC covenants that it will cause all FMC Materials to comply with Requirements of Law and to fairly and accurately present Loans and the Program.  FMC shall submit all FMC Materials to SunTrust for written approval prior to FMC’s use of the FMC Materials.  SunTrust shall provide comments or approval on FMC Materials submitted to it within ten (10) Business Days of submission.  To the extent that content templates are prepared, FMC may submit templates of FMC Materials to SunTrust for written approval, provided, however, FMC shall not use any final FMC Materials based on SunTrust-approved templates without SunTrust’s prior written consent.  SunTrust shall be responsible for the compliance of FMC Materials with Requirements of Law to the extent, and only to the extent, of changes to such FMC Materials required by SunTrust.  SunTrust may use FMC Materials upon FMC’s prior written consent.

2.7Retention of Vendors by FMC and FMER.

2.7.1In furtherance of its efforts to locate effective marketing channels for Loans, SunTrust may, by its prior written approval, authorize and direct FMC and/or FMER to select and retain one or more marketing firms to:  (i)  prepare content and strategies for mass marketing (such as television and radio) and direct marketing (such as telemarketing and web-based marketing) with respect to the Program (such vendors collectively “Advertising Firms”) and (ii) implement and administer all consumer contact in accordance with such content and strategies and applicable Requirements of Law (such vendors collectively, “Marketers”).  Neither FMC nor FMER shall engage such Advertising Firms or Marketers as remarketers or as marketers of the Program under any product or brand name.  FMC and/or FMER may enter into appropriate contracts with all Advertising Firms and Marketers; provided, however, FMC and/or FMER provide copies of such contracts to SunTrust within three (3) Business Days of receiving SunTrust’s written request.  All marketing contracts shall comply with the Production Support Plan.

2.7.2FMC and/or FMER shall not retain any Advertising Firm or Marketer, other than any Initial Vendors, without first providing to SunTrust at least ten (10) Business Days advance written notice of the identity, qualifications, and general proposed activities of such Advertising Firm or Marketer.  SunTrust may reasonably object to the selection or continued use of any Advertising Firm or Marketer by providing written notice of SunTrust’s reasonable objection, in which case FMC and/or FMER shall be prohibited from using the proposed Advertising Firm or Marketer; provided, however, that if SunTrust objects to the continued use of any Advertising Firm or Marketer, FMC and/or FMER shall use

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commercially reasonable efforts to use a different, previously approved Advertising Firm or Marketer to perform the work. If FMC and/or FMER is not able to use of a different, previously approved Advertising Firm or Marketer to perform the work, despite commercially reasonable efforts, FMC and/or FMER shall be required to terminate the use of any such Advertising Firm or Marketer only when permitted by the contract between such Advertising Firm or Marketer and FMC and/or FMER and only after the Parties have identified and mutually agreed upon a successor Advertising Firm or Marketer.  If SunTrust does not respond to the notice from FMC or FMER with respect to such proposed Advertising Firm or Marketer within ten (10) Business Days, then contracting with such firm by FMC and/or FMER, directly or through subcontract, shall be deemed to have been approved by SunTrust.

2.7.3In addition, subject to the next sentence of this Section 2.7.3, SunTrust authorizes FMC and/or FMER to retain from time to time one or more firms, directly or through subcontract, to provide ministerial services and production commodities in connection with services received from Advertising Firms and Marketers under this Agreement (“Commodity Vendors”), including the provision of media commodities, electronic provision of a web-hosting environment, printing, letter shop, data processing, broadcast production and editing services.  Neither FMC nor FMER will retain, either directly or through subcontract, any Commodity Vendor to perform any of the Services hereunder who will receive Consumer Information without obtaining SunTrust’s approval pursuant to the requirements of this Section 2.7 above.

2.8Eligible Institutions; Promotion of Program.

2.8.1SunTrust and FMC shall on the Effective Date adopt the lists of post-secondary educational institutions in the Program Guidelines as Eligible Institutions.  Additions to and removals from such lists shall be performed as set forth in the Program Guidelines.  Loans made to Student Borrowers attending Additional Institutions shall not exceed [**] dollars ($[**]) in Disbursed Loan Amount (the “Volume Threshold”) unless, after the Volume Threshold is exceeded, Loans made to Student Borrowers attending Additional Institutions remain less than [**] percent ([**]%) of the Disbursed Loan Amount for the Program.  On a monthly basis, FMC and Program Lender shall monitor the Disbursed Loan Amount to Student Borrowers attending Additional Institutions and if the Disbursed Loan Amount for Student Borrowers attending the Additional Institutions reaches [**] dollars ($[**]), the Parties shall confer in good faith regarding an adjustment to the Compensation Schedule with respect to Loans to be made in excess of the Volume Threshold to students enrolled at the Additional Institutions.  If the Disbursed Loan Amount to Student Borrowers attending Additional Institutions exceeds the Volume Threshold and is greater than [**] percent ([**]%) of the Disbursed Loan Amount for the Program, and no agreement pursuant to the preceding sentence has been reached, then after such date such Applications will not be covered by the credit enhancement the provisions of Article 7.  All Applications submitted for a credit inquiry by such date shall be processed in accordance with Section 18.4 of this Agreement notwithstanding the Volume Threshold.

2.8.2FMC agrees that it shall not encourage consumers to apply for a Loan before exhausting other available forms of aid, including grants, scholarships and federally insured education loans recommended by the Eligible Institution, as applicable.  FMC also shall use commercially reasonable efforts to ensure that Eligible Institutions do not encourage consumers to apply for a Loan before exhausting other available forms of aid, including grants, scholarships and federally insured education loans recommended by the Eligible Institution.  FMC agrees and understands SunTrust will also promote all other available private student loan products and options offered by SunTrust in the SunTrust Sales States; provided, however, that SunTrust shall not present the Program as a loan program for borrowers with poor credit or those with no other loan options.  Without limiting the foregoing, FMC acknowledges and understands that (i) SunTrust does not control which, if any, private student loan product offered by SunTrust is chosen by any Eligible Institution for inclusion on a preferred lender list, and (ii) Eligible Institutions may decide to choose only one SunTrust private student loan product for inclusion on a

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preferred lender list in order to create a preferred lender list with at least the number of unaffiliated programs required by the Higher Education Opportunity Act of 2008 and its implementing regulations and other Requirements of Law.

2.9Exclusivity.  FMC agrees that, for the Term of this Agreement, it shall not design, facilitate or otherwise provide services for, or offer to design, facilitate or otherwise provide services for a Combination Program, except for the Program offered through this Agreement.

ARTICLE 3.  LOAN PROCESSING SERVICES

3.1Web Application; Credit Agreement.

3.1.1FMER will use the forms of Credit Agreements approved by SunTrust and included in the Program Guidelines.  SunTrust and FMER shall notify each other from time to time of recommended changes to the Credit Agreements, and each shall respond promptly to such notifications, noting the feasibility and desirability of such changes, as well as the implementation time needed to make such changes.  After SunTrust and FMER have reviewed and negotiated the proposed changes to the Credit Agreements, the Parties shall agree on the written version of such negotiated changes, and FMER shall revise the Credit Agreement in accordance therewith.  SunTrust represents and warrants that the forms of Credit Agreement comply, and as they may be modified from time to time with SunTrust’s approval for inclusion in the Program Guidelines, will comply, with the Program Guidelines and Requirements of Law.  FMER represents that its use of such forms shall comply with this Agreement, the Program Guidelines and Requirements of Law.

3.1.2FMER will use the Online Application System approved in writing by SunTrust. FMER represents, warrants and covenants that the content and operation of its Online Application System complies with this Agreement, the Program Guidelines and Requirements of Law; provided, however, that SunTrust represents, warrants and covenants that the content of the Online Application System complies with the Program Guidelines and Requirements of Law to the extent, and only to the extent, of content in such Online Application System that is specifically required by SunTrust.  FMER shall accept Applications via both the SunTrust Website and the FMC Website.  The FMC Website is the responsibility of FMC subject to the conditions set forth in this Agreement.  The FMC Website shall comply with any requirements specified in this Section 3, the Program Guidelines, and Requirements of Law, and shall be subject to SunTrust’s approval.  SunTrust represents, warrants and covenants that the content of the FMC Website complies with the Program Guidelines and Requirements of Law to the extent, and only to the extent, of content in such FMC Website that is specifically required by SunTrust.

3.2Disclosures.  The forms of state and federal disclosures, including application and solicitation disclosures, approval disclosures, final disclosures, and adverse action notices, must be approved in writing by SunTrust as set forth in the Program Guidelines.  FMER represents, warrants and covenants that its use of such forms and disclosures, including mathematic calculations contained therein, shall comply with the Agreement, the Program Guidelines and all Requirements of Law.  Notwithstanding anything in this Agreement or the Program Guidelines, FMC shall make the Application and Solicitation Disclosure available to potential Borrowers at the beginning of and during the entire Application process as directed by SunTrust.  It is understood and agreed that the Application and Solicitation Disclosure must be viewed and acknowledged by potential Borrowers prior to the time such Borrower provides application information.

3.3Privacy Notice.  SunTrust will provide FMER and FMC with a web link to its online Privacy Notice which FMC will make available on both the FMC Website and each page of the Online Application System accessed via the FMC URI/URL; provided, however, that neither FMC nor FMER is responsible for the content of SunTrust’s Privacy Notice or its compliance with the requirements of any Requirements of Law, including the Gramm-Leach-Bliley Act or Regulation P.  FMER shall include its

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privacy statement in the Online Application System, and shall mail SunTrust’s initial privacy policy to each Borrower on the first Disbursement Date for such Borrower.

3.4Additional Forms, Documents and Disclosures; Changes.  Any documentation not set forth in this Section 3 or the Program Guidelines that SunTrust requires for the origination and processing of Applications will be identified and provided by SunTrust to FMC for FMER and/or FMC’s use.  SunTrust represents, warrants and covenants that any such form provided to FMC and/or FMER and any instructions with respect thereto shall comply with the Agreement, the Program Guidelines and Requirements of Law.  In the event FMER and/or FMC determines changes should be made to the Program Guidelines or any documentation contained therein, FMER and/or FMC, as applicable, shall not implement such changes without SunTrust’s prior written consent.  If SunTrust agrees with FMC’s recommendations, they shall be acknowledged by each of the Parties in writing approving such recommendations, and they shall be implemented as soon as reasonably practicable.  Within twenty (20) Business Days of receiving a request from SunTrust to make changes to either the Program Guidelines or the documentation contained therein (other than changes to the Pricing Schedule, which shall instead be subject to Section 3.7 of this Agreement), FMER and/or FMC will provide in writing a response with a statement of FMER’s and/or FMC’s ability to implement the change to deliver the requested services and the terms and conditions on which FMER and/or FMC would be willing to do so.  In the event SunTrust elects to authorize such services on the terms and conditions set forth in FMER’s and/or FMC’s response, SunTrust will, within twenty (20) Business Days of its receipt of FMER’s and/or FMC’s response, respond to FMC and/or FMER by executing and returning a change order to FMER and/or FMC reflecting the agreed upon terms and conditions relating to such Services.  Such change in Services as agreed to by the Parties shall be incorporated into a new or restated Exhibit to this Agreement or as an addendum to the Program Guidelines, which shall be signed by duly authorized representatives of the applicable Parties.

3.5Credit Bureau Requests.  Simultaneously with the execution of and as a condition of FMC’s and FMER’s obligations under this Agreement, SunTrust shall execute a TransUnion Addendum in the form substantially similar to the attached Exhibit C hereto authorizing FMER to make credit inquiries on SunTrust’s behalf solely for purposes of this Program as permitted by Requirements of Law and the Program Guidelines.

3.6Application Receipt and Review.

3.6.1Upon receipt of an Application for review from an Applicant, FMER will review the data for completeness according to the eligibility standards in the Program Guidelines.  If any necessary data are outstanding, FMER will use commercially reasonable efforts to secure such data from the Applicant on behalf of SunTrust as required by the Program Guidelines.  After receipt of complete data relating to a particular Applicant, FMER will review such data and, on a preliminary basis, apply the standards in the Program Guidelines with respect to loan underwriting and determine whether the Applicant is credit approved for a Loan in accordance with the Program Guidelines.  FMER shall adhere to minimum custom credit and FICO scores and credit tiers as set forth in the Program Guidelines.

Application review shall initially be conducted using FMER’s automated Online Application System.  If any part of the Application process cannot be conducted on an automated basis by the Online Application System, but instead must be performed manually, such manual performance shall not cause unnecessary delay and the performance of any such manual process shall be completed in accordance with the service standards set forth in the Program Guidelines.

3.6.1.1Applicant Liaison.  FMER will respond promptly to all inquiries that it or SunTrust may receive from any Applicant concerning the status of an Application.  SunTrust will promptly forward to FMER Application status inquiries from Applicants that SunTrust receives.

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3.6.1.2Rejection of an Application.  If an Application is rejected or denied by FMER on behalf of SunTrust, FMER will so notify the Applicant in accordance with Requirements of Law and the Program Guidelines.

3.6.1.3Credit Approval of an Application; Preliminary Approval; Approval Disclosure.  If an Application is credit approved by FMER on behalf of SunTrust, FMER will provide the Applicant one or more repayment schedules, interest rates, or other Loan options dependent on the Applicant’s eligibility.  After the Applicant has selected a Loan option, FMER will generate and provide a Credit Agreement to the Applicant, along with a notice that the Applicant has passed the credit check, and (b) appropriate instructions for completion of the Application process.  Credit Agreements and instructions will be provided to the Applicant by access to a secure internet site or by U.S. mail.  To the extent authorized by the Program Guidelines, FMER will provide the Applicant the ability to electronically review, sign and return the Credit Agreement to FMER.  To the extent required by the Program Guidelines, FMER will communicate with the applicable Eligible Institution in order to obtain the Eligible Institution’s certification of enrollment and financial need.

3.6.2Final Approval of an Application.  Upon receipt of the Credit Agreement and other requested information from an Applicant who has received credit approval under Section 3.6.1, FMER will perform the following functions and SunTrust will assist as indicated:

3.6.2.1Document Review.  FMER will review the Credit Agreement and any supporting documentation required by the Program Guidelines and ensure that the Credit Agreement has been executed in the name of all Applicants.  If any necessary data, signature(s), forms or other information are outstanding, FMER will use commercially reasonable efforts to secure such missing data, signatures, forms or other information on behalf of SunTrust from the Applicant or the applicable Eligible Institution as required.  FMER will use commercially reasonable efforts to inquire of the Applicant as to all missing data promptly after receipt of the incomplete Application.  In processing Applications, FMER’s policies will comply with SunTrust’s Customer Identification Program, Red Flags Program, OFAC Program, and Address Mismatch Program and any other regulatory programs as required under this Agreement and the Requirements of Law.  Upon receipt of complete Application data, including certification of enrollment and need by the Eligible Institution, FMER will continue processing the Application hereunder.

3.6.2.2Final Review.  When FMER has possession of all necessary data and documentation relating to particular Applicant(s), FMER will conduct a final review to confirm that the Applicant(s) is approved for a Loan in accordance with the standards and processes contained in the Program Guidelines.

3.6.2.3Approval; Denial.  After completion of the final review, FMER will, on behalf of SunTrust, approve or deny the Application.  Such decision will be made solely in accordance with the Program Guidelines and any other SunTrust instructions that are not inconsistent therewith and comply with Requirements of Law.  SunTrust covenants, represents, and warrants that such instructions comply with this Agreement, the Program Guidelines, and Requirements of Law.  For approved Applications, FMER shall prepare and provide an Approval Disclosure to the Applicant(s).  After delivery of the Approval Disclosure, FMER shall not make any changes to the Application or proposed Loan terms, except as permitted by Requirements of Law or the Program Guidelines, and shall allow the Applicant to accept the Loan within the time period prescribed under Requirements of Law and the Program Guidelines.  After the Applicant(s) have accepted the Approval Disclosure using one of the methods set forth therein, FMER, on behalf of SunTrust, will notify and send to the Applicant the Final Disclosure in accordance with all Requirements of Law.  FMER shall not disburse funds until the expiration of the right to cancel,

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as required under Requirements of Law.  Cancellation shall be effective as set forth in the Program Guidelines.  In the case of denial of an Application, FMER will so notify the Applicant in accordance with Requirements of Law (which, for the avoidance of doubt, shall include the Equal Credit Opportunity Act and the Fair Credit Reporting Act).

3.6.3Fulfillment and Disbursement of Approved Loans.

3.6.3.1FMER shall populate and distribute the Truth-in-Lending Disclosure Statements in accordance with Requirements of Law and the Program Guidelines.

3.6.3.2By 12:00 p.m. eastern standard or daylight time, as applicable, on the Roster Date for each Loan, FMER will provide SunTrust with a disbursement roster detailing all Loans scheduled for disbursement.  SunTrust will fund each Loan on the disbursement roster by depositing in the SunTrust Disbursement Account by no later than 11:59 p.m. eastern standard or daylight time, as applicable, on the Roster Date, an amount equal to the sum to be disbursed for the Loans on the disbursement roster.  SunTrust hereby authorizes FMER to access such account by automated clearinghouse (“ACH”) debit to transfer the disbursement funds to the FMER Funding Account and complete the disbursement of the Loan on the Disbursement Date.  SunTrust understands that FMER intends to disburse Loan proceeds from the FMER Funding Account as frequently as necessary to accommodate the funding needs of Borrowers and Eligible Institutions, including as frequently as daily.  SunTrust agrees to fund the SunTrust Disbursement Account as often as necessary to facilitate such frequent disbursements.  Provided that adequate funds are transferred by SunTrust to the SunTrust Disbursement Account, FMER will complete disbursement of the Loans on the Disbursement Date by electronic funds transfer to the applicable Eligible Institution or by check written in accordance with the Program Guidelines.  If the Borrower cancels or withdraws his or her Application or cancels the Loan within the time permitted for cancellation under the Program Guidelines, Requirements of Law or the Credit Agreement, FMER, as SunTrust’s agent, will immediately process the cancellation by (a) requesting repayment of any funds disbursed on the canceled Loan from the Borrower and the applicable Eligible Institution, and (b) remitting such collected amounts to the Servicer for the benefit of SunTrust.  In the event the Borrower or Eligible Institution returns the funds to FMER, FMER shall remit the funds to Servicer to process the cancellation for the benefit of SunTrust.  Subsequent disbursements with respect to any Loan may be canceled as set forth in the Program Guidelines.

3.6.3.3FMER shall provide online and facsimile methods of certification for Eligible Institutions.  SunTrust hereby authorizes FMER, on SunTrust’s behalf and as SunTrust’s agent, to disburse funds under this Agreement utilizing the systems operated by the ELM National Disbursement Network, Great Lakes Central Disbursing System, disbursement services offered by Texas Guaranteed Student Loan Corporation, Pennsylvania Higher Education Assistance Authority / American Education Services or any other funds disbursement agent as the Parties may agree to from time to time (collectively, the “CDAs”).  As SunTrust’s agent, FMER shall operate pursuant to future agreements and/or amendments to existing agreements between SunTrust and the CDAs, copies of which shall be provided to FMER no more than ten (10) Business Days after execution.  FMER is authorized to follow all rules and procedures required by the CDA systems.  Any action undertaken by FMER in conformity with the CDA systems will be deemed to be in accordance with the Program Guidelines and the Agreement to the extent set forth therein.  The Parties agree to share equally and pay equal amounts required to pay the disbursement charges and any other charges associated with the CDAs as the CDAs set those fees on a monthly basis based on SunTrust’s membership status.

3.7Pricing Schedule.  SunTrust may revise the Pricing Schedule set forth in the Program Guidelines from time to time upon [**] Business Days prior written notice to FMC; provided, however, that

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SunTrust agrees that any such change made by it shall be commercially reasonable, in accordance with the representation and warranty made in Section 8.2.3 of this Agreement, and with respect to Fixed Rate Loans, based on market conditions or fluctuations in the cost of certain financial instruments.  Unless otherwise agreed by SunTrust and FMC in writing, changes in the Pricing Schedule shall be effective for and applied only to Applications submitted for a credit check after the effective date of such changes, and not to Applications for which a credit check has already been completed.

3.8Performance of Regulatory Programs.

3.8.1OFAC Check.  FMER agrees that, in regards to all Services provided to SunTrust, it will perform all necessary actions to ensure that FMER and SunTrust are both in, and remain in, compliance with all applicable Executive Orders, laws, rules, regulations and sanctions administered, enforced or implemented by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) or any other Governmental Authority’s rules, regulations and sanctions related to foreign asset control (collectively, the “Sanctions”).  As part of its obligations, FMER will perform, prior to originating any Loan, all necessary reviewing and scanning of an Applicant against the List of Specially Designated Nationals and Blocked Persons administered by OFAC.  If originating a Loan would violate any of the Sanctions, FMER agrees to not originate any such Loan.  If FMER becomes aware that the name of an Applicant is potentially or actually the subject of one or more Sanctions, FMER will promptly notify SunTrust of such a fact by following the notification provisions provided in Section 19.1 below, the Program Guidelines, and the Servicing Guidelines, and FMER will provide SunTrust with any requested information and documentation related to any such violation or potential violation.  At the request of SunTrust, FMER shall provide SunTrust with a data file or report with information regarding all or a selected group of Loans that have been applied for or established, as well as any other data and information reasonably requested by SunTrust.  Such a data file or report will contain the requested information in a form, format and at intervals reasonably requested by SunTrust.

3.8.2Employee Check.  All FMER employees performing services or supporting FMER activities under this Agreement, regardless of their location, shall be validated by FMER to not be on any list published and maintained by the United States government of Persons with whom any U.S. Person is prohibited from conducting business.  Currently, the lists of such Persons can be found on the following web sites:

(i)Denied Persons List on the Bureau of Industry and Security at http://www.bis.doc.gov/dpl/Default.shtm.

(ii)The Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control — Department of Treasury at http://www.treas.gov/offices/enforcement/ofac/sdn/.

(iii)Office of Foreign Assets Control — Recent OFAC Actions http://www.treas.gov/offices/enforcement/ofac/actions/.

(iv)Palestinian Legislative Council (PLC) List http://www.treas.gov/offices/enforcement/ofac/programs/terror/ns/index.shtml.

FMER shall conduct periodic reviews, no less frequently than quarterly, of the lists mentioned above.  FMER shall report to SunTrust immediately if the name of any FMER employee performing the services matches with the name of any Person listed on any list published by the United States government of Persons with whom any U.S. Person is prohibited from doing business.  FMER shall mandate that each Subcontractor shall validate that its own employees are not on the lists referred to above.

3.8.3FACT Act.  Subject to Sections 3.6.2.1 and 3.8.5 of this Agreement, FMER shall perform its obligations under this Agreement in conformity with the requirements imposed on SunTrust as a user and furnisher of consumer report information under the Fair and Accurate Credit Transactions Act of

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2003 and all regulations issued pursuant thereto, including proper responses to fraud alerts, active duty alerts, red flags, and address mismatch notices that are included in any consumer report obtained in connection with the origination of a Loan and timely and lawful forwarding to SunTrust of any identity theft report received from any Applicant.

3.8.4Suspicious Activity Reporting.  FMER agrees that on behalf of SunTrust, it will monitor for any potential or actual suspicious activity detected regarding any Services that FMER performs on behalf of SunTrust, including any potential or actual suspicious activity which is committed by Applicants or Borrowers.  Such suspicious activity includes any potential or actual activity or transaction that would require SunTrust to file a Suspicious Activity Report as described in the USA PATRIOT Act or 12 C.F.R. § 208.62 (“USA PATRIOT Act”) or other activity which involves fraud, violations of federal, state or local law or which appears to have no legitimate purpose.  If FMER becomes aware of any potential or actual suspicious activity, FMER will promptly, and in all cases within seventy-two (72) hours, notify SunTrust’s Consumer Lending Operations Department of the precise nature of any such activity and provide SunTrust with any information and documents concerning the matter.  Further, FMER agrees to reasonably cooperate with SunTrust and to provide SunTrust with any additional information and documentation requested regarding any investigation of potential or actual suspicious activity.  The contact in the SunTrust’s Consumer Lending Operations Department is Ms. Debra Hendricks, whose contact information is:  Telephone: (804) 319-1533, Fax: (877) 862-8494, E-Mail: debra.hendricks@suntrust.com.  SunTrust may change its contact in its Consumer Lending Operations Department at any time by written notice to FMC and FMER that meets the requirements of Section 19.1.

3.8.5Customer Identification Program.  FMER agrees that prior to establishing any Loan in the name of SunTrust, it will perform all aspects of SunTrust’s Customer Identification Program, as indicated below, and which may be amended from time to time by SunTrust on thirty (30) days written notice to FMER.

3.8.5.1Applicant Notice.  FMER agrees that Applicants will be provided notice that FMER is requesting information about them on behalf of SunTrust to verify their identities as required by Federal law.  FMER may use any verbal or written means of such notification which is reasonably designed to provide such notice to Applicants before the issuance of a Loan, including, but not limited to, one or more of the following:

·Verbal notification to the Applicant

·Notice on Application form or other documents being provided to an Applicant

·Notice on a website or other promotional items or SunTrust Materials

Upon request by SunTrust, FMER will provide SunTrust with a copy and description of any methods of notice used.

3.8.5.2Collection of Applicant Information.  FMER will collect and record the following information from each Applicant prior to the initial disbursement of any Loan (the “Applicant Information”):

·Name

·Date of Birth

·Physical Address (which includes a residential or business street address or if the individual does not have such an address, an Army Post Office (APO) or Fleet Post Office (FPO) box number, the residential or business street address of next of kin or of another contact individual, or a description of the customer’s physical location)

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·For a United States person, a Taxpayer Identification Number (or evidence of application for one) and for a non-United States person, one or more of the following:  a Taxpayer Identification Number, a passport number and country of issuance, an alien identification card number, or a number and country of issuance of any other unexpired government-issued document evidencing nationality or residence which bears a photograph or similar safeguard

3.8.5.3Applicant Identity Verification and Recordation.  FMER will verify the accuracy of the Applicant Information through either a documentary method or a non-documentary method.  Under either method, FMER will record how such verification was done and the results of such verification.

·Documentary methods of verifying the Applicant Information include reviewing and recording one or more of the following types of unexpired identification: driver’s license; passport; state identification card; armed forced identification card; alien identification card; marticula consular card; instituto federal electoral identification; cedula de identidad identification; diplomatic identification; or diplomatic driver’s license.  The recording of such verification will include recording the type of identification reviewed, the number of such identification, the place of issuance, the date of issuance and the date of expiration (if any) of such identification.

·Non-documentary methods of verifying the Applicant Information include comparing the information with information obtained in advance from a consumer or credit reporting agency, Lexis/Nexis, TrustedID, or if verification cannot be obtained through those methods, verification may be obtained from the certification of the Loan by the Eligible Institution.

3.8.5.4Addressing Inconsistencies.  After collecting and attempting to verify the Applicant Information, FMER will attempt to resolve any inconsistencies in information.  If any such inconsistencies cannot be resolved with a reasonable explanation and verification, FMER will not further process or close any Loan for the Applicant.  Further, FMER will notify SunTrust of the inconsistency for possible further investigation.  FMER agrees to fully cooperate with SunTrust in any such investigation.

3.8.5.5Comparison with Government Lists.  As required by the USA PATRIOT Act and its implementing regulations, FMER will verify that an Applicant is not included on any lists of known or suspected terrorists or terrorist organizations issued by the United States government.  If an Applicant is included on any such lists, FMER will not establish a Loan for the Applicant and will immediately notify SunTrust of such a fact.

3.8.5.6Access to and Maintaining of Records.  FMER agrees to allow SunTrust access to any records maintained regarding the Applicant Information and its verification.  Such access will include allowing access at SunTrust’s request and direction to any individual or entity that is performing tests, audits or exams of, for or on behalf of SunTrust.  FMER agrees to maintain all records of Applicant Information along with any Loan documentation it retains (or any copies thereof) for at least seven (7) years from either the time the Loan is repaid and closed or the Loan is sold by SunTrust to a third party and to keep records of the verification of the Applicant Information for at least seven (7) years from the date of such verification.

3.9Transfer to Servicing System.  Within [**] Business Days following the first disbursement of each Loan, FMER will forward to the Servicer a copy of the original Credit Agreement, along with a complete copy of the Truth in Lending Disclosure Statements (other than the Application and Solicitation Disclosure), Student Borrower self-certification, income verification, enrollment verification/certification

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by the Eligible Institution, missing information notices, and correspondence and information received from the Applicant(s) except for verification documentation received pursuant to Section 3.8.5.  FMER will cooperate with SunTrust or Servicer in transferring all additional information necessary to service such Loan.  FMER will be responsible for the safe maintenance of Loan documentation as set forth in Section 12.2 of this Agreement.

3.10Loan Origination Data.

3.10.1Notwithstanding any other provision of the Agreement, SunTrust hereby authorizes FMER to retain and use records of applicable data and information relating to Borrowers received under this Agreement, in identified form, for the limited purpose of calculating cumulative education debt, annual loan limits and Program limits with respect to the Borrower, and to provide Program Support Services set forth in this Agreement.

3.10.2Notwithstanding the foregoing or any other provision of this Agreement to the contrary, FMER may retain and use records of data and information relating to Applicants and Borrowers received under this Agreement, in identified form, for the limited purpose of identifying red flags or indications of identity theft or other fraud (“Fraud Database Data”).  If SunTrust’s education loan applications have previously been processed by FMER prior to the date of this Agreement (in FMER’s capacity as either agent for SunTrust or subcontractor of SunTrust’s agent), SunTrust hereby authorizes the use of historic records of application data and information relating to applicants and borrowers received under such agreement, in identified form, by FMER for the limited purposes set forth in the preceding sentence.  SunTrust hereby authorizes FMER to disclose the Fraud Database Data to its Affiliates, and to use records of application data and information in FMER’s possession relating to any of SunTrust’s historic education loan applications, for the limited purposes set forth above.

3.11Reports.  FMER will provide to SunTrust the “Datamart” report as set forth in Exhibit A on each Business Day.  All such reports, transmittals, records or data files required, maintained or provided by FMER hereunder shall be accurate in all material respects, and SunTrust shall have the right to rely thereon.  Additional reports, including reports for SunTrust’s use in connection with regulatory matters, may be prepared by FMER as may be mutually agreed by the Parties.

3.12Subcontractors.  FMER or FMC may retain Subcontractors to provide customer service and ministerial services in connection with its performance of Loan Processing Services, provided, however, that any such Subcontractors other than the Initial Vendors must be approved by SunTrust in accordance with the procedure set forth for Advertising Firms and Marketers in Section 2.7.2.

ARTICLE 4.PROGRAM SUPPORT SERVICES

4.1Program Analytics and Development.

4.1.1No later than fifteen (15) days after the end of each calendar month, FMC shall review the Pools on an aggregate basis and present such findings to SunTrust regarding product reconfigurations including, but not limited to, the following categories:  pricing, tier construction, repayment options, repayment terms, and the list of Eligible Institutions in the Program Guidelines.  The Parties may recommend changes to the Program based on such review.  If the Parties agree with the other Party’s recommendations and proposed changes to the Program, each Party shall approve such recommendations by executing revised Program Guidelines or another revised Exhibit hereto, as appropriate, which revised Exhibit shall be deemed to be a part of this Agreement upon execution, and any changes pursuant to such revised Exhibit shall be implemented as soon as reasonably practicable, or upon the effective date provided in the applicable revised Exhibit.  If the Parties do not agree on the recommended changes within ten (10) Business Days of the applicable request, the Parties shall confer in good faith about the proposed changes.  If the Parties cannot agree on such changes within thirty (30) days after the date a Party first delivered recommendations to the other Parties, then any Party may, by notice to the other

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Parties delivered no later than thirty (30) days after the expiration of such thirty (30) day period during which changes could not be agreed, terminate this Agreement on fifteen (15) days’ written notice to the other Parties, subject to Section 18.1 and Section 18.3 hereof. Notwithstanding the foregoing, changes to the Pricing Schedule shall be subject to Section 3.7 and not to this Section 4.1.1.

4.1.2FMC shall assist SunTrust with the initial and ongoing administration of the Program by providing Program analytics and portfolio performance reporting on the Pools.  FMC shall provide a key metrics report monthly, containing the information set forth in Schedule 1 to Exhibit D or as otherwise agreed to in writing by the Parties; provided however, that FMC shall not be required to deliver such report more frequently than weekly.  To support this service, SunTrust will provide or cause to be provided to FMC accurate and complete origination and servicing information periodically as reasonably requested by FMC, including the amount of paid and unpaid principal and accrued interest with respect to each Loan, and payment status, together with the information contained in the data requirements set forth in this Agreement.  FMC may create, use and disclose, in any manner reasonably necessary, any data, or statistical abstracts of data, from Borrowers as long as all information which identifies, or which reasonably could be used to identify Borrowers has been removed.  FMC and SunTrust shall participate in monthly conference calls to review portfolio performance, and the Parties shall discuss whether to implement changes to the Program Guidelines.  As a result of its analysis of Loan data and performance metrics, FMC may also provide SunTrust additional services such as Borrower retention strategies and prepayment mitigation strategies, as agreed to in writing from time to time.

4.1.3FMC shall provide Services under this Section 4.1 in good faith and in accordance with the same standard of care, judgment and conduct as would be used by a reasonable and prudent professional providing such Services.  FMC EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, REGARDING OR RELATING TO FORWARD-LOOKING PORTFOLIO METRICS AND OTHER PREDICTIVE MEASURES, DOCUMENTS, MATERIALS, ANALYSES, AND STATEMENTS IT PROVIDES TO SUNTRUST (COLLECTIVELY, “FORWARD-LOOKING MATERIALS”).  WITH RESPECT TO THE FORWARD-LOOKING MATERIALS, FMC (A) SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND ANY WARRANTY ARISING UNDER STATUTE OR OTHERWISE IN LAW OR FROM A COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OR TRADE PRACTICE; AND (B) DOES NOT WARRANT, GUARANTEE, OR MAKE ANY REPRESENTATIONS REGARDING THE USE OF, OR THE RESULTS OF THE USE OF THE FORWARD-LOOKING MATERIALS IN TERMS OF CORRECTNESS, QUALITY, ACCURACY OR RELIABILITY.

4.2Post-Disbursement Loan Servicing.  FMC shall perform its obligations to SunTrust as Portfolio Administrator, as defined and more fully set forth in the Servicing Agreement.

4.3Loan Sale; Right of First Refusal.

4.3.1SunTrust agrees, in consideration of FMC’s undertakings pursuant to this Agreement, that if SunTrust seeks or offers to sell, transfer, or assign one or more Loans to any Person other than one of its Affiliates, SunTrust shall notify FMC of any such proposed sale, transfer, or assignment, and invite FMC and its Affiliates to participate as a potential purchaser in any bid process in connection therewith.  If SunTrust receives any bona fide third-party written offer to purchase such Loan(s) outside of a bid process initiated by SunTrust (“Third-Party Offers”), SunTrust shall, prior to accepting any Third-Party Offer, provide a copy of same to FMC, and FMC (or an entity affiliated with or sponsored by FMC) shall have the sole and exclusive right to notify SunTrust within [**] Business Days that it will purchase such Loan(s) on the terms of the Third-Party Offer.  If, within [**] Business Days after receipt of the Third-Party Offer from SunTrust, FMC (or an entity affiliated with or sponsored by FMC) notifies SunTrust that it declines to purchase, or fails to notify SunTrust that it (or an entity affiliated with or sponsored by it) will purchase such Loan(s) on the terms of the Third-Party Offer, SunTrust shall within its sole discretion

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be entitled to sell such Loan(s) to that third party, in whole or in part, for its own account on the terms of the Third-Party Offer free and clear of any claim under this Agreement.

4.3.2SunTrust shall not, without the express written consent of FMC, transfer, sell, or assign any Loan to an entity that has no function other than to hold the Loans, or a “variable interest entity”, within the meaning of Accounting Standards Codification, 810-10, Consolidation (ASC 810-10).

4.3.3The funds in the Participation Account (including ongoing rights and obligations related to Recoveries) shall accompany any transfer, sale or securitization of Loans and be available for the transferee under the terms of this Agreement if the rights of FMC and FMER to perform Services related to such Loans and receive compensation for such Services under the terms of this Agreement are also transferred.

4.4Portfolio Management Services Generally.

4.4.1SunTrust hereby retains FMER to perform Portfolio Management Services.  FMER shall develop default prevention and collection strategies and customized Borrower treatment streams to minimize credit losses.  Upon SunTrust’s written request and approval, activities may include:

(a)  education of Borrower and Cosigner about Loan responsibilities both in writing and through calls in preparation for repayment;

(b)  multi-channel (mail and outbound calling) contact strategies; or

(c)  development and optimization of tools (payment plans, forbearance, payment vehicles, etc.) tailored to SunTrust needs.

In carrying out its duties with respect to the Portfolio Management Services and subject to Section 4.6 and FMER’s indemnification obligations set forth herein, FMER may retain and employ Subcontractors as provided herein.

4.4.2Nothing in this Agreement shall be construed to require or permit FMER to undertake direct or indirect collection activities with respect to Borrowers or other consumer obligors, it being the intent of the Parties that consumer-facing collection activities be conducted by Subcontractors primarily engaged in the business of collecting consumer debts for third parties.

4.4.3SunTrust shall cause Servicer to provide to FMER (a) consumer file data in the manner and form described in Section 4.9.1, and (b) view-only access to Borrower Loan accounts on Servicer’s system.

4.5Early Awareness Services.  FMER shall perform the early awareness services as described in this Section (“Early Awareness Services”).

4.5.1Early Awareness Services consist of activities intended to alert Borrowers who are approaching the end of their Eligible Institution enrollment, or are no longer enrolled but not yet in repayment, to their repayment obligations, available borrower benefits (such as ACH automatic payments) and contact information for Servicer.  An additional objective of the Early Awareness Services shall be to educate Borrowers of upcoming payment requirements and advise Borrowers, if appropriate under the circumstances, of the existence of deferment, forbearance and modified graduated repayments (MGRS) alternatives under Program Guidelines then in effect, to reduce the number and percentage of Borrowers becoming subsequently delinquent in the repayment process.  Early Awareness Services include both telephonic and mail contacts, as well as address verification and skip tracing; provided, however, Early Awareness Services shall not include any activity that is prohibited by Requirements of Law, as determined by SunTrust in its sole discretion.

4.5.2Subject to Section 4.6 and FMER’s indemnification obligations set forth herein, FMER may retain the Servicer and licensed, third party Subcontractors to perform Early Awareness Services as

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described in this Section.  Subcontractors shall perform Early Awareness Services in compliance with all Requirements of Law and this Agreement.

4.5.3FMER shall oversee the results of operations of Subcontractors and shall be responsible for all activities performed by Subcontractors.

4.6Default Prevention Services.  FMER shall provide Default Prevention Services as described in this Section 4.6 (“Default Prevention Services”).

4.6.1  FMER shall retain and be responsible for licensed, third party Subcontractors who are Approved Collectors to perform Default Prevention Services.  FMER shall ensure Subcontractors perform Default Prevention Services in compliance with all Requirements of Law and this Agreement.  FMER shall manage Subcontractors in order to minimize losses from those categories of Delinquent Loans for which SunTrust and FMER agree from time to time that Default Prevention Services will be performed (i.e., Loans at or beyond a specified stage of delinquency).  Such tactics shall be undertaken in order to incent Borrowers who are past due but with respect to whom Servicer has not yet submitted a “Default Notification” (as defined in the Servicing Guidelines) to SunTrust to become current.  FMER shall require Subcontractors to provide dedicated staff to make outbound calls related to past due accounts referred by FMER and receive inbound calls resulting from Subcontractor’s efforts.  FMER also shall require Subcontractors to draft and mail letters and conduct other activities reasonably calculated to minimize losses from Delinquent Loans.  Default Prevention Services include both telephonic and mail contacts, as well as address verification and skip tracing; provided, however, Default Prevention Services shall not include any activity that is prohibited by Requirements of Law, as determined by SunTrust in its sole discretion.

4.6.2  FMER shall use commercially reasonable efforts to maximize collections in connection with the operations of Subcontractors.

4.6.3  Notwithstanding anything to the contrary herein or in the Program Guidelines or Servicing Agreement, and regardless of the length of the delinquency of any Loan, in no event shall FMER and the applicable Subcontractors continue the Default Prevention Services with respect to each applicable Loan past the date a default notification is submitted with respect to such Loan in accordance with the Servicing Guidelines.

4.6.4  Loan Payments.  Except as set forth in this Section 4.6.4, neither FMER nor any Subcontractor shall solicit payments directly to FMER or the Subcontractor from any Borrower or any other Person with respect to a Delinquent Loan, or accept payments from any Borrower or any other Person with respect to a Delinquent Loan.  Subcontractors shall direct Borrowers and any other Persons making payments on behalf of a Borrower with respect to a Loan to make such payments directly to Servicer or may (i) receive payments by electronic check or other electronic means and post such payments directly to Servicer’s payment system of record, such that the Subcontractor shall have processed the payment on behalf of SunTrust but will not itself have received the payment funds, or (ii) process payments as an ACH transmission whereby entries are initiated by the Subcontractor to the Automated Clearinghouse through the rules and guidelines established by the National Automated Clearinghouse Association as in effect from time to time.  The Parties also acknowledge and agree that a Subcontractor may facilitate payments to Servicer by taking information from a Borrower or other Person necessary to effectuate such payments, and forwarding such information to Servicer.  This Section 4.6.4 shall not affect the ability of Approved Collectors to forward Borrower payments.

4.7Subcontractors.  FMC and/or FMER may utilize the services of the Subcontractors listed in Schedule 2 to Exhibit D in the performance of FMC’s and/or FMER’s Services, provided that:  (a) FMC and/or FMER take commercially reasonable due diligence measures before engaging such Subcontractor, and on at least an annual basis thereafter, (b) FMC and FMER will remain liable for all responsibilities and obligations of FMC and/or FMER under the terms and conditions of this Agreement, even if some of

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such responsibilities and obligations are performed by FMC’s or FMER’s Subcontractors; and (c) FMC and/or FMER enters into a written Agreement with any such Subcontractor that requires the Subcontractor to abide by the terms and conditions of this Agreement, including Requirements of Law, that are applicable to FMC and/or FMER, as applicable.  FMC and FMER will pay, and hereby accept full and exclusive liability for the payment of, any and all contributions and taxes for unemployment compensation, disability insurance, old age pension, or annuities, and all similar provisions now or hereafter imposed by any Governmental Authority, which are imposed with respect to or measured by wages, salaries, or other compensation paid by FMC and/or FMER to its Personnel; provided, however, that with respect to Subcontractors, the foregoing obligates FMC and/or FMER to compensate Subcontractor Personnel only as between SunTrust, on the one hand, and FMC and/or FMER, on the other hand. Nothing in this Agreement shall obligate SunTrust to compensate Personnel, including Personnel of Subcontractors.

4.8Special Accounts.

4.8.1Bankruptcy.  In the event any Borrower becomes a debtor under the U.S. Bankruptcy Code, FMER shall accept from Servicer the documentation specified under “Bankruptcy Notification” set forth in the Servicing Guidelines and file necessary proofs of claim and other documents required to preserve the SunTrust’s interests in the subject Loan.  FMER shall promptly forward to SunTrust any notice of an adversary proceeding received by it with respect to any Loan other than a Charged Off Loan, and SunTrust shall be responsible for the management and defense of such proceeding.

4.8.2Deceased.  With respect to any Loan other than a Charged Off Loan, in the event any Borrower subject to the Portfolio Management Services is deceased, FMER shall be obligated to perform the applicable activities required under this Agreement, the Program Guidelines and the Servicing Agreement related to such deceased person.

4.8.3Fraud.  With respect to any Application or Loan for which fraud or identity theft is alleged, FMER shall assist SunTrust by promptly performing its obligations and services required under the terms of this Agreement, the Program Guidelines and the Servicing Agreement.

4.8.4Complaints and Requests for Information.  In addition to any requirements set forth in the Program Guidelines and the Servicing Agreement, FMER will immediately notify SunTrust regarding any written consumer complaint that it receives relating to the Services performed under this Agreement, and shall forward a copy of the complaint to SunTrust.  FMER shall not respond to any complaint or request for information on SunTrust’s behalf without prior written approval of such response and attachments, if any.

4.8.5Court Orders and Litigation.  In addition to the requirements in the Program Guidelines and the Servicing Agreement, FMC and/or FMER shall promptly notify SunTrust upon receipt of any subpoenas to forward documents, testify in court proceedings or otherwise provide evidence with respect to its performance of any Services hereunder, and respond to such subpoenas.  FMC and/or FMER shall provide a copy of such responses, if applicable and if permitted by Requirements of Law, to SunTrust.  FMC and/or FMER shall promptly notify SunTrust upon receipt of any subpoenas to forward documents, testify in court proceedings or otherwise provide evidence where SunTrust is the addressee or named recipient.

4.9Servicer Data to be Delivered for Program Support Services

4.9.1Data Requirements:

4.9.1.1On a daily basis, SunTrust shall, through the Servicer, provide the following data to FMC, along with other data reasonably requested from time to time and necessary for the performance of the Services:

·Default prevention data regarding Loans thirty-one (31) or more days past due

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·Default claims data for Charged Off Loans

·Loan level Borrower communication details and call disposition data reflecting dates and times of attempts and contacts, current principal balance, amounts outstanding and past due, promise-to-pay dates and other results of calls

4.9.1.2On a weekly basis, SunTrust shall, through the Servicer, provide the following data to FMC, along with other data reasonably requested from time to time and necessary for the performance of the Services:

·Loan level detail, including information on the following subjects:

·Identifying information, such as account ID, name, address, birth date, Social Security number, and telephone number

·Disbursement dates and amounts

·Loan type

·Current principal balance

·Interest rate, accrued interest, and capitalization

·Current loan status

·Enrollment status

·Deferment and forbearance

4.9.1.3On a monthly basis, SunTrust shall, through the Servicer, provide the following data to FMC no later than the third (3rd) Business Day of each month, along with other data reasonably requested from time to time and necessary for the performance of the Services:

·Loan level detail, including information on the following subjects:

·Commonline data

·Identifying information, such as account ID, name, address, birth date, Social Security number, and telephone number

·Disbursement dates and amounts

·Loan type

·Current principal balance

·Interest rate, accrued interest, and capitalization

·Current loan status

·Enrollment status

·Deferment and forbearance

·Pricing tier

·Loan payments

·Repayment period

·School identity and type

·Transaction details for the month reflecting Borrower account activity

·Data reflecting eligibility for and usage of Borrower benefits

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4.9.2Data Format:  File layouts must provide for “fixed-width” fields using the ASCII character set.  Delimited data is also acceptable, provided that FMC’s consent to the delimiter must be obtained.  If comma-delimited fields are being submitted, then all text fields must be enclosed in double quotes.

4.9.3Data Transmission:  Files will need to be encrypted (PGP preferred) and delivered to FMC via FTP.  The filenames must include unique identifiers for servicer name, snapshot or transaction file category, and contain a date-time-stamp.

Example filename for raw data file: xxxxSD00.csv_ccyymmddhhmmss.sfx

XXXX = Client Abbreviation,

SD = Transaction Detail (Monthly Loan Transaction),

00 = Tiebreaker

sfx=current file suffix as .pgp

Example filename for PGP-encrypted data file: xxxxTD00.csv_ccyymmddhhmmss.sfx

XXXX = Client Abbreviation,

TD = Transaction Detail (Monthly Loan Transaction),

00 = Tiebreaker

sfx=current file suffix as .pgp

4.10Portfolio Management Transfer.  SunTrust reserves the right to perform all Services set forth in Sections 4.4 through 4.8 upon [**] Business Days prior written notice to FMC if, after the full funding of the Participation Account at the end of the Term and at the time SunTrust delivers such notice, the amount of the balance in the Participation Account is below [**] per cent ([**]%) of the Participation Percentage multiplied by Outstanding Loan Volume.  For example, if Outstanding Loan Volume is $[**], and the Participation Percentage is [**]%, then SunTrust may deliver to FMC its notice of its election to perform all Services set forth in Sections 4.4 to 4.8 if the balance in the Participation Account is less than $[**].  In the event SunTrust provides such notice to FMC, and the Services provided in this Section 4 are terminated, (a) the transition rules set forth in Section 18.3.2 shall apply, and (b) after the end of the Transition Period, SunTrust shall no longer be obligated to pay to FMC the fee set forth in Section 6.4.1.

ARTICLE 5.  PURCHASE

5.1FMC’s Purchase Obligations.  SunTrust shall be entitled to cause FMC (or its Affiliate designee) to purchase, subject to the terms and conditions set forth in this Section 5, any Loan (each such Loan purchased pursuant to this Section 5, a “Purchased Loan”).  Such right shall apply to any Loan that is reasonably determined by SunTrust to be a Loan which should not have been approved due to FMER’s or FMC’s failure to comply in any material respect with the terms of this Agreement, the Program Guidelines or Requirements of Law, and not due to any action or omission of SunTrust.  In order to exercise such purchase right, SunTrust, pursuant to the terms of and within the time limitation set forth in the Program Guidelines and Servicing Agreement, shall make demand of FMC in writing that FMC purchase such Loans as have been so determined for an amount equal to the Purchase Price, calculated in the manner set forth below.  If FMC objects to SunTrust’s characterization of any Loan as a Loan which should not have been approved, the dispute resolution procedure set forth in this Agreement shall apply; if FMC provides no such objection to SunTrust within ten (10) Business Days of SunTrust’s written purchase demand, then FMC shall pay SunTrust the Purchase Price in immediately available funds (outside of funds in the Participation Account) within fifteen (15) Business Days after receipt of SunTrust’s purchase notice.

5.2Purchase Price.  The “Purchase Price” for each Purchased Loan shall be an amount equal to the outstanding balance of the Loan, including accrued and unpaid interest through the date the Loan is removed from the Servicer’s system.

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5.3Conveyance.  Upon payment of the Purchase Price with respect to such Loans which should not have been approved, SunTrust shall convey to MG Private Student Loan Trust 2010-1, at FMC’s cost and expense, any such Purchased Loan.  No later than the time that is contemporaneous with the payment of the Purchase Price, SunTrust shall deliver, or cause to be delivered, to MG Private Student Loan Trust 2010-1 (or its designee) the Credit Agreement, all related Loan documentation and complete Loan file relating to such Purchased Loan and shall execute and deliver such instruments of transfer or assignment, in each case without recourse absent any violation by FMC or SunTrust of Requirements of Law or the Credit Agreement, as shall be necessary to vest in FMC (or its Affiliate designee) title to such Purchased Loan.

ARTICLE 6.  FEES

6.1Invoices.  All fees will be invoiced to SunTrust by FMC on behalf of itself and FMER at the following address:

SunTrust Bank

SunTrust Education Loans

1001 Semmes Avenue

Richmond, VA 23224

Attn: Marnie Crane

SunTrust may change its designated address for invoices at any time by written notice to FMC which meets the requirements of Section 19.1.

6.2General.  All fees shall be paid by SunTrust within sixty (60) days after SunTrust’s receipt of the invoice therefor, except fees subject to good faith dispute between the Parties.  In the event any fees have been made for a cancelled Disbursement, as defined by the cancellation window described in the Servicing Guidelines, SunTrust shall offset future fees with any and all prior fees paid for such cancelled Disbursement.  Except as set forth in this Article 6, Section 18.1.2, Section 18.3.1, or as otherwise set forth in this Agreement, no fees will be paid after the termination of this Agreement, except for Applications which have already been submitted and credit approved prior to the termination of this Agreement.  Except pursuant to an indemnity obligation or as otherwise expressly stated in this Agreement, no other amounts shall be due or payable by SunTrust.

6.3Loan Processing Services Fees.

6.3.1For the Loan Processing Services rendered during the Term of this Agreement, FMC shall invoice to SunTrust on a monthly basis, and SunTrust shall pay to FMER fees (the “Loan Processing Fees”)” equal to [**]% of the principal amount of the Disbursed Loan Amount for the prior month.

6.3.2Loan Processing Fees shall be invoiced monthly as agreed by the Parties from time to time.  FMC’s invoice for FMER’s Loan Processing Services will state the number and amount of Loans disbursed during the month covered by the invoice.

6.4Program Support Services Fees.

6.4.1For Program Support Services rendered during the Term of this Agreement, other than Production Support Services and Program Administration Services, SunTrust shall pay FMC an ongoing monthly fee equal to [**]% multiplied by the Average Daily Balance, divided by [**].  SunTrust shall be invoiced on a monthly basis by the Servicer and shall remit payment to the Servicer for all Program Support Services fees incurred hereunder.

6.4.2For Production Support Services rendered during the Term of this Agreement, FMC shall invoice SunTrust for, and SunTrust shall pay FMC, a fee equal to [**]% of the Disbursed Loan Amount

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in the previous month for Loans sourced through the FMC URI/URL, payable monthly in accordance with this Article 6.

6.5Participation Account Administrative Fee; Program Administration Services Fees.

6.5.1For administration of the Participation Account, SunTrust shall pay the monthly Participation Account Administrative Fee as set forth in this Agreement.  For Program Administration Services, SunTrust shall pay FMC the monthly Program Administration Services Fee.

6.5.2SunTrust shall be invoiced for this fee monthly by FMC.

6.5.3Notwithstanding Section 6.5.1, in the event the Program Administration Services Fee is less than $[**], SunTrust shall offset the Participation Account Administrative Fee by an amount equal to the amount the Program Administration Services Fee falls below $[**].

6.6After termination of this Agreement, SunTrust shall continue to pay FMC the Program Administration Services Fee on a monthly basis.

6.7For example purposes only, with respect to the fees for Program Support Services, Participation Account Administration, and Program Administration Services:

Average Daily Balance	$[**]
Monthly Accrued Interest	$[**]
Sum of accrued interest due to FMC in each pricing segment	$[**]
Program Support Services Fee	$[**]	([**]% * Average Daily Balance)/ [**]
Participation Account Administrative Fee (monthly)	$[**]	([**]% * Average Daily Balance)/ [**]
Program Administration Services Fee (monthly)	$[**]	(FMC Share of Portfolio Yield, less the Program Support Services Fee, less the Participation Account Administrative Fee)

ARTICLE 7.FMC CREDIT ENHANCEMENT

7.1Participation by FMC.  In connection with Loans originated and funded under the terms of this Agreement, FMC agrees to fund the Participation Account for charge off coverage and credit enhancement purposes.  The Participation Account shall be governed by this Article VII and an agreement between FMC and SunTrust regarding deposits, withdrawals, and procedures relating to the Participation Account (the “Participation Account Deposit Agreement”).  SunTrust agrees to compensate FMC, by paying to FMC an undivided fractional interest in the Portfolio Yield from its portfolio of such Loans, on the following terms and conditions:

7.1.1Initial Participation Account Deposit; Quarterly Participation Account Deposits.  Prior to the commencement of the Loan Processing Services, FMC shall deposit the Initial Participation Account Deposit in a Participation Account for the initial Pool, which amount shall be counted toward the Participation Cap.  Not later than fifteen (15) days following the end of each calendar quarter, FMC shall calculate the average of (i) the Participation Interest on the initial Pool as of the end of such quarter and (ii) the Participation Percentage multiplied by the Disbursed Loan Amount as of the end of such quarter, in each case after giving effect to changes to the Projected Default Rate as of quarter-end.  Not later than fifteen (15) days following the end of the calendar quarter, and subject to the Participation Cap, FMC shall deposit in the Participation Account the amount, if any, by which the foregoing average exceeds the cumulative previous deposits made by FMC to the Participation Account as of the end of such quarter (each, a “Participation Account Deposit”).  The Parties intend that additional Participation Account Deposits shall be made by FMC quarterly through the expiration or termination of this Agreement,

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subject to the Participation Cap, to the extent the distribution of the Disbursed Loan Amount among pricing tiers changes the Projected Default Rate, and therefore, the Participation Interest, for the Pools, taken together.

7.1.2Initial Participation Account Deposit Reconciliation.  On the last day of the month in which the first anniversary of the Initial Participation Account Deposit by FMC occurs, FMC shall be entitled to a payment from the Participation Account of any amount by which the sum of Participation Account Deposits exceeds the Participation Percentage multiplied by the Disbursed Loan Amount, including remaining scheduled Loan disbursements, through the last day of such month (e.g., if Loan volume is substantially below projections, the amount, if any, by which the Initial Participation Account Deposit exceeded the required deposit for Disbursed Loan Amount during the first year of the Agreement).  SunTrust agrees to withdraw and pay such amounts to FMC within fifteen (15) days after the end of such month.

7.1.3Participation Account Deposits for Subsequent Pool; Reconciliation.  With respect to the second Pool during the Term, subject to the Participation Cap, FMC shall deposit an Initial Participation Account Deposit in the Participation Account prior to the disbursement of the first Loan in such Pool.  Not later than fifteen (15) days following the end of each calendar quarter during the second year of the Term, FMC shall calculate the average of (i) the Participation Interest on the Pools as of the end of such quarter and (ii) the Participation Percentage multiplied by the Disbursed Loan Amount as of the end of such quarter, in each case after giving effect to changes to the Projected Default Rate as of quarter-end.  Not later than fifteen (15) days following the end of the calendar quarter, FMC shall deposit in the Participation Account the amount, if any, by which the foregoing average exceeds the cumulative previous deposits in the Participation Account as of the end of such quarter, minus amounts paid from the Participation Account pursuant to Section 7.1.2. Not later than 270 days following the end of the then-current Term (to allow for all final disbursements and any cancellations thereof to be made), and subject to the Participation Cap, (a) if the sum of previous deposits in the Participation Account as of the end of the then-current Term is less than the Participation Percentage for all Pools multiplied by the Disbursed Loan Amount plus the amount of all remaining scheduled Loan disbursements, for all Pools as of the end of the then-current Term, after giving effect to changes to the Projected Default Rate as of the end of the Term, then FMC shall deposit a final Participation Account Deposit into the Participation Account equal to the amount of such difference, or (b) if the sum of all Participation Account Deposits is greater than the Participation Percentage for all Pools multiplied by the Disbursed Loan Amount plus the amount of all remaining scheduled Loan disbursements for all Pools, then FMC shall be entitled to payments from the Participation Account of any amount by which the sum of Participation Account Deposits exceeds the Participation Percentage for all Pools as of the end of the Term multiplied by the Disbursed Loan Amount plus the amount of all remaining scheduled Loan disbursements for all Pools as of the end of the Term.  SunTrust agrees to withdraw and pay to FMC such amounts subject to subsection (b) above, if any, no later than two hundred eighty-five (285) days after the end of the Term.

7.1.4Charged Off Loan Payments.  Not later than thirty (30) days following the end of each month, SunTrust shall withdraw on a monthly basis from the Participation Account, to the extent of available funds, the outstanding principal and accrued interest balance as of the date each Charged Off Loan is moved from the Servicer’s system.  Upon SunTrust’s withdrawal under this Section 7.1.4, SunTrust shall assign the Charged Off Loan to FMC (or its Affiliate designee) by delivering, or causing to be delivered, the Credit Agreement, all related Loan documentation and complete Loan file relating to such Charged Off Loan and shall execute and deliver such instruments of transfer or assignment, in each case without recourse absent any violation by FMC or SunTrust of Requirements of Law or the Credit Agreement, as shall be necessary to vest in FMC (or its Affiliate designee) title to such Purchased Loan.  On the date of any payment under this Section, SunTrust shall only be entitled to withdraw a payment in an amount equal to the outstanding principal and accrued interest balance as of the date each Charged Off Loan is moved from the Servicer’s system.  Notwithstanding any other provision in this Agreement to the

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contrary, if the funds in the Participation Account are not sufficient to cover the payment to SunTrust for any Charged Off Loan, the payment to SunTrust for such Charged Off Loan will be made when funds become available through the deposit of Recoveries in the Participation Account.  Funds deposited in the Participation Account under Section 7.1.5 hereof shall not be available for withdrawal by SunTrust under this Section 7.1.4.

7.1.5Participation Account Administrative Fee.  Not later than thirty (30) days following the end of each month, SunTrust shall deposit the Participation Account Administrative Fee in the Participation Account.  Regardless of whether funds in the Participation Account are sufficient to cover the payment to SunTrust for any Charged Off Loan, the Participation Account Administrative Fee deposited by SunTrust shall be released to FMC within two (2) Business Days of deposit into the Participation Account.  During the Term, the Participation Account Administrative Fee shall be modified quarterly to reflect the extent to which the distribution of the Disbursed Loan Amount among pricing tiers changes the Projected Default Rate for the Pool.  FMC shall invoice SunTrust for the amount of such fee as set forth in Section 6.2.

7.1.6Participation Account Payments.  In addition to any payments set forth in Section 7.1.2, payments shall be made to FMC monthly, after the date that is forty-eight (48) months after the Effective Date, to the extent that funds in the Participation Account as of the end of any month, as a percentage of Outstanding Loan Volume as of the end of such month, exceed the ratio, expressed as a percentage, of the Participation Percentage, after giving effect to changes to the Projected Default Rate as of the end of the Term to Disbursed Loan Amount (such excess, the “Participation Account Excess Percentage”).  Such monthly payment to FMC at the end of any such month (the “Participation Account Payment”) in which the Participation Account Excess Percentage is positive shall equal the Participation Account Excess Percentage multiplied by the Outstanding Loan Volume at the end of such month.

7.1.7Recoveries.  After the payment to SunTrust with respect to any Charged Off Loans under Section 7.1.4, and after SunTrust has assigned the Charged Off Loan to FMC, Recoveries shall be deposited in the Participation Account by MG Student Loan Trust 2010-1 and its agents.

7.1.8Review of Participation Reporting.  FMC and SunTrust shall review the quarterly Participation Account report during the first ten (10) days after receiving it and shall notify the other Party in writing (which may be in the form of an email communication) if it in good faith disputes any items in such report during such 10-day period.  If either FMC or SunTrust disputes items in the report, the payments required in Section 7.1.4 relating to such disputed item shall be withheld until such dispute is resolved to the satisfaction of FMER, SunTrust and FMC.  If, within thirty (30) days of receiving a notice of dispute, the Parties are unable to resolve the dispute, any Party may invoke the dispute resolution procedures of this Agreement.

7.1.9Account Access.  SunTrust agrees that it shall provide view-only online access to the Participation Account to FMC and/or FMER employees designated by FMC and/or FMER from time to time.

7.1.10Security Interest in Participation Account.  FMC hereby grants SunTrust a security interest in the Participation Account pursuant to Article 9 of the Georgia Uniform Commercial Code (“Article 9”).  SunTrust is responsible for perfecting this security interest in accordance with Article 9.  FMC shall cooperate in good faith to enable SunTrust to perfect its security interest in the Participation Account, including, but not limited to, by entering into a mutually acceptable Participation Account Deposit Agreement with SunTrust.  Any such Participation Account Deposit Agreement or similar agreement, or other means of perfecting SunTrust’s security interest, shall be consistent with the purpose and terms of this Agreement.  SunTrust shall be entitled to enforce its security interest in the Participation Account in accordance with Article 9, subject to the terms of this Agreement, only upon the occurrence of

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one or more events giving SunTrust the right to terminate this Agreement pursuant to Section 18.2.1 hereof.

7.1.11Participation Cap and Transition.  At such time as FMC has deposited, in the aggregate and inclusive of Initial Participation Account Deposits, [**] dollars ($[**]) in the Participation Account, FMC shall monitor the number and amount of pending Applications and amount of potential Loan disbursements, and FMC and SunTrust shall confer and mutually establish a date to cease accepting new Applications.  Such date shall reasonably approximate the date on which cumulative deposits in the Participation Account, whether previously made by FMC or which FMC will be obligated to make once Loan disbursements are complete, are expected to equal or exceed [**] dollars ($[**]), after giving effect to estimated future Loan disbursements that will be made for all Applications submitted for a credit inquiry on or before such date.  All Applications submitted for a credit inquiry by such date shall be processed in accordance with Section 18.4 of this Agreement, and FMC shall make Participation Account Deposits in connection with any Loans made for such applications, regardless of whether the total deposits ultimately made by FMC in the Participation Account are less than or greater than [**] dollars ($[**]).

ARTICLE 8.  REPRESENTATIONS AND WARRANTIES

8.1Representations and Warranties of the Parties.  Each Party hereby represents and warrants to the other Parties as of the Execution Date and throughout the Term of this Agreement as follows:

8.1.1Organization.  It is duly organized, validly existing and in good standing under the laws of its state of organization and/or the United States, and has full power and authority to conduct its business as it is presently being conducted.

8.1.2Authorization.  It has all necessary authority and has taken all necessary action to enter into this Agreement, and subject to the satisfaction or waiver of the Effectiveness Conditions, on the Effective Date, to consummate the transactions contemplated hereby and to perform its obligations hereunder.  This Agreement has been duly executed and delivered by each Party and is a legal, valid and binding obligation of each Party, enforceable against it in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, rearrangement, reorganization or similar debtor relief legislation affecting the rights of creditors generally from time to time in effect and by general principles of equity (regardless of whether such enforcement is sought in a proceeding at law or in equity) and the discretion of the court before which any such proceeding may be brought.

8.1.3Absence of Conflicts.  Neither the execution and delivery of this Agreement by any Party nor the performance by any Party of its obligations hereunder will result in (i) a violation of the articles of incorporation or charter documents of such Party, (ii) a breach of, or a default under any contract, agreement, instrument, lease, commitment, franchise, license, permit or authorization to which such Party is a party or by which it or its assets are bound, which breach or default would have a material adverse effect on its business or financial condition or its ability to consummate the transactions contemplated hereby, or (iii) a violation by such Party of any Requirements of Law, which violation would have a material adverse effect on such Party’s business or financial condition, its ability to consummate the transactions contemplated hereby or perform its obligations hereunder, or which could materially impair the enforceability of the Loans.

8.1.4Consents and Approvals.  Each Party has obtained any and all consents, approvals or authorizations of, and made any and all declarations, filings or registrations with, any Governmental Authority, or any other Person, required to be obtained or made by such Party in order to execute, deliver and perform its obligations under this Agreement or consummate the transactions contemplated hereby, except where the failure to do so would not have a material adverse effect on its business or financial condition, its ability to consummate the transactions contemplated hereby or perform its obligations hereunder, or which would not materially impair the enforceability of the Loans.

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8.1.5Litigation.  There is no action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, labor dispute, arbitral action or investigation pending, or to the actual knowledge of any Party threatened, against or relating to such Party that would likely have a material adverse effect on this Agreement or on its business or financial condition, its ability to consummate the transactions contemplated hereby or perform its obligations hereunder, or which could materially impair the enforceability of the Loans.

8.1.6Compliance with Law.  It does and will at all times comply with all applicable Requirements of Law, in all material respects including the provisions of Title X and the marketing and conduct requirements of Section 1011 thereof, 15 U.S.C. § 1650.

8.1.7Intellectual Property.  It owns, or has the right to use under valid and enforceable agreements, all intellectual property rights reasonably necessary for and related to its performance under this Agreement and such performance will not infringe or violate any intellectual property rights of any other Person.

Each Party is bound by the representations and warranties specifically designated to it within this Agreement and any exhibit attached hereto.

8.2Representations and Warranties of SunTrust.  With respect to Loan Processing Services and subject to FMER’s and FMC’s representations, warranties and covenants regarding compliance with Requirements of Law as expressly set forth in the Agreement, SunTrust represents, warrants and covenants to FMC and FMER that it will at all times comply with all Requirements of Law.  Without limiting the generality of the foregoing, SunTrust represents, warrants and covenants that:

8.2.1all documents and forms provided by SunTrust to FMC or FMER and all instructions with respect thereto, including the forms of loan applications and Credit Agreements, comply with all Requirements of Law;

8.2.2SunTrust is a federally-insured financial institution and has obtained any and all consents, approvals or authorizations of, and made any and all declarations, filings or registrations with, any Governmental Authority, or any other Person, required to be obtained or made by it in order to advertise, make, fund, hold or collect Loans; and

8.2.3the Program Guidelines, including but not limited to the Pricing Schedule, all marketing activities and SunTrust Materials with respect to the Program conform to all Requirements of Law, including the Truth-in-Lending Act and Regulation Z, the Federal Trade Commission Act and any interpretations issued by the Federal Trade Commission and federal banking regulators, the Equal Credit Opportunity Act, Higher Education Opportunity Act Title X, the Student Lending Accountability, Transparency and Enforcement Act, all implementing regulations and all similar state and/or federal laws that may be now in effect or hereinafter enacted.

8.3Representations and Warranties of FMER.  With respect to Loan Processing Services, FMER hereby represents and warrants to SunTrust at the time of each Loan disbursement, subject to the exceptions noted in subsection 8.3.12 below, as follows:

8.3.1With respect to each Loan originated hereunder, a Credit Agreement has been duly and properly executed by the Borrower thereunder and is enforceable against such Borrower in accordance with its terms except as enforceability may be affected by bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and by equitable principles.

8.3.2Without limiting the generality of the foregoing subsection 8.3.1, each Loan has been made to a Borrower who, at the time of origination of the Loan:

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(i)had the legal capacity to execute and deliver a Credit Agreement under Requirements of Law, including attaining the age of majority;

(ii)was not deceased; and,

(iii)was a United States citizen/national or a permanent resident alien of the United States.

8.3.3Except as expressly otherwise approved in writing by SunTrust, each Loan has been originated in the United States of America, its territories, its possessions or other areas subject to its jurisdiction, by FMER in the ordinary course of its business.

8.3.4Each Loan has been originated in conformity in all material respects with the Program Guidelines and all Requirements of Law with respect to the origination thereof, including the Equal Credit Opportunity Act and any applicable usury laws.  No Application for a Loan shall be, or has been, rejected, approved or discouraged by FMER on behalf of SunTrust on the basis of race, sex, color, religion, national origin, age (other than laws limiting the capacity to enter a binding contract) or marital status, the fact that all or a part of any Applicant’s income derives from any public assistance program, or the fact that any Applicant has, in good faith, exercised any right under the Consumer Credit Protection Act.

8.3.5Each Loan has been documented on forms set forth in the Program Guidelines, which forms, except to the extent otherwise modified from time to time pursuant to Section 3.1.1, (a) require interest accrual (whether or not such interest is being paid currently or is being capitalized) and yield interest at the applicable rate thereto, (b) provide or, when the payment schedule with respect thereto is determined, will provide for payments on a periodic basis that fully amortize the principal amount of the Loan by its maturity, as such maturity may be modified in accordance with any applicable deferral or forbearance periods granted in accordance with Requirements of Law and the Program Guidelines; and (c) contain consumer loan terms in strict conformity with the Program Guidelines;

8.3.6With respect to each Loan (subject to SunTrust’s obligations above), FMER has provided or caused to be provided, all notices, statements and disclosures required under the Program Guidelines, Requirements of Law, and rules and regulations with respect to the origination thereof, including but not limited to the Truth-in-Lending Disclosure Statements, and each such notice, statement and disclosure was true, correct and complete in all material respects when provided;

8.3.7Neither FMER nor any of its Affiliates has received any notice or communication alleging noncompliance with the Program Guidelines, or any applicable Requirement of Law with regard to the origination of any Loan.

8.3.8FMER has not impaired, waived, altered or modified the terms of any Credit Agreement.

8.3.9All data and records provided by or on behalf of FMER to SunTrust (and the Servicer) with respect to each Loan shall be true, correct and complete when provided in all material respects.

8.3.10At the time of application, according to the credit bureau report or self-reported application information, no Borrower was a debtor in a bankruptcy proceeding.

8.3.11All agreements with Subcontractors shall require the Subcontractors to perform in accordance with the relevant portions of this Agreement, the Program Guidelines, the Servicing Agreement, and Requirements of Law.

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8.3.12All of FMC’s and FMER’s representations, warranties and covenants hereunder are subject to the following:

(i)FMC’s and FMER’s representations, warranties and covenants hereunder shall not be breached by any occurrence or condition to the extent such occurrence or condition is caused by a breach of one or more of SunTrust’s representations, warranties or covenants regarding compliance with Requirements of Law or the failure of SunTrust to perform any of its other agreements hereunder related to FMER’s or FMC’s performance as expressly set forth in this Agreement.

(ii)Execution of Credit Agreements shall be deemed lawful and complete if: (A) an original document received by U.S. mail contains original signatures purporting to be the signatures of all Borrowers, (B) a copy received by fax contains copies of signatures purporting to be signatures of all Borrowers, or (C) if execution is by electronic signature, the Borrower who is electronically signing has satisfied the authentication criteria set forth in the Program Guidelines.

(iii)In performing its obligations under this Agreement, FMC and FMER shall be entitled to rely on the accuracy and completeness of all information provided to it by SunTrust, any Borrower or any Eligible Institution.

(iv)To the extent that FMER has followed the policies and procedures set forth in its Customer Identification Program, Red Flags Program and Address Mismatch Program, neither FMC nor FMER shall not be liable with respect to any Borrower fraud, identity theft or defective execution with respect to any Applicant or Borrower (or purported Applicant or Borrower).

8.4Custom Scoring Model.  FMC represents and warrants that its custom and proprietary score model complies with Requirements of Law, including that the model does not use (i) any of the following elements as inputs or model variables: gender, age, race, color, religion, national origin, childbearing or familial status, marital status, ethnic group, veteran status, disability, receipt of income from any public assistance program, or good faith exercise of any right under the federal Consumer Credit Protection Act, or any other factor prohibited by Requirements of Law, or (ii) geographic information in a way that would result in restricting credit from geographic areas on any basis prohibited by Requirements of Law.

8.5Performance of FMER and FMC.  Each of FMER and FMC acknowledge and agree with SunTrust that each of them shall be jointly and severally liable to SunTrust for any failure of either of them to perform as required by the terms of this Agreement.

8.6Licensing.  Each Party warrants that it will maintain during the effectiveness of this Agreement the legal authority to conduct all of the activities required to be conducted by it pursuant to the terms of this Agreement.  As of the Execution Date, FMER has applied for the licenses set forth on Exhibit J (the “FMER License Applications”).  If the FMER License Application in Massachusetts has not been approved prior to the Effective Date, FMER shall not charge SunTrust the fee set forth Section 6.3.1 for any Loan for which any Borrower is a resident of Massachusetts until FMER obtains its Massachusetts license.  If the FMER License Application in New Jersey has not been approved prior to the Effective Date, FMER shall not accept any Applications for which any Applicant is a resident of New Jersey, until FMER obtains its New Jersey license.

ARTICLE 9.COMPLIANCE WITH REQUIREMENTS OF LAW.  Each Party shall comply with all applicable Requirements of Law in all material respects in performing its respective obligations under this Agreement.  Notwithstanding the foregoing, the Parties acknowledge and agree that unless expressly

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set forth in the Agreement, neither FMER nor FMC makes any representation or warranties regarding conformity of any loan servicing processes or loan product terms or any forms, documents or disclosures with Requirements of Law.  With respect to all aspects of the Program for which FMER and FMC make no express representations, including the Program Guidelines, SunTrust shall be responsible for compliance of such aspect of the Program with Requirements of Law.

ARTICLE 10.INSURANCE.

10.1FMC shall (on behalf of itself and its Affiliates) at all times and at its sole cost and expense, keep in full force and effect until one (1) year after termination of this Agreement, the insurance coverage in amounts no less than what is specified on Exhibit H, attached hereto and incorporated herein (“Insurance Requirements”).  All insurance policies or bonds required by this Agreement will be issued by insurance companies with an A.M. Best Rating of not less than “A1”, a Standard & Poor’s rating of not less than “A-”, or a Moody’s rating of not less than “A3”.  Except as otherwise approved in writing by SunTrust, FMC must also ensure that its Subcontractors comply with the Insurance Requirements.  FMC shall also maintain workers compensation insurance in compliance with all applicable Requirements of Law.

10.2No insurance policy shall be cancelled, amended or modified by FMC in any manner that materially limits, restricts, or conditions the coverage provided, decreases the amount of coverage or increases the deductible, or in any other way reduces the coverage provided with the result that the Insurance Requirements are no longer met, without the prior written consent of SunTrust, which shall not be unreasonably withheld.  Cancellation, amendment or modification of any insurance policy shall not relieve either FMC of its continuing obligation to maintain insurance coverage in accordance with the Insurance Requirements.

10.3FMC agrees to waive, and will require its insurers to waive, all rights of subrogation against SunTrust, its directors, officers, and Personnel as it relates to the General Liability and Umbrella Liability policies required on Exhibit H.  On or prior to the Effective Date, FMC will provide SunTrust with a certificate of insurance evidencing such required coverage; provided that SunTrust reserves the right to require FMC to deliver complete copies of FMC’s insurance policies from time to time thereafter.  In addition, SunTrust will be notified of any material change or cancellation of such policies with at least thirty (30) days prior written notice.  Notwithstanding any other provision in this Agreement, if FMC, at any time, neglects or refuses to maintain or deliver evidence of the insurance required herein within a reasonable time after SunTrust’s request, or should such insurance be canceled or materially changed with the result that the Insurance Requirements are no longer met without SunTrust’s consent, SunTrust will have the right to immediately terminate this Agreement without penalty, subject to Section 18 hereof.

ARTICLE 11.INTELLECTUAL PROPERTY.

11.1Except as otherwise agreed to in writing by the Parties, in connection with the provision of Services as specified in this Agreement, each Party shall retain all right, title and interest in and to its intellectual property, Proprietary Information, systems, software, programs, processes, technology, services, methodologies, models, products, trademarks, service marks and any other materials or rights, tangible or intangible (collectively, “Intellectual Property”) and nothing shall or shall be construed to restrict, impair, transfer, license, convey or otherwise alter or deprive either Party of any of its rights or proprietary interests in its Intellectual Property, including any modifications, enhancements or derivative works thereof.

11.2No Party may use any other Party’s Intellectual Property for any purpose other than as specified in this Agreement.  Upon expiration or termination of this Agreement, all licenses granted by any Party to the other shall immediately terminate without notice required, and each Party shall return the other Party’s Intellectual Property and all copies or derivative works made thereof, as specifically permitted hereunder. 

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Each Party shall have no further rights or licenses to use the other Party’s Intellectual Property or any such copies or derivative works, except as specifically agreed between the Parties in writing.

11.3Nothing contained in this Agreement shall be construed as granting to any Party any right or license under any of the other Parties’ present or future patent rights or copyrights, or as granting to any Party any right or license to use for any purpose other than those purposes expressly stated herein any of the other Parties’ information or any other information, materials or results received, discovered, or produced by any Party in connection with the Services performed for SunTrust.

ARTICLE 12.BOOKS AND RECORDS; AUDIT RIGHTS

12.1Maintenance of Books and Records.  Each Party will keep proper books and records reflecting all of its activities and transactions under this Agreement so that its financial statements can be maintained in accordance with generally acceptable accounting practices.  Each Party shall maintain its books and records relating to activities under this Agreement throughout the term hereof and thereafter for such periods as are required under applicable Requirements of Law or such Party’s policy, whichever is longer.

12.2Recordkeeping Requirements.  FMER shall retain the original Credit Agreement for each Loan (or a copy thereof in the case of execution by fax or electronic signature as permitted in the Program Guidelines), along with a complete copy of the Truth in Lending Disclosure Statements (other than the Application and Solicitation Disclosure), income verification, enrollment verification/certification of the Loan by the Eligible Institution, credit bureau report, missing information notices, correspondence from the Applicant(s), and all other documents and data related to the Loan, whether originally sent to SunTrust (and forwarded to FMER) or to FMER.  FMER shall also retain records of the time and date each Applicant acknowledges the Application and Solicitation Disclosure and records of the content of the Application and Solicitation Disclosure that each Applicant viewed at such date and time.  FMER will be responsible for the safe maintenance of such Loan documentation and all records of Applicant Information for at least seven (7) years from either the time the Loan is fully repaid or the Loan is sold by SunTrust to a third party.

12.3Audit Rights.

12.3.1General Audits.  SunTrust shall have the right to review, inspect and audit, at SunTrust’s expense, at such reasonable times as mutually agreed by the Parties, and upon at least ten (10) Business Days’ advance notice, the books, records, documents, other writings, information, whether in hard copies, electronic form or otherwise, of FMC or any Affiliate thereto performing Services to the extent related to: (i) such Party’s activities hereunder or (ii) conformance with such Party’s obligations hereunder.  Upon at least ten (10) Business Days’ advance written notice to FMC, and subject to FMC’s reasonable security requirements, FMC shall provide to SunTrust (and SunTrust’s internal and external auditors, inspectors, regulators and other representatives that SunTrust may designate from time to time) access at reasonable hours to FMC’s Personnel, to the facilities at or from which Services are then being provided, and to FMC’s records and other pertinent information, all to the extent relevant to FMC’s obligations under this Agreement.  Such access shall be provided for the purpose of performing audits and inspections of FMC and its businesses and to examine FMC’s performance under this Agreement, including: (a) verifying the integrity of data related to or concerning systems in FMC’s possession and control; (b) examining the systems that process, store, support and transmit such data; (c) examining the controls (e.g., organizational controls, input/output controls, system modification controls, processing controls, system design controls and access controls) and the security, disaster recovery and back-up practices and procedures; (d) examining FMC’s measurement, monitoring and management tools; and (e) enabling SunTrust to meet applicable legal, regulatory and contractual requirements.  FMC shall provide any assistance reasonably requested by SunTrust or its designee, and at SunTrust’s expense, in conducting any such audit.  Such audit and any information obtained therefrom shall be subject to the confidentiality

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restrictions contained in this Agreement and SunTrust shall be responsible for enforcing such restrictions with respect to its internal and external auditors, inspectors, regulators (to the extent permitted by Requirements of Law) and other representatives.  SunTrust shall also have the right to perform a monthly audit of Application and Loan files at a time and using procedures mutually acceptable to FMER and SunTrust.

12.3.2Within five (5) Business Days of receipt of any audit notice, FMC shall notify SunTrust, in writing, of any objections to the scope of the review, inspection or audit or the supporting documentation requested, it being understood that any objections must be based upon a reasonable and documented belief that such review, inspection, audit or documentation is not reasonably related to the obligations of FMC or FMER under this Agreement or would require the disclosure of Proprietary Information (other than information that is proprietary solely as a result of this Agreement).  The Parties shall cooperate in good faith to resolve objections with respect to any review, inspection or audit proposed by SunTrust and such review, inspection or audit shall not commence until such objections are resolved, unless sooner required for compliance with a court order, civil investigation demand or other Governmental Authority inquiry.  In the event the Parties are not able to resolve such objections, the matter shall be resolved in accordance with the procedures set forth in Article 17.

12.3.3Any review, inspection or audit to be performed by SunTrust pursuant to this Section 12.3 shall be conducted only during normal business hours, using reasonable care not to cause damage and not to interrupt the normal business operations of the Party to be inspected.

12.4Regulatory Agency Requirements.  FMC and FMER understand and acknowledge that SunTrust is subject to examination by a Governmental Authority with authority over SunTrust and its Affiliates.  FMC and FMER agree to cooperate fully with any examination or inquiry by any such Governmental Authority at SunTrust’s expense.  FMC and FMER further acknowledge that SunTrust, as a regulated financial institution, is required to engage in ongoing oversight of its relationship with FMC and FMER, including reviewing such Parties’ compliance with Privacy Requirements, insurance coverage, and performance under this Agreement.  FMC and FMER agree to notify SunTrust promptly in writing in the event it experiences any material adverse change, including material financial difficulty, other catastrophic event, material change in strategic goals, or significant staffing changes relative to its obligations under this Agreement.  With respect to audits and examinations related to the Program to be performed on FMC and/or FMER by a Governmental Authority with authority over SunTrust and its Affiliates, SunTrust shall provide FMC with as much prior written notice as reasonably practicable; provided, however, that the notice requirement of Section 12.3.1 shall not apply to any such audit or examination.

12.5Regulatory Audits.  Within ten (10) Business Days of its receipt, FMC shall provide SunTrust with a copy of the final written results of any audit performed by a Governmental Authority, unless such results are confidential under Requirements of Law; it being understood that FMC shall not be required to disclose the results of any examinations conducted by, or correspondence with, the U.S. Office of Thrift Supervision (“OTS”) that are deemed confidential by the OTS.  If any audit results in FMC being notified that it is not in compliance with any Requirements of Law, or relevant and generally accepted accounting principle or other material audit requirement related to the Services, FMC shall immediately notify SunTrust and confer with SunTrust to determine the merits of the alleged violation and the appropriate response.  In the event the Parties conclude that the auditor’s or regulator’s notice of violation is accurate, in whole or in part, FMC shall promptly use commercially reasonable efforts to comply with such audit to the extent that the alleged violations are deemed accurate by the Parties at no cost to SunTrust.

ARTICLE 13.PRIVACY AND SECURITY POLICIES

13.1Privacy and Security. FMC’s privacy and security policies, as of the Execution Date, are attached hereto and incorporated herein as Exhibit I.  FMC reserves the right to modify its privacy and

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security policies in its reasonable discretion from time to time by notice, in writing, to SunTrust; provided, however, that any modifications that materially adversely affect SunTrust’s rights or interests must be approved in advance and in writing by SunTrust before FMC implements such modifications. Within ten (10) Business Days after receipt of a modification notice from FMC, SunTrust shall notify FMC as to whether it believes the proposed modifications will materially adversely affect SunTrust’s rights or interests.  If SunTrust notifies FMC that the proposed modifications will materially adversely affect SunTrust’s rights or interests, SunTrust and FMC shall confer regarding how such proposed modifications may be altered so that they would not materially adversely affect SunTrust’s rights or interests.  In the event SunTrust and FMC are unable to reach agreement on proposed modifications within sixty (60) days after the date of FMC’s original notice, the dispute shall be resolved using the procedures set forth in Article 17.

ARTICLE 14.CONFIDENTIALITY OF PROPRIETARY INFORMATION.

14.1Proprietary Information Access or Exchange.  In the performance of this Agreement, each Party may disclose to the other Party certain Proprietary Information.

14.2Definitions.  For the purposes of this Agreement, the following terms will have the definitions set forth below.

14.2.1 “Proprietary Information” means Trade Secrets, Confidential Business Information, and NPPI.

14.2.2“Trade Secrets” means trade secrets as defined under Georgia law, as amended from time to time, and will include without limitation and without regard to form, technical or non-technical data, formulae, patterns, compilations, programs, software programs, devices, methods, techniques, drawings, processes, financial data, financial plans, product plans, non-public forecasts, studies, projections, analyses, all customer data of any kind, lists of actual or potential customers, business and contractual relationships, or any other information similar to the foregoing that: (a) derives economic value, actual or potential, from not being generally known and not being readily ascertainable by proper means to other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.  For the sake of clarity, “Trade Secrets” will include information provided to any Party by any third parties, which such Party is obligated to hold in confidence.

14.2.3“Confidential Business Information” means (a) any valuable, secret business information, other than Trade Secrets, that is designated or identified as confidential at the time of the disclosure or is by its nature clearly recognizable as confidential information to a reasonably prudent person with knowledge of the Disclosing Party’s business and industry, and (b) for purposes of this Agreement, FMC Custom Model Property.

14.2.4“NPPI” means non-public, personally identifiable information of SunTrust’s customers, SunTrust Personnel or other individuals, which has been provided to SunTrust by such persons or their representatives.

14.2.5 “Disclosing Party” means the Party disclosing any Proprietary Information hereunder, whether such disclosure is directly from or through the Disclosing Party’s Personnel.

14.2.6“Receiving Party” means the Party receiving any Proprietary Information hereunder, whether such disclosure is received directly from or through the Receiving Party’s Personnel.

14.3Exclusions.  Notwithstanding the definition of Proprietary Information above, Proprietary Information does not include any information that: (a) was in the Receiving Party’s possession before being disclosed to it by the Disclosing Party without a duty of confidentiality on the Receiving Party; (b) 

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is or becomes a matter of public knowledge through no fault of the Receiving Party; (c) is rightfully received by the Receiving Party from a third party without a duty of confidentiality; (d) is disclosed by the Disclosing Party to a third party without a duty of confidentiality on the third party; (e) is independently developed by the Receiving Party without use of or reference to the Disclosing Party’s Proprietary Information; or (f) is disclosed by the Receiving Party with the Disclosing Party’s prior written approval without a duty of confidentiality on the Party making such disclosure or the third party to which disclosure is authorized.  In addition, notwithstanding anything else contained in this Article 14 or this Agreement, nothing in this Article 14 will be construed to prohibit disclosure of any information to regulatory agencies, rating agencies, attorneys, accountants, servicers and/or consultants of a Party, and/or the employees and agents of any of the foregoing, who are obliged to respect the confidentiality thereof.

14.4Ownership and Restrictions on Use.  The Receiving Party acknowledges and agrees that except to the extent otherwise expressly provided herein, the Proprietary Information of the Disclosing Party will remain the sole and exclusive property of the Disclosing Party or a third party providing such information to the Disclosing Party, and the disclosure of such information to the Receiving Party does not confer upon it any license, interest, or right of any kind in or to the Proprietary Information, except as provided under this Agreement.  At all times and notwithstanding any termination or expiration of this Agreement, the Receiving Party agrees that it will:  (a) hold in strict confidence and not disclose to any third party the Proprietary Information of the Disclosing Party, except as approved in writing by the Disclosing Party; (b) only permit access to the Proprietary Information of the Disclosing Party to those of its Personnel who have a need to know and have signed confidentiality agreements or are otherwise bound by confidentiality obligations substantially similar to those contained in this Agreement; (c) be responsible to the Disclosing Party for any third party’s use and disclosure of the Proprietary Information provided to such third party by the Receiving Party; (d) only use Proprietary Information that it receives to carry out the purposes of the Agreement and for no other purpose whatsoever; and (e) use at least the same degree of care it would use to protect its own Proprietary Information of like importance, but in no event less than a reasonable degree of care, including maintaining information security standards for such Proprietary Information as are commercially reasonable and customary for the type of information.  Specifically, with regard to NPPI, FMC and FMER will comply with the information security standards specific to such information set forth in this Agreement.  No Party will communicate any information to the other Party in violation of the proprietary rights of any third party.

To the extent FMC or FMER delivers or is required to deliver to SunTrust any FMC Custom Model Property, FMC shall own all right, title and interest (including all trademarks, trade secrets, copyrights, patents and any other intellectual property rights) in such FMC Custom Model Property.  In addition, FMC may use the data collected in activities conducted pursuant to this Agreement to prepare, develop, or modify FMC Custom Model Property, provided, however, that such FMC Custom Model Property does not include Consumer Information, which may be used to perform analysis but shall not be included in reports, studies or other FMC Custom Model Property except on an aggregated and de-identified basis.  In consideration of its obligations under this Agreement, FMC shall own all right, title and interest in and to all FMC Custom Model Property.  FMC Custom Model Property shall not constitute a “work made for hire” as that term is defined in the federal Copyright Act.  FMC may use FMC Custom Model Property for any lawful purpose, including in support of other loan programs, during the term of the Agreement and following termination of the Agreement.

14.5Required Disclosures.  If the Receiving Party is required by a Governmental Authority or law to disclose any of the Proprietary Information of the Disclosing Party, the Receiving Party must, if legally permissible: (a) first give written notice of such required disclosure to the Disclosing Party; (b) make a reasonable effort to obtain a protective order requiring that the Proprietary Information so disclosed be used only for the purposes for which disclosure is required; (c) take reasonable steps to allow the Disclosing Party to seek to protect the confidentiality of the Proprietary Information required to be disclosed; and (d) disclose only that part of the Proprietary Information which, in the opinion of its legal

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counsel, it is required to disclose.  The foregoing requirements will not apply and are not intended to limit any Party’s ability to fully comply with requests for information from regulators or the Internal Revenue Service, as permitted by the last sentence of Section 14.3.

14.6Notice of Unauthorized Disclosures.  Each Party to this Agreement will immediately notify the other Parties in writing upon discovery of any loss or unauthorized disclosure of the Proprietary Information of the other Parties.

14.7Limit on Reproductions.  The Receiving Party will not reproduce the Disclosing Party’s Proprietary Information in any form except as reasonably necessary to fulfill such Party’s duties and obligations and otherwise comply with the agreements of such Party under this Agreement.  Any reproduction of any Proprietary Information by the Receiving Party will remain the property of the Disclosing Party and will contain any and all confidential or proprietary notices or legends that appear on the original, unless otherwise authorized in writing by the Disclosing Party.

14.8Document Destruction — Information Erasure.  Except as otherwise set forth in this Agreement, upon the earlier of:  termination of this Agreement, the written request of the Disclosing Party, or when no longer needed by any Party for fulfillment of its obligations under this Agreement, each Receiving Party will either: (a) promptly return to the Disclosing Party all documents and other tangible (including electronic) materials containing the Disclosing Party’s Proprietary Information, including all copies thereof in its possession or control; or (b) erase or destroy all such materials by the following methods.  If return, erasure, or destruction is not feasible, then the Receiving Party may maintain the Disclosing Party’s Proprietary Information in compliance with the requirements of the confidentiality and information security provisions of this Agreement; provided, however, that when the return, destruction, or erasure of any such materials becomes feasible for the Receiving Party, the Receiving Party must comply with the requirements of (a) or (b) above within sixty (60) calendar days.  Notwithstanding the foregoing, SunTrust understands and agrees that FMC or FMER shall maintain encrypted, archived back-up tapes stored at a secure, offsite location that include transaction history received in connection with the Services and this Agreement and related documents and records for purposes of internal and external auditing of controls and recordkeeping requirements.

TYPE OF PROPRIETARY INFORMATION STORED OR USED	DESTRUCTION METHOD
Hard Copy	Shredding, pulverizing, burning, or other suitable destruction method so that any Proprietary Information is not readable at all and cannot be reassembled or reconstructed in any way so that it is practicably readable.
Electronic Tangible Media, such as CDs, Disks, Tapes	Destruction or erasure of such media so that any Proprietary Information is not readable at all and cannot be reassembled or reconstructed in any way so that it is practicably readable.
Hard Drive Storage or similar Computer or Device Storage	Erasure or elimination of Proprietary Information from such device so that any Proprietary Information is not readable at all and cannot be reassembled or reconstructed in any way so that it is practicably readable.

14.9Equitable Relief.  If any Party should breach or threaten to breach any provision of this Article  14 of the Agreement, the non-breaching Party, in addition to any other remedy it may have at law or in equity, will be entitled to seek a restraining order, injunction, or other similar remedy in order to

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specifically enforce the provisions of this Agreement.  Each Party specifically acknowledges that money damages alone would be an inadequate remedy for the injuries and damages that would be suffered and incurred by the non-breaching Party as a result of a breach of any provision of this Agreement.  In the event that any Party should seek an injunction hereunder, the other Parties hereby waive any requirement for the submission of proof of the economic value of any Proprietary Information or the posting of a bond or any other security.

14.10Survival.  Notwithstanding any termination of this Agreement, all of the Receiving Party’s nondisclosure and use obligations pursuant to this Article 14 will survive:  (a) for three (3) years after termination with respect to any Confidential Business Information received prior to such termination, other than the FMC Custom Model Property, for which the Receiving Party’s nondisclosure and non-use obligations pursuant to this Article 14 will survive indefinitely;  (b) with respect to Trade Secrets, for so long as such information continues to constitute a trade secret under Requirements of Law; and (c) with respect to NPPI, for so long as required by applicable state and federal laws.

14.11Prior Agreements.  The provisions set forth in this Agreement supersede any previous agreement between the Parties relating to the protection of any Proprietary Information.

14.12Information related to Tax Structure and Treatment.  It is the Parties’ mutual intent that the tax structure and tax treatment of the transactions contemplated by this Agreement will not be confidential and, that notwithstanding anything herein to the contrary, each Party and its Personnel may disclose to any and all Persons of any kind, the tax structure and tax treatment of the transactions contemplated herein such that the transactions will be treated as not having been offered under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations promulgated under Section 6011 of the Internal Revenue Code of 1986, as amended, and any comparable provision in the law of any other jurisdiction.

ARTICLE 15.INFORMATION SECURITY.

15.1General Requirements.  FMC will provide information, data back-up procedures, and information security so as to reasonably ensure that any Proprietary Information provided by or for SunTrust is not lost, stolen, modified, disclosed to or accessed by any other party (other than those permitted parties under Article 14 of this Agreement) without SunTrust’s prior written approval.  Such security measures will equal or exceed standard industry practices for similar entities dealing with Proprietary Information.  FMC warrants to SunTrust that FMC will reasonably monitor, evaluate and adjust its information security systems and procedures, its data security systems, and its processes in response to relevant changes in technology, changes in the sensitivity of any SunTrust Proprietary Information, as reasonably determined by SunTrust, and internal and external threats to information security.  FMC will promptly notify SunTrust of: (a) any unauthorized possession, use, or knowledge or attempt thereof, of the data-processing files, transmission messages, or other SunTrust Proprietary Information by any person or entity that may become known; (b) the effect of such; and (c) the corrective action FMC has taken in response thereto.

15.2FMC Encryption.  FMC represents and warrants that, to the extent FMC will be placing, and retaining SunTrust Proprietary Information on the following types of devices, FMC will encrypt with whole disk encryption all laptop computers maintaining SunTrust Proprietary Information on such devices.  To the extent personal digital assistants (PDAs) do not contain or provide access to Consumer Information, PDAs may be password-protected. Other portable devices (including, but not limited to, thumb drives) must be encrypted and files on portable media (including, but not limited to, tapes and CDs) must be encrypted.  All encryption must meet a minimum standard of Advanced Encryption Standard (AES) algorithm with a minimum key strength of 256-bit.

15.3Information Security Audits.  During the term of this Agreement, and for one (1) year following termination:

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15.3.1Audit Scope.  Solely with respect to SunTrust Proprietary Information, to assess the effective protection of such information, SunTrust will have the right to conduct remote or on-site audits of FMC, at SunTrust’s discretion and expense (except as set forth below), to review the information and data security systems and procedures and processes of FMC (collectively, the “Security Systems”) at any time during FMC’s regular business hours, upon no less than ten (10) Business Days prior written notice to FMC.  Testing conducted will be performed only on ports of application hosts, operating systems, and web server software utilized in the course of performing Services for SunTrust.  Testing will emulate tactics used by outside attackers with and without knowledge of specific applications, and with malicious intent, however, no such tactic shall interrupt services (e.g., denial of service attacks).  Testing will not include the following actions or methods: changes to assigned user passwords; telephone modem probes and scans (active and passive); intentional viewing of email content, internet caches, and/or cookie files; or DoS attacks (smurf, land, SYN flood, etc.).  Such audits and reviews may be performed by SunTrust, its agent, or an independent third party bound by a nondisclosure provision substantially similar to that set forth above in this Agreement, and may include reasonable testing of the Security Systems, including periodic vulnerability scans.  Upon request, SunTrust shall provide to FMC the results of, and any data obtained from, such vulnerability assessment. Any such information security tests will be scheduled by mutual agreement of the Parties.  FMC will provide SunTrust with such reasonable assistance and information as may be necessary for the performance of such testing.  SunTrust will use reasonable, industry-standard precautions to prevent or minimize any risks to FMC’s Security Systems that may be associated with such testing, and the Parties will cooperate in structuring the testing so as to avoid harming the rights and interests of FMC or any third parties.  FMC agrees to promptly grant reasonable access to logs, policies, records, other materials, and FMC Personnel reasonably required for SunTrust to perform the audit.  SunTrust will reasonably determine the extent and methodology of the testing subject to the approval of FMC, such approval not to be unreasonably withheld.  Further, FMC agrees to make available to SunTrust the results of any third party’s or its own testing, monitoring and auditing of such Security Systems; provided, however, that FMC will not be required to make available any such results which would breach confidentiality obligations between FMC and any third party.  To the extent that any system data or information is obtained by SunTrust in the course of such assessment, such data or information shall be Confidential Business Information of FMC and FMER, and SunTrust shall treat it in accordance with Article 14.  In no event shall SunTrust retain any code from FMC’s or FMER’s systems or decompile, disassemble, or reverse engineer any such code, in whole or in part.  Neither SunTrust nor its representatives shall introduce any malicious or unauthorized code (virus, Trojans, worms, trap door, etc.) or undisclosed features into FMC’s or FMER’s systems intending to disable, deactivate, interfere with or otherwise harm such systems or data or provide access not authorized by FMC or FMER.

15.3.2Audit Finding / Remediation.  Should such an audit, test or review reveal that the Security Systems or the contemplated Services do not effectively protect any SunTrust Proprietary Information, then FMC will prepare and present to SunTrust within thirty (30) days of receipt of the relevant audit, test, or review finding a remediation plan, including proposed modifications of the Security Systems, the cost, proposed allocation of such costs among the Parties, and deadlines to meet the information security requirements of SunTrust, its regulators, and the provisions of Requirements of Law.  Should the Parties be unable to agree to a remediation plan within thirty (30) days of FMC’s preparation and presentation of such plan to SunTrust pursuant to the previous sentence, or shall FMC or FMER, as applicable, be unable to complete and install adequate modifications (as set forth in the plan of remediation) within the deadline set forth in any such plan of remediation, then any Party shall be entitled to immediately terminate this Agreement for cause as provided in Section 18.2.7.

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15.3.3Audit Costs.  Prior to the initiation of any audit or review as permitted under this Agreement, the Parties will discuss and mutually agree upon a reasonable estimate of the total costs of the audit, which Party will bear these costs, and the payment schedule for such costs.  SunTrust will reimburse FMC’s reasonable incremental direct expenses associated with the audit (e.g., reasonable copy charges or other reasonable standard expenses), but not any other expenses, such as a charge for access to FMC Personnel or other sources of information.  It is the intent of the Parties that SunTrust bear the agreed upon cost of any such audit as described in this Article 15, unless a substantial and previously unknown security breach is identified as a result of such audit.

15.4Procedures for Security Breaches.  In the event FMC and/or FMER, as applicable, knows or reasonably believes that there has been any unauthorized access or attempted unauthorized access to Proprietary Information of SunTrust or Consumer Information in the possession or control of FMC or FMER, as applicable, that compromises the security, confidentiality or integrity of such Proprietary Information or Consumer Information, FMC or FMER, as applicable, shall take the following actions:

(a)immediately notify SunTrust of such unauthorized access or attempted unauthorized access;

(b)take reasonable steps to remedy the circumstances that permitted any such unauthorized access to occur;

(c)take reasonable steps to prohibit further disclosure of Proprietary Information or Consumer Information;

(d)upon request, cooperate with SunTrust or its agents to investigate the scope and content of the unauthorized access; and

(e)take corrective action as required by SunTrust in its sole discretion as related to SunTrust Consumer Information.

ARTICLE 16.INDEMNIFICATION; EXCLUSIONS FROM LIABILITY

16.1Mutual General Indemnity.

Subject to the conditions set forth in Section 16.4 and the limitations in Section 16.6, each Party will indemnify, defend, and hold the applicable Indemnified Parties harmless from and against any and all damages (including any and all third party claims against such Indemnified Party and damages resulting therefrom, whether ordinary, direct, indirect, incidental, special, consequential, or exemplary), judgments, liabilities, fines, penalties, losses, claims, actions, demands, lawsuits, costs, and expenses including reasonable attorneys’ fees (collectively, “Damages”) incurred by such Indemnified Parties that arise out of or relate to any:

(a)gross negligence, willful misconduct or fraud of the Indemnifying Party;

(b)breach of the Indemnifying Party’s confidentiality or information security obligations under this Agreement;

(c)breach of the Indemnifying Party’s representations or warranty obligations or covenants under this Agreement; and

(d)failure by the Indemnifying Party to comply with Requirements of Law applicable to it or with the Program Guidelines,

provided, however, that in the case of any Damages resulting from a breach or failure described in Section 16.1(b), Section 16.1(c) or Section 16.1(d), no Indemnified Party shall be entitled to indemnification under this Article 16 to the extent that such breach or failure occurred as a result of or in

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connection with the willful misconduct or fraud of an Indemnified Party, any failure of any representation or warranty made by an Indemnified Party in or pursuant to this Agreement to be true and correct, the non-fulfillment or non-performance of any covenant or obligation of an Indemnified Party contained in this Agreement, or the failure by an Indemnified Party to comply with Requirements of Law applicable to it or with the Program Guidelines.

For purposes of this Article 16, the acts or omissions of a Party’s Personnel will be deemed the acts or omissions of such Party.

16.2FMC Infringement Indemnity.

FMC, at its expense, will defend, indemnify, and hold each SunTrust Indemnified Party harmless from and against any and all Damages that arise out of or relate to third party claims against a SunTrust Indemnified Party associated with SunTrust’s use of any FMC Intellectual Property and the infringement by such FMC Intellectual Property of such third party’s patent, trade secret, copyright, or trademark or other intellectual property right.  For purposes of this Section 16.2 and Section 16.3 only, “FMC Intellectual Property” will include the following:  FMC’s custom and proprietary credit scoring model and the Online Application System.

16.3Specific Conditions and Additional Remedies Associated with FMC’s Infringement Indemnity.

16.3.1Additional Remedies.In the event a court of competent jurisdiction makes a determination that any FMC Intellectual Property infringes or otherwise violates any third party intellectual property right, or if FMC determines that any FMC Intellectual Property likely infringes or otherwise violates such third party’s intellectual property right, FMC, at its option and sole expense, in addition to the indemnification obligation set forth above, will:

16.3.1.1 modify the infringing portion of any FMC Intellectual Property so as to make it non-infringing and non-violating, while maintaining equivalent functionality that is reasonably satisfactory to SunTrust;

16.3.1.2 replace the infringing portion of any FMC Intellectual Property with a non-infringing and non-violating solution having equivalent functionality that is reasonably satisfactory to SunTrust; or

16.3.1.3 obtain the right for SunTrust to continue using the infringing or violating portion of FMC Intellectual Property.

16.3.2Conditions.FMC’s intellectual property infringement indemnity obligations will not apply to the extent of any applicable third party claim resulting solely from:

16.3.2.1 modifications to any FMC Intellectual Property by any party other than FMC or its authorized Personnel that are made without FMC’s written approval and only to the extent such modifications caused the infringement or violation;

16.3.2.2 the combination of any FMC Intellectual Property with other products, processes, or materials prohibited by FMC in the applicable specifications if, but for such other products, processes, or materials, the infringement would not have occurred; or

16.3.2.3 SunTrust’s use of any FMC Intellectual Property other than in accordance with the terms and conditions of this Agreement or the applicable specifications relating to such FMC Intellectual Property.

16.4General Conditions on Indemnity Obligations.  Each potential Indemnifying Party’s obligations under this Agreement will be subject to the Indemnified Party: (a) promptly, after receipt of any written claim, notice of any action giving rise to a claim for indemnification or the discovery by such Indemnified Party of any Damages that may give rise to a claim for indemnification, providing the Indemnifying Party

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notice of the claim, action or Damages (provided that failure to so notify the potential Indemnifying Party will not relieve the potential Indemnifying Party of its indemnification obligations, except to the extent that the potential Indemnifying Party’s ability to defend against the claim or event with respect to which indemnification is sought is adversely affected by the failure of the potential Indemnified Party to give prompt notice as required by this Section); (b) providing reasonable cooperation and assistance in the defense or settlement of any claim; and (c) granting the Indemnifying Party control over the defense and settlement of the same (provided that any Indemnified Party shall be entitled to participate in the defense and settlement of the claim and to employ counsel at its own expense to assist in the handling of the claim; and provided further that the Indemnified Party does not invoke its retained right to defend as stated below).

The Indemnifying Party will not agree to any settlement which results in an admission of liability by the Indemnified Party without the Indemnified Party’s prior written consent.

16.5Reservation of Right to Defend.  If either SunTrust, on the one hand, or FMC or FMER, on the other hand, as an Indemnified Party, reasonably determines that the Indemnifying Party has failed to diligently assume and maintain a prompt and vigorous defense of any claim to which Indemnified Party is entitled to indemnification hereunder and with respect to which the conditions set forth in Section 16.4 have been satisfied, either SunTrust, on the one hand, or FMC or FMER, on the other hand, as an Indemnified Party, may, at its own expense, option and discretion, assume sole control of the defense of any claim and all related settlement negotiations with counsel of its own choosing and without waiving any other rights to indemnification.  If SunTrust or FMC and/or FMER, as applicable, provides sufficient evidence to support its right to defend pursuant to this Section, the Indemnifying Party will pay all costs and expenses (including reasonable attorneys’ fees) incurred by such Indemnified Party in such defense.  Notwithstanding anything to the contrary in the foregoing, SunTrust or FMC and/or FMER, as applicable, will not accept any settlement on behalf of the Indemnifying Party that results in an admission of liability by the Indemnifying Party without the Indemnifying Party’s express written consent.

16.6Exclusions from Liability.

16.6.1Except for each Party’s respective indemnification obligations in respect of third party claims against an Indemnified Party, in no event shall any Party be liable for indirect, incidental, special, consequential, or exemplary or punitive damages (or any comparable category or form of such damages, howsoever characterized in any jurisdiction), regardless of the form of action, whether in contract, tort, strict liability or otherwise, and even if foreseeable or if such Party has been advised of the possibility of such damages.

16.6.2The limitation of liability provisions of Section 16.6.1 do not apply to liability that is the result of the Party seeking to limit its liability hereunder in connection with (i) a breach of its confidentiality, privacy or security obligations contained in this Agreement (including with respect to any Consumer Information or NPPI, or any Intellectual Property or other Proprietary Information of another Party to this Agreement), (ii) such Party’s violation of Requirements of Law or (iii) such Party’s fraud or willful misconduct.

16.6.3SunTrust acknowledges and agrees that any liability of FMC and/or FMER hereunder to SunTrust or any of its Affiliates for Damages in any way related to a Loan that is purchased by FMC pursuant to Section 5 shall be reduced in proportion to the Purchase Price of any such Loan that is purchased by FMC or any of its Affiliates pursuant to Section 5.

16.7Exclusive Remedies.  EXCEPT IN CONNECTION WITH (I) THE OTHER PARTY’S FRAUD, WILLFUL MISCONDUCT OR GROSS NEGLIGENCE, (II) A PARTY’S EXERCISE OF EQUITABLE REMEDIES AVAILABLE TO IT, (III) THE RIGHTS OF SUNTRUST PURSUANT TO SECTION 5 OR (IV) A PARTY’S RIGHT TO SET OFF AMOUNTS PAYABLE TO THE OTHER PARTY AGAINST AMOUNTS OWED TO IT BY SUCH OTHER PARTY, IT IS UNDERSTOOD

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AND AGREED THAT THE INDEMNIFICATION OBLIGATIONS OF A PARTY SET FORTH IN THIS ARTICLE 16 CONSTITUTE THE SOLE AND EXCLUSIVE REMEDIES OF A PARTY AGAINST ANY OTHER PARTY HERETO IN RESPECT OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF.

ARTICLE 17.DISPUTE RESOLUTION

17.1Except as otherwise expressly set forth in this Agreement, the Parties agree that any dispute arising in connection with the interpretation of this Agreement or the performance of either Party under this Agreement or otherwise relating to this Agreement will be treated in accordance with the procedures set forth in this Article 17, prior to the resort by either Party to arbitration or litigation in connection with such dispute.  The dispute will be referred for resolution first to a Senior Vice President for SunTrust, and the General Counsel or Chief Financial Officer for FMC.  Such procedure will be invoked by either Party presenting to the other Party a Notice of Request for Resolution of Dispute (a “Notice”) identifying the issues in dispute sought to be addressed hereunder.  A telephone or personal conference of those executives will be held within ten (10) Business Days after the delivery of the Notice.  In the event that the telephone or personal conference between these executives does not take place or does not resolve the dispute, either Party may refer the dispute to binding arbitration pursuant to the arbitration provisions set forth below.

17.2 Except as otherwise expressly set forth in this Agreement and except for actions for equitable relief, all claims or disputes between the Parties arising out of or relating to this Agreement will be decided by arbitration pursuant to the Commercial Arbitration Rules of the American Arbitration Association in effect at the time of the claim or dispute and in accordance with Title 9 of the United States Code.  Notice of the demand for arbitration must be provided in writing to the other Party and must be made within a reasonable time after the dispute has arisen.  If the amount claimed to be in dispute is equal to or greater than Two Hundred Fifty Thousand Dollars ($250,000), then the arbitration will be decided by a panel of three (3) arbitrators selected under the Commercial Arbitration Rules of the American Arbitration Association.  If the amount claimed to be in dispute is less than that amount, then the arbitration will be decided by one (1) arbitrator selected pursuant to the same rules.  Said arbitration will occur within sixty (60) calendar days after the Party demanding arbitration delivers the written demand on the other Party, unless the Parties mutually agree otherwise in writing.  The award rendered by the arbitrators will be final and specifically enforceable under Requirements of Law, and judgment may be entered upon it in any court having jurisdiction thereof.  No arbitration arising out of or relating to this Agreement may include, by consolidation, joinder or in any other manner, any Person not a Party to this Agreement.  Neither Party will appeal such award nor seek review, modification, or vacation of such award in any court or regulatory agency.

17.3The arbitrators will award to the prevailing Party, if any, as determined by the arbitrators, all of its Costs and Fees.  “Costs and Fees” mean all reasonable pre-award expenses of the arbitration, including the arbitrators’ fees, administrative fees, travel expenses, and out-of-pocket expenses, such as copying, telephone, court costs, witness fees and attorneys’ fees.

17.4No provision of this Article 17 shall limit the right of any Party to this Agreement to seek to exercise any equitable remedies available to it (whether available in a court of law or a court of equity), exercise self-help remedies such as setoff, or obtain provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding.  The exercise of a remedy does not waive the right of either party to resort to arbitration.

17.5Permissible Legal Proceedings.  Notwithstanding anything contained in this Article 17, (a) a Party may institute legal proceedings to seek a temporary restraining order or other temporary or preliminary injunctive relief to prevent immediate and irreparable harm to such Party, and for which monetary damages would be inadequate, pending final resolution of the dispute, controversy or claim

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pursuant to arbitration, and (b) a Party may institute legal proceedings if necessary to preserve a superior position with respect to other creditors.  Such conduct shall not constitute a waiver of the right of either party to resort to arbitration to obtain relief other than that specified in this Section 17.5.

ARTICLE 18.TERM AND TERMINATION

18.1.1Effective Date.  This Agreement shall be effective following the satisfaction or waiver of each of the conditions set forth in this Section 18.1.1(a) through (g) (the “Effectiveness Conditions”).  Each of the Parties covenants and agrees with each other Party to act in good faith and use its best efforts to work diligently to satisfy of all of the Effectiveness Conditions and thereafter execute and deliver the Effective Date Communication at the earliest practicable date.  Upon the satisfaction or waiver of each and every Effectiveness Condition, the Parties shall establish the Effective Date of this Agreement in a writing signed by all Parties (the “Effective Date Communication”).  Until the execution of the Effective Date Communication by each of the Parties, no Party shall have any of the rights set forth in this Agreement or any obligation to perform any of the duties, covenants or other agreements set forth in this Agreement, or otherwise be subject to any of the restrictions contained herein, other than (i) the obligations to act in good faith and use its best efforts to work diligently to satisfy of all of the Effectiveness Conditions at the earliest practicable date, and any other provisions of this Section 18.1.1, (ii) all applicable obligations with respect to any Confidential Business Information or Proprietary Information of the other Party or any Consumer Information hereunder, including obligations and restrictions pursuant to Articles 11, 13, 14, 15 and 19 with respect to any such information or other materials that a Party is provided or to which it otherwise has access prior to the Effective Date, (iii) the representations and warranties of the Parties set forth in Section 8.1, and (iv) Article 16, in connection with any Party’s breach of any of its respective representations or warranties set forth in Section 8.1, or its failure to perform any covenant or obligation, set forth in any of the Articles or Sections referenced in Section 18.1.1(ii) above.

The Effectiveness Conditions are:

(a) Each of SunTrust, FMC, and the Servicer shall have executed the Servicing Agreement, including Servicing Guidelines satisfactory to SunTrust, FMC, and the Servicer;

(b) Each of SunTrust and FMC shall have executed the Participation Account Deposit Agreement;

(c) The Parties’ written approval of the Program Guidelines, including the forms of Credit Agreements and Truth-in-Lending Disclosures;

(d) The execution of documents establishing and governing the purchase of Charged Off Loans by MG Student Loan Trust 2010-1;

(e) SunTrust’s written approval of the Online Application System, including processes for complying with Title X;

(f) SunTrust’s written approval of the FMC Website and FMC Materials; and

(g) Complete execution of the TransUnion Addendum in a form substantially similar to attached Exhibit C.

If the Effectiveness Conditions are not satisfied or waived prior to September 1, 2010 as evidenced by the Parties’ execution of the Effective Date Communication prior to such date, then this Agreement may be automatically terminated by any Party on such date pursuant to this Section 18.1.1 and no Party shall have any further obligation under this Agreement except for any such obligation hereunder that is intended to survive the termination of this Agreement.  The provisions of Section 18.1.1(ii), (iii) and (iv), to the extent applicable, and any other provisions hereof referenced therein or otherwise necessary to the interpretation of any such provisions, shall survive any termination of this Agreement as a result of the failure of the Effectiveness Conditions to be satisfied or waived prior to September 1, 2010.

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18.1.2Term of Agreement.  Subject to Section 18.1.1 and this Section 18.1.2, this Agreement and the Services contemplated hereby shall commence on the Effective Date and shall continue through the earlier of two (2) years after the Effective Date or the date on which the Participation Cap is reached, unless earlier terminated pursuant to the provisions of this Section (the “Term”); provided, however, that notwithstanding the expiration of the Term or termination of Loan Processing Services, the Program Administration Services and Program Support Services set forth in Article 4 shall continue to be provided, and the associated fees and compensation to FMC and/or FMER therefor shall continue to accrue and become payable for such Services, for all periods through the month following the month during which the principal and interest of each Loan have been fully paid and remitted to SunTrust (the “Final Services Termination Period”).  Notwithstanding the foregoing, if the Agreement is terminated prior to the Final Services Termination Period pursuant to Section 18.1.2, Program Support Services shall no longer be performed by FMC and FMER and the Program Support Services Fee due in Section 6.4.1 shall no longer by paid by SunTrust to FMC.  In addition, in connection with a breach that is not cured as permitted by Section 18.2.2, a Force Majeure Event pursuant to Section 18.2.3, or a failure of audit remediation of the scope and for the applicable period described in Section 15.3.2, the Program Support Services may be terminated prior to the end of the Final Services Termination Period to the extent that such uncured breach, Force Majeure Event, or audit remediation failure, as applicable, is directly related to the Services that a Party seeks to terminate, and the Party seeking to terminate under such provisions timely gives the other Parties the notice of termination specified in Section 18.2.2, 18.2.3 or 18.2.6, as applicable.  In the event of termination of Program Support Services under the preceding sentence, the Program Support Services Fee shall no longer be payable to FMC.  This Agreement may be extended for an additional Term or Terms upon the terms and conditions set forth in a mutual written agreement among the Parties.

If FMC or SunTrust undergoes a Change in Control, the other Party may elect to terminate Loan Processing Services upon sixty (60) Business Days prior written notice; provided, however, that prior to delivering such notice, the Party considering such termination shall meet with representatives of the successor entity and engage in good faith negotiations for the continuation of this Agreement upon mutually acceptable terms and conditions.

18.2Termination for Cause.  From and after the Effective Date, FMC and SunTrust may each terminate the Agreement, subject to Section 18.1.2 and Section 18.3, immediately (after giving effect to notice and cure periods set forth in Sections 18.2.1 to 18.2.6, as applicable) by delivery of a written notice of termination to the affected Party or Parties, if:

18.2.1Insolvency or Reorganization.  The other Party shall file a petition to take advantage of any applicable insolvency or reorganization statute; or shall file a petition or answer seeking or shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to such Party or Parties or relating to all or substantially all of its or their property; or a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or the winding-up or liquidation of its affairs, shall have been entered against such Party or Parties, which decree or order entered against such Party or Parties shall have remained in force undischarged or unstayed for a period of fifteen (15) days; or such Party or Parties shall be insolvent, admit in writing its inability to pay its or their debts generally as they become due, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; or

18.2.2Breach.  The other Party fails to perform any of its obligations (including the failure to pay fees for Services when due and not the subject of a good faith dispute) in any material respect, or shall breach any of its or their representations, warranties or covenants in this Agreement, in any material respect and such failure or breach continues unremedied after the expiration of thirty (30) days following

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written notice to such Party or Parties specifying the nature of such failure or breach and stating the intention of the terminating Party to terminate this Agreement absent a cure of such failure or breach in all material respects within such thirty (30) day period; or

18.2.3Force Majeure Event.  In the event that a Force Majeure Event occurs, if any Party is prevented from performing or its performance is rendered impracticable for a period of at least five (5) days after notice of such event and inability to perform was provided to the other Party or Parties, provided, however, that if the Party previously unable to perform regains its ability to perform hereunder within five (5) days after notice of the event and inability to perform, the notice of termination must be delivered to the other Parties no later than thirty (30) days after the Party regains such ability to perform and notifies the other Parties thereof; or

18.2.4Failure to Agree on Program Changes.  If SunTrust and FMC cannot agree on Program changes (other than changes to the Pricing Schedule) following full compliance with the procedures set forth in Section 4.1.1, then any Party may terminate this Agreement on fifteen (15) days’ written notice to the other Parties, provided, however, that such notice of termination is delivered to the other Parties no later than thirty (30) days after the expiration of the thirty (30) day period described in Section 4.1.1 during which changes could not be agreed; or

18.2.5Governmental Authority.  To the extent required by Requirements of Law, a Governmental Authority with oversight of SunTrust requires, in writing, termination of this Agreement because, among other things, SunTrust is considered a “troubled” institution, which termination shall be without penalty to SunTrust; provided, however, that such termination shall be effective only to the extent of the Services required by such Governmental Authority to be terminated; or

18.2.6Audit Remediation Failure. As set forth in Section 15.3.2, if the Parties are unable to agree to a remediation plan within thirty (30) days of FMC’s preparation and presentation of such plan to SunTrust pursuant to the first sentence of Section 15.3.2, or if FMC or FMER, as applicable, shall be unable to complete and install adequate modifications (as set forth in the plan of remediation) within the deadline set forth in any such plan of remediation; provided, however, that if (i) subsequent to such thirty (30) day period a remediation plan shall be agreed, or if subsequent to such other deadline set forth in any such plan of remediation, FMC or FMER, as applicable, is able to complete and install adequate modifications in accordance therewith, as applicable, and (ii) the Agreement has not been effectively terminated prior to such agreement or completion of modifications, then no Party may deliver a notice of termination under this Section 18.2.6 thereafter in connection with such subsequently remedied failure described in this subsection or Section 15.3.2.

18.3Rights and Obligations Upon Notice of Termination.

18.3.1Requirements Upon Termination.  As of the effective date of termination of this Agreement, FMER shall (i) cease accepting new applications for Loans and (ii) unless otherwise agreed by the Parties in writing, process all Applications received prior to the effective date of termination through disbursement or denial.  In addition, upon the termination of this Agreement for any reason:

(A)FMC shall make a final Participation Account Deposit in the Participation Account pursuant to Section 7.1.3 and shall thereafter not be required to make further Participation Account Deposits;

(B)payments pursuant to Section 6.5.1, Section 7.1.4, Section 7.1.5, and Section 7.1.7 shall continue notwithstanding such termination;

(C)releases from the Participation Account pursuant to Section 7.1.6 shall continue notwithstanding such termination.

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18.3.2Transition Services.  Upon notice of termination of this Agreement or any Services provided hereunder, the Parties shall meet to develop a plan to wind down the affected Services and transition for the terminated Services, to extend for a period not to exceed ninety (90) days past the effective date of termination (the “Transition Period”), unless mutually agreed by the Parties in writing to be longer than ninety (90) days.  The fees paid for Services provided during the Transition Period shall be in accordance with the fees in effect at the expiration or termination of this Agreement.  Except as otherwise set forth in this Agreement, upon the conclusion of the Transition Period for any specific Services, each Party shall cease the affected Services and return to the other Party or Parties, as applicable, or destroy all Proprietary Information and/or Consumer Information in accordance with Section 14.8 of this Agreement, except as necessary pursuant to any Requirements of Law.

18.4Requirements Upon Termination.  In addition to the requirements contained in Section 18.3.2 of the Agreement, (i) in the event that less than all disbursements of a multi-disbursement Loan have been made prior to the date of termination, the remaining disbursement(s) will also be made pursuant to the terms of this Agreement, (ii) Loan Applications will no longer be accepted by FMER as of the termination date, (iii) any legal commitments already made to Borrowers shall be fulfilled and all Applications received for a credit inquiry prior to termination shall be processed through denial or final disbursement.

18.5Rights Upon Termination.  With respect to the termination of Portfolio Management Services, FMER shall provide to SunTrust a final reconciliation of all amounts collected by Subcontractors, collect all original files from Subcontractors, and transmit all such files to SunTrust.

ARTICLE 19.MISCELLANEOUS

19.1Notice Procedure; Addresses.  All notices, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given and received at the time delivered by hand, if personally delivered; when receipt is acknowledged, if mailed by certified mail, postage prepaid, return receipt requested; the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next-day delivery; and when received, if delivered by hand, as follows:

If to SunTrust: SunTrust Bank Attn: W. Mark Smith Executive Vice President 1001 Semmes Avenue Mail Code CS-RVW-7900 Richmond, VA 23224	If to FMC: The First Marblehead Corporation Attn: Chief Executive Officer 800 Boylston Street, 34th Floor Boston, MA 02199-8157 If to FMER: First Marblehead Education Resources, Inc. Attn: Managing Director One Cabot Road Medford, MA 02155
With a copy to: SunTrust Bank Legal Department 303 Peachtree Street, N.E., 36th Floor Atlanta, GA 30308	For either FMC, FMER, as applicable, with a copy to: The First Marblehead Corporation Legal Department 800 Boylston Street, 34th Floor Boston, MA 02199-8157

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The Persons or addresses to which mailings or deliveries shall be made may be changed from time to time by notice given pursuant to the provisions of this Section.

19.2Press Releases; Regulatory Reports.  No Party shall issue any press release or other announcement regarding the subject matter of this Agreement without the written consent of the other affected Parties with respect to mutually acceptable language (which consent shall not be unreasonably withheld), unless a Party refuses to consent and the Party desiring to issue the release or other announcement is advised by its legal counsel that the press release or other announcement is required in order to comply with applicable Requirements of Law.  Notwithstanding the foregoing, SunTrust acknowledges that FMC expects to be required pursuant to Requirements of Law to file this Agreement and a report regarding this Agreement with the Securities and Exchange Commission which FMC shall provide to SunTrust at least three (3) Business Days prior to FMC releasing such report to provide SunTrust a reasonable opportunity to review, comment, and consent, which consent shall not be unreasonably withheld.

19.3Relationship of the Parties.  The Parties agree that in carrying out their responsibilities pursuant to this Agreement they are in the position of independent contractors.  This Agreement is not intended to create, nor does it create and shall not be construed to create, a relationship of partners or joint venturers, fiduciaries or any association for profit between and among the Parties or any of their respective Affiliates.

19.4Expenses.  Except as is otherwise specifically provided in this Agreement, each Party shall pay its own costs and expenses in connection with this Agreement and the transactions contemplated hereby, including all regulatory fees, attorneys’ fees, accounting fees and other expenses.

19.5Successors and Assigns.  All terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the Parties, and each of their respective permitted transferees, successors and assigns.  Neither Party may assign or transfer any right or obligation under this Agreement without the prior written consent of the other Party; provided, however, that (i) no prior written consent of the other Party is required in the event that FMC or FMER assigns or delegates any Services set forth in this Agreement to the other or to any other Affiliate of FMC, including but not limited to First Marblehead Data Services, Inc., and such assignee or delegatee would be able to make the representations and warranties of FMC or FMER, as applicable, herein, and comply with each of the covenants and other agreements of FMC or FMER, as applicable, herein.  Notwithstanding the foregoing, neither SunTrust, on the one hand, nor FMC and/or FMER, on the other hand, shall be permitted to assign or otherwise transfer the rights and obligations of this Agreement (including any transfer by operation of law) to any Person completing a Change in Control of the assigning Party, without the written consent of the other Party and the assumption by the Person completing such Change in Control of all of the assigning or transferring Party’s obligations under this Agreement.

19.6Multiple Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original for all purposes and all of which shall be deemed, collectively, one agreement.

19.7Drafting; Captions.  Each Party acknowledges that its legal counsel participated in the drafting of this Agreement.  The Parties hereby agree that the rule of construction that ambiguities are to be resolved against the drafting Party shall not be employed in the interpretation of this Agreement to favor one Party over any other.  Further, the captions, headings and arrangements used in this Agreement are for convenience only and do not in any way affect, limit or amplify the terms and provisions hereof.

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19.8         Entire Agreement; Amendments.  The making, execution and delivery of this Agreement by the Parties have been induced by no representations, warranties, statements or agreements other than those herein expressed.  This Agreement, including the Schedules and Exhibits attached hereto, embodies the entire understanding of the Parties, and there are no further or other agreements or understandings, written or oral, in effect among the Parties relating to the subject matter hereof.  This Agreement may be amended or modified only by a written instrument signed by each of the Parties.

19.9         Waiver.  None of the Parties shall be deemed to have waived any of its rights, powers or remedies under this Agreement unless such waiver is approved in writing by an authorized representative of the waiving Party.  No delay or failure by any Party to exercise any right, power or remedy hereunder shall constitute a waiver thereof by such Party, and no single or partial exercise by any Party of any right, power or remedy shall preclude other or further exercise thereof or any exercise of any other rights, powers or remedies.

19.10       Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Requirements of Law, but if any provision of this Agreement is held to be prohibited by or invalid under Requirements of Law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

19.11       Disaster Recovery and Force Majeure.  Each of the Parties will timely implement, if it has not already, and maintain a reasonable disaster recovery plan.  Upon request by SunTrust, FMC shall promptly provide to SunTrust a description of and summary test results for FMC’s disaster recovery plan, including such information as may reasonably be requested by SunTrust to comply with Requirements of Law.  Upon the occurrence of any disaster requiring use of FMC’s disaster recovery plan, FMC shall promptly notify SunTrust of same, and FMC shall provide to SunTrust access to services equal to services provided to other clients.  Subject to the foregoing, no Party hereto shall be responsible for, or in breach of, this Agreement if it is unable to perform or its performance is rendered impracticable as a result of delays or failures due to any cause beyond its control, howsoever arising, and not due to its own act or negligence and that cannot be overcome by the exercise of due diligence.  Such causes shall include, but not be limited to, labor disturbances, riots, fires, earthquakes, floods, storms, lightning, epidemics, terrorist attacks, wars, civil disorder, hostilities, expropriation or confiscation of property, failure or delay by carriers, interference by civil and military authorities whether by legal proceeding or in fact and whether purporting to act under some constitution, decree, law or otherwise, or acts of God (each such event, a “Force Majeure Event”).  Upon the occurrence of a Force Majeure Event, the Party declaring such event shall provide written notice thereof to the other Party as soon as practicable.  Notwithstanding any other provision in this Agreement, either SunTrust or FMC may immediately terminate this Agreement if the other Party cannot perform the Services (in the case of FMC) or otherwise perform their obligations hereunder for more than five (5) days, subject to the provisions of Section 18.1 and Section 18.3, and provided, however, that if the Party previously unable to perform regains its ability to perform hereunder, the notice of termination must be delivered to the other Parties no later than thirty (30) days after the Party regains such ability to perform and notifies the other Parties thereof.

19.12       GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN TO THOSE OF THE STATE OF GEORGIA.  EACH PARTY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS.

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19.13       No Third Parties Benefitted.  This Agreement is made and entered into for the protection and legal benefit of the Parties, and their permitted successors and assigns, and each and every Indemnified Party (all of which shall be entitled to enforce the indemnity contained herein), and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement.

19.14       Permitted Filing.  Each Party may file this Agreement (with redactions as permitted by Requirements of Law) with the appropriate state or federal regulators, including the Securities and Exchange Commission, as required by such regulators.

19.15       Survival.  Any and all provisions, promises, and warranties contained herein, which by their nature or effect are required or intended to be observed, kept or performed after expiration or termination of this Agreement (including representations and warranties, confidentiality, information security, audit rights, indemnification, limitation of liability, dispute resolution and miscellaneous provisions), will survive the expiration or termination of this Agreement and remain binding upon and for the benefit of the Parties hereto.

[Signatures appear on next page]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers, being first duly authorized, as of the day and year first above written.

SUNTRUST BANK
By:	/s/ W. Mark Smith
Name:	W. Mark Smith
Title:	Executive Vice President
THE FIRST MARBLEHEAD CORPORATION
By:	/s/ Daniel Maxwell Meyers
Name:	Daniel Maxwell Meyers
Title:	President and CEO
FIRST MARBLEHEAD EDUCATION RESOURCES, INC.
By:	/s/ Michael Plunkett
Name:	Michael Plunkett
Title:	President

EXHIBIT A

Datamart Report

In addition to the data set forth in the Program Guidelines and Servicing Agreement, the report shall consist of loan level data and provide at least the following information with respect to each Loan application:

·Identifying information and demographic information

·Repayment option

·Enrollment status

·Grade level

·Applicable borrower benefits for which the borrower may become eligible

·Missing information reasons, if any

·Decline reasons, if applicable

·Current application status

·Acquisition channel

·Residency status (own, rent, live with parents)

·Credit score (including FMC custom credit score)

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EXHIBIT B

Compensation Schedule

[**]

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EXHIBIT C

TransUnion Addendum

AGENT ADDENDUM TO THE TRANSUNION MASTER SERVICES

AGREEMENT FOR CONSUMER REPORTING AND ANCILLARY SERVICES

This Agent Addendum (“Addendum”), effective the       day of              , 2010 (the “Effective Date”), by and between Trans Union LLC, with its principal place of business located at 555 West Adams, Chicago, Illinois 60661 (“TransUnion”), SunTrust Bank, with its principal place of business located at 303 Peachtree Street, Atlanta, GA 30308 (“SUBSCRIBER”), and First Marblehead Education Resources, with its principal place of business located at                                             (“Agent”), is meant to modify the terms of the Master Agreement for Consumer Reporting and Ancillary Services entered between TransUnion and Subscriber on or about August 26, 2003 (the “MSA”).

RECITALS

WHEREAS, SUBSCRIBER has entered into an agreement with Agent for the purpose of conducing the project indicated on the attached Schedule A (the “Project”);

WHEREAS, the Project requires TransUnion to disclose Services and Services Information directly to Agent on behalf of SUBSCRIBER;

WHEREAS, SUBSCRIBER desires TransUnion disclose such Services and Services Information directly to Agent, and TransUnion has agreed to such disclosure, subject to the terms contained in both the MSA and this Addendum; and,

WHEREAS, SUBSCRIBER desires that TransUnion invoice Agent for the Services and Services Information disclosed to Agent as more fully explained herein.

NOW, THEREFORE, in exchange for the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.The forgoing Recitals are hereby incorporated by reference as a material part of this Agreement.

2.Capitalized terms not defined herein shall have the definition ascribed in the MSA.

3.SUBSCRIBER hereby appoints Agent its agent with all necessary authority to disclose to, and, request and receive from, TransUnion, Services or Services Information.  Moreover, SUBSCRIBER hereby authorizes TransUnion to disclose Services and Services information to Agent.

4.SUBSCRIBER shall at all times be responsible and ensure Agent’s compliance with the terms and conditions of the MSA.  Additionally SUBSCRIBER hereby represents to TransUnion that it has entered into a written agreement with Agent containing obligations and restrictions consistent with its obligations and restrictions under the MSA.  SUBSCRIBER further agrees to enforce such obligations and restrictions against Agent to the satisfaction of TransUnion, and to immediately notify TransUnion upon the discovery of any violation of such obligations and restrictions by Agent.  In the event SUBSCRIBER fails to enforce said obligations and restrictions to TransUnion’s satisfaction, SUBSCRIBER hereby agrees to assign to TransUnion

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all such enforcement rights against Agent.

5.TransUnion, subject to the terms of the MSA and this Addendum, agrees to: 1) disclose Services and Services Information to Agent on behalf of SUBSCRIBER; and, 2) allow Agent to access Services and Services Information on behalf of Subscriber.

6.Agent certifies that it will request and use any information provided as part of the TransUnion services pursuant to this Addendum in compliance with the terms and conditions of the MSA and only on behalf of SUBSCRIBER one-time and only for the specific permissible purpose certified by SUBSCRIBER at the time of its request.  Agent further certifies that it will limit the disclosure of Services and Services Information to those individuals inside its organization with a “need to know”, and that it will not disclose such information to any third party other than the SUBSCRIBER.

7.SUBSCRIBER and Agent shall at all times be responsible for compliance with, and any violation of, the terms, certifications, obligations and restrictions as set forth in the MSA with respect to Services and/or Services Information disclosed to Agent, including, but not limited to, those terms related to compliance with laws and security.  Moreover, and without regard to any cap on liability set forth in the MSA, SUBSCRIBER and Agent shall jointly and severally defend, indemnify and hold TransUnion harmless from and against any and all claims, expenses, costs, damages, settlements, judgments or awards, including attorney’s fees, directly or indirectly resulting from, or alleged to have directly or indirectly resulted from, disclosure hereunder.

8.SUBSCRIBER authorizes, and TransUnion agrees, that for any Services and/or Services Information accessed by its Agent, TransUnion will invoice SUBSCRIBER care-of Agent, at a rate previously agreed upon by TransUnion and Agent, at the following address                                                                                                    , which may be changed upon written notice to TransUnion in accordance with Paragraph 11.  Agent shall remit to TransUnion payment to TransUnion Invoice within thirty (30) days of the invoice date, regardless whether or not it has collected such payment from SUBSCRIBER.  Without limiting any of TransUnion’s remedies for non payment or late payment of invoices, invoices which are not paid by Agent within sixty (60) days of the invoice date shall be subject to a late charge of one and one-half percent (1.5%) per month (18% per year) or the maximum allowed by law, whichever is less.  If collection efforts are required, Agent shall pay all costs of collection, including reasonable attorneys’ fees.

9.Notwithstanding the forgoing, SUBSCRIBER, in accordance with the terms of the MSA, shall remain responsible for payment of any unpaid or untimely paid invoices, as well as any fees associated therewith, submitted to SUBSCRIBER care-of Agent.

10.Agent recognizes the confidential nature of the information contained in the TransUnion invoice(s).  Agent shall keep all information in any way related to the TransUnion invoice(s), whether received from either TransUnion or SUBSCRIBER, in confidence and shall not use such information except for purposes of this Addendum, nor disclose such information to any person or persons outside of its organization.  Moreover, Agent shall limit the disclosure of such information inside its organization to employees having a need to know who are subject to written obligations of confidentiality substantially similar to those contained herein.  Furthermore, no information related to the TransUnion invoice(s), whether received from TransUnion or SUBSCRIBER, shall be copied or duplicated in any form or manner except as necessary to carry out the purpose of this Addendum.

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11.All notices and correspondence required under the Addendum shall be sent to the Parties at the following addresses.  Either party may change such name and address by notice to the other in accordance herewith.  Any such change shall take effect immediately upon receipt of such notice.

TransUnion LLC	SunTrust Bank
555 West Adams
Chicago, IL 60661
Attn: General Counsel	Attn:
First Marblehead Education Resources
Attn:

12.All terms of the MSA are incorporated into this Addendum and are expressly applicable to all orders and payments hereunder.  In the event of a conflict between any of the terms of this Addendum and those of the MSA, the terms of this Addendum shall govern.  The remaining terms of the MSA shall at all times remain in full force and effect.

13.This Addendum shall be coterminous with the MSA unless earlier terminated by SUBSCRIBER in accordance with the termination provisions contained in the MSA or by TransUnion upon written notice to SUBSCRIBER.

[Signatures appear on next page]

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IN WITNESS WHEREOF, the parties, intending to be legally bound, have caused this Addendum to be executed by their duly authorized representatives as of the Effective Date.

TransUnion LLC		SunTrust Bank
By:		By:
	Name and Title of Signer		Name and Title of Signer
	Date Signed		Date Signed
First Marblehead Education Resources
By:
	Name and Title of Signer
	Date Signed

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Schedule A

Project Description: Student Loan Originations

All SUBSCRIBER orders placed hereunder shall be made under the following TransUnion Subscriber Code(s):                                    .

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Exhibit D

Schedule 1             Key Metrics Report

Schedule 2             Approved Collectors

Schedule 3             Default Collection Reports

Schedule 4             Approved Initial Vendors

Schedule 5             Settlement Authority

Schedule 1 to Exhibit D

Key Metrics Report

The report shall consist of aggregate program data and metrics and provide information in at least the following categories:

·Application metrics

·Configuration and submission rate

·Application status—pending configuration; submitted, unbooked; missing information; in review; awaiting certification; Approval Disclosure sent; Approval Disclosure accepted; closing; Final Disclosure sent

·Cosign rate

·Booking rate

·Cancellation rate

·Grade-level and degree-level breakout, if available

·Initial credit decisions

·Conditional approvals

·Declines and top decline reasons

·Applications Pending Review

·Counteroffers—Accept/Decline/Pending

·Approvals by acquisition channel and disbursement method

·Repayment option and repayment term distribution

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Schedule 2 to Exhibit D

Approved Collectors

NCO Financials Systems, Inc.

Diversified Collection Services, Inc.

Collection Company of America

Simm Associates, Inc.

American Education Services

Estate Information Services, Inc.

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Schedule 3 to Exhibit D

Default Collection Reports

On a monthly basis, FMC shall provide reports containing at least the following information:

· defaulted Loans

· balances and borrowers in each delinquency stage, including forbearance

· balances and borrowers entering repayment next month

· # of cures by type (re-enter deferment, forbearance, payment, etc.)

· # on loans on automatic payment

· flow rates by delinquency stage, compared to historical measures

· liquidation rate

· # of right party contacts made

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Schedule 4 to Exhibit D

Approved Initial Vendors

1.Google

Cambridge, MA

Services:  Online advertising tracking, optimization and analysis.

2.Interwoven

Sunnyvale, CA

Services: Content Management system provider

3.Center Partners

Fort Collins, CO

Services: Call center operations, including inbound customer service calls, outbound customer service calls, outbound telemarketing

4.JLS Mailing Services, Inc.

Brockton, MA

Services: Mail pick-up; folding and stuffing envelopes, mail processing, storage and management of fulfillment materials and supplies

5.National Student Clearinghouse

Herndon, VA

Services: student enrollment verification

6.Trans Union LLC

Chicago, IL

Services: Consumer reports, Total ID, fraud readiness

7.Nicholas Barone

Buffalo, NY

Graphic Designer:  Brand, website, advertising and collateral design.

8.Patricia Lenz Bovie

Boston, MA

Copywriter:  Copy for website, advertising and collateral materials

9.Matthew Mombrea

Buffalo, NY

Programmer:  Programming work to build and update FMC Website

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Schedule 5 to Exhibit D

Settlement Authority

FMER and Approved Collectors may offer a settlement of the Loan obligation in full for a payment of a percentage of the outstanding Loan balance, as follows:

Days Delinquent	Customer Contact Method	Cash Settlement Offer (% of outstanding balance)
[**]	Email	As low as [**]%
[**]	Settlement Letter	As low as [**]%
[**]	Call Campaign	As low as [**]%
[**]	Email	As low as [**]%
[**]	Settlement Letter	As low as [**]%
[**]	Call Campaign	As low as [**]%

Communication of the settlement offer shall be to both the Borrower and Cosigner (where applicable).

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Exhibit E

Schedule 1

School Sales Activity States

Each of FMC and SunTrust shall restrict in-person Eligible Institution sales activities for the Program as listed below:

SunTrust Sales States	FMC Sales States
Florida	Arizona
Georgia	Arkansas
Maryland	California
North Carolina	Connecticut
Pennsylvania	Indiana
South Carolina	Kansas
Tennessee	Louisiana
Virginia	Maine
District of Columbia	Massachusetts
	Michigan
	Minnesota
	Mississippi
	Missouri
	Nebraska
	New Hampshire
	New Jersey
	Ohio
	Oklahoma
	Rhode Island
	Vermont
	West Virginia

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Schedule 2

Production Support Plan

The Program will be marketed by the FMC sales team directly to Eligible Institutions within the FMC Sales States.  Within the FMC Sales States and in accordance with the terms of the Agreement, the FMC sales team will leverage various presentation materials to build awareness of the Program among financial aid officers, present the Program to Eligible Institutions, respond to requests for proposals and provide Eligible Institutions with regular updates about the Program, and will conduct the following activities to support the promotion of the student loan product:

·Onsite visits to targeted Eligible Institutions in the FMC Sales States

·Webinars to key Eligible Institutions who require application demonstrations or additional product training

·Attend and/or exhibit at state, regional and national conferences to support FMC Sales States product sales, including NASFAA

·Monthly email communications to Eligible Institutions in FMC Sales States to highlight product features, interest rate changes or pertinent information in the industry

·Provide training onsite or via webinar as requested by Eligible Institutions on subjects including but not limited to: the product, product processing, servicing, default management

·Conduct mailings to Eligible Institutions and potential Applicants in accordance with Sections 2.2.1 and 2.2.5 of the Agreement

In addition, FMC will provide students in FMC Sales States with collateral materials and a link to the FMC Website so they have easy access to get more information about the Program.

FMC will also market the program using open channel activities, including: geo-targeted online advertising, and possibly email and/or direct mail prior to future peak periods for customer retention purposes.

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EXHIBIT F

Program Guidelines

TO BE ADOPTED PRIOR TO THE EFFECTIVE DATE

EXHIBIT G

SunTrust Service Marks

SunTrust

Custom Choice

EXHIBIT H

INSURANCE REQUIREMENTS

WORKERS’ COMPENSATION:

(A)	Workers’ Compensation: Statutorily Required
(B)	Employer’s Liability:
	(1)	Bodily Injury by Accident, for Each Accident:	$ [**]
	(2)	Bodily Injury for Each Employee by Disease:	$ [**]
	(3)	Policy Limit for Bodily Injury by Disease:	$ [**]

COMMERCIAL GENERAL LIABILITY:

Written on a per occurrence basis to include coverage for: Broad Form Property Damage; Bodily Injury; Personal Injury; Blanket Contractual Liability; Products/Completed Operations.
(A)	Combined Single Limit Per Occurrence:	$[**]
(B)	General Aggregate:	$[**]
(C)	Fire Legal Liability Per Occurrence:	$[**]
(D)	Medical Expense Per Person per Occurrence:	$[**]
SunTrust Banks, Inc., its subsidiaries, affiliate companies, its officers, directors and employees will be listed as additional insureds.  FMC’s insurance will be primary and non-contributory.

AUTOMOTIVE LIABILITY:

Such policy will include coverage for all vehicles owned, hired, non-hired, non-owned and borrowed by FMC in the performance of the Services covered by this Agreement.
Combined Single Limit:	$[**]

UMBRELLA LIABILITY:

Combined Single Limit:	$[**]
SunTrust Banks, Inc., its subsidiaries, affiliate companies, its officers, directors and employees will be listed as additional insureds.

ERRORS & OMISSIONS LIABILITY (PROFESSIONAL LIABILITY):

Such policy will include coverage for actual or alleged breach of duty, act, error, and omission, misstatement, misleading statement or neglect in the rendering of or failure to render the Services under this Agreement.
Combined Single Limit:	$[**]

FIDELITY BOND (CRIME INSURANCE):

Including blanket employee dishonesty: $[**]

CYBER / PRIVACY LIABILITY:

Such policy will include coverage for first and third party legal liability as a result of a physical privacy breach or breach of privacy regulations, as well as damages and claims for expenses arising out of computer attacks caused by security failures.        $[**]

EXHIBIT I

FMC Privacy and Security Policies

[**]

A total of thirty-five pages were omitted pursuant to a request for confidential treatment.

The First Marblehead Corporation

Employee Code of Conduct

On June 21, 2010, our board of directors approved our revised Code of Conduct.

Letter from the Chairman & Chief Executive Officer

Dear Fellow Employees,

At First Marblehead, integrity is a fundamental corporate value. We are strongly committed to it, and to the ethical conduct, honesty and compliance with law that underlie it. Integrity is vital to our long-term relationships with clients, colleagues and investors, particularly at this time in the history of our Company and industry.

Our Code of Conduct outlines standards for employee conduct. It is intended to raise your awareness about what is expected of each of us, to provide you with guidance if you have questions about what is proper conduct for you or anyone else, and to encourage you to report any ethical, accounting or legal problems that you may confront. Given the variety of situations to which our standards apply, the Code is not intended to provide you with a roadmap for every question that you have or specific concern that may arise. Each of us is expected to use our judgment and common sense in order to comply not only with the letter of the Code but also with its spirit.

Please read the Code carefully and thoroughly, as it has been updated to clarify some requirements as well as to reflect our growing and evolving businesses. You are required to formally acknowledge that you have read the Code, understand it, and agree to abide by it.

The principles of the Code apply to everyone at First Marblehead regardless of job function or seniority. Each of us must do our part to prevent or correct violations and maintain a culture where absolutely nothing compromises our commitment to integrity. I encourage you to discuss any questions or concerns you may have about the Code or any activity at our Company with any member of the Code of Conduct Committee.

Our Code provides a foundation, but the value we get from it depends on your level of dedication to upholding its principles. Please join me in renewing our commitment to protecting and strengthening First Marblehead’s reputation for integrity and the trust that our clients, colleagues and investors have placed in each of us.

Daniel Meyers
Chairman & Chief Executive Officer

Introduction

We are all equal under the Code

At The First Marblehead Corporation (Company), we are committed to upholding the highest standards of honest, ethical conduct. Always. Without compromise. That commitment also reflects our goals to meet and exceed the expectations of our stakeholders — those groups of people with a vested interest in the success of our Company.

Our Code of Conduct (Code) summarizes the shared values and behaviors we must exhibit in all of our business transactions and interactions with our key stakeholders, including customers, fellow employees, business partners, suppliers, shareholders, government regulators and communities.

Our Code applies equally to all employees and officers. In addition, our vendors, consultants and other business partners are expected to uphold our ethical standards and values. Compliance with our Code, Company policies and procedures, and applicable laws and regulations is a responsibility that we take seriously, and we will hold each other accountable in meeting that responsibility.

Our leaders and managers are expected to serve as ethical role models.

They are expected to be familiar with our Code and effectively communicate its importance and guidelines and answer the questions of those who report to them.

Leaders and managers also have an obligation to create a positive work environment in which Company personnel feel comfortable asking questions or reporting concerns.

Leaders and managers who fail to meet this responsibility or who do not act promptly to report suspected misconduct will be subject to disciplinary action that may include termination.

Raising and Reporting Ethical Issues

What to do when you think something is wrong

If you believe that any employee, officer, director or anyone working on our behalf may have engaged in ethical or legal misconduct, it is your responsibility to promptly report the matter to your manager or any member of the Code of Conduct Committee (see the list and contact information at the end of this document or on our HR intranet). Doing so helps us to address issues and prevent future misconduct. Suspected Code violations can be reported to anyone on our Code of Conduct Committee, or call our toll-free HOTLINE, 866-709-9950, or e-mail CodeOfConduct@fmd.com, where you can leave a message about any suspected violation. While we prefer that you identify yourself when reporting suspected violations so that we may follow up with you, you may leave messages anonymously.

We will promptly and thoroughly investigate complaints to determine whether violations have occurred and if so, how to effectively address them. Disciplinary measures for violations may include, but are not limited to:

·reprimands

·warnings

·probation or suspension without pay

·demotions

·reductions in salary

·restitution

·termination of employment

Certain violations may require external reporting

Certain violations of our Code may require us to refer the matter to the appropriate governmental or regulatory authorities for investigation or prosecution.

We may also be required to report particular violations to clients, and the clients may report the violation to appropriate regulators. Employees, officers and directors are expected to cooperate fully with any inquiry or investigation by the Company regarding an alleged violation of our Code. Failure to cooperate with any such inquiry or investigation may result in disciplinary action up to and including discharge.

If the alleged violation involves an executive officer, then the Board of Directors and the Chief Executive Officer (but only to the extent that the CEO is not involved in the alleged violation) will determine whether a violation of our Code has occurred and, if so, will determine the disciplinary measures to be taken.

While we prefer to coordinate matters internally, nothing in our Code should discourage you from reporting any illegal activity, including any violation of securities laws or any other federal state or foreign law, rule or regulation, to the appropriate regulatory authority.

You are protected

Employees, officers and directors will not fire, demote, suspend, threaten, harass or in any other manner discriminate or retaliate against a person because he or she reports a violation, unless it is determined that the report

was made with knowledge that it was false. Our Code does not prevent you from testifying, participating or otherwise assisting in any state or federal administrative, judicial or legislative proceeding or investigation.

Reporting Process

You have three options for reporting a violation:

If the alleged violation involves a member of the Code of Conduct Committee, that member will not participate in the investigative process.  In addition, suspected violations involving a member of the Audit Committee may be reported to WilmerHale LLP, our outside counsel.  All contact information is included at the end of this Code.

Concerns about Accounting or Auditing Matters

Reporting your concerns

If you become aware of an actual or potential problem with our accounting, internal accountings controls or auditing matters, please raise your concerns immediately, by using the reporting process on page 6, by contacting the

Chairman of the Audit Committee directly or by contacting Susan Murley at WilmerHale LLP, our outside counsel, (617) 526-6000.

All concerns of merit will be forwarded to the Audit Committee, and a record of all complaints and concerns received by us will be provided to the Audit Committee each quarter.  Again, you may report any concerns regarding accounting or auditing matters confidentially and anonymously.

Working with independent auditors or regulators

We are expected to cooperate completely and provide all information requested in any internal or external investigation, audit or regulatory inquiry. This requires us to provide accurate and complete information to these parties when requested.

·No one may directly or indirectly make or cause to be made a false or misleading statement.

·No one may omit to state, or cause another person to omit to state, any material fact in connection with any audit review, examination or investigation.

·No one may directly, or indirectly, take any action to coerce, manipulate, mislead or fraudulently influence any independent public or certified public accountant engaged in the performance of an audit or review of our financial statement.

Reporting Company Information

Compliance with all laws, rules and regulations is vital

We report corporate and business data to a number of regulatory agencies, including the Securities and Exchange Commission, the Internal Revenue Service and the New York Stock Exchange, in addition to the financial and educational institutions and other enterprises with which we do business. The accuracy and integrity of this information is critical to maintain our marketplace reputation and business model.

It is the responsibility of each one of us to comply with all laws, rules and regulations applicable to our business, as well as our Code and Company policies.

You are responsible for the accuracy of books, records and public reports

Because our regulators, shareholders and other business partners rely on the detailed information contained in our business records, we must make sure that the information we provide is accurate, timely and complete. You are responsible for the accuracy of the records and reports you create and/or review. Accurate information is essential to our ability to meet our legal and regulatory obligations.

All of our books, records and accounts must be maintained in accordance with all applicable regulations and standards and accurately reflect the true nature of the transactions they record.

Financial statements

Our financial statements must conform to generally accepted accounting principles, as well as our accounting policies and internal control procedures.

·No undisclosed or unrecorded account or fund can be established for any purpose.

·No false or misleading entries can be made in our books or records for any reason.

·No disbursement of corporate funds or other corporate property can be made without adequate supporting documentation.

It is our policy to provide full, fair, timely and understandable disclosure in reports and documents filed with, or submitted to, our regulators and in other public communications.

Protecting Company Assets

Protection of our company assets

We are all trusted to respect and safeguard Company property, which includes both physical and intangible assets. We must be diligent and work together to prevent identity theft, destruction or misappropriation of Company property, including our physical property, consumer information, proprietary client information, confidential and proprietary internal information and intellectual property.

Protecting physical assets

At all times we must protect and respect Company facilities, equipment and supplies from theft, loss, damage or misuse. Company issued portable devices, such as a BlackBerry or laptop, intended to promote work efficiency, should always be used for acceptable work-related purposes.

Protecting intellectual property

We also have an obligation to protect our intangible assets. Intellectual property refers to those intangible assets of the Company which include business methods, inventions, publications, patents, copyrights and trademarks. We were all asked to sign a non-disclosure agreement when we were hired. These signed agreements are kept in Human Resources and represent each of our individual commitments to protect our intellectual property. In addition, it is our policy to respect the intellectual property of others and to adhere strictly to all relevant laws and regulations regarding the patents, trademarks or copyrights owned by others.

Example:

Q.  John & Joe are on the T after work discussing their day.  John brings up comments made by management at a Town Hall meeting held earlier in the week.  He is interested in knowing Joe’s thoughts on certain statements about stock options and pending clients, which John names, that were confidentially made to employees at the meeting.  How should Joe respond?

A.  Without drawing further attention to John’s specific statements, Joe should make clear to John that the timing and setting are inappropriate for the conversation.  John’s public statements are in breach of his confidentiality obligations under our Code and are especially inappropriate if he is wearing anything identifying him with First Marblehead (fleece, name badge, computer bag or other item).

Protecting Information

Consumer information

We are all required to comply with the privacy policy applicable to the applications and loans we facilitate. In addition, federal and state law and contract requirements impose strict rules protecting information about loan applicants and borrowers.

All consumer data is confidential. Individual department policies define personnel who are authorized to access consumer data, and only authorized personnel with a need to know are permitted access.

Unauthorized access to consumer data is prohibited. Consumer data may only be used and disclosed to third parties in accordance with applicable law and applicable contractual requirements and restrictions.

All consumer data, such as personal data provided to us by or about loan applicants and borrowers, must be safeguarded against unauthorized access in accordance with our Information Security Policy. If you have any questions concerning access to, use of, or safeguarding of consumer data, contact our Chief Risk Officer.

Company information

Proprietary and confidential information is generally not available to the public and includes internal business information, such as contract documentation, business processes, and corporate strategies and plans.

We must maintain the confidentiality of proprietary and confidential information entrusted to us by the Company or other companies, including our suppliers and clients, except when disclosure is authorized by a manager or is legally mandated.

Unauthorized disclosure of any proprietary or confidential information is prohibited. In addition, you should take appropriate precautions to ensure that confidential or sensitive business information, whether it is proprietary to us or another company, is not communicated within the Company except to authorized personnel or outside parties who need this information for legitimate business purposes.

You may find yourself in a position where a third party asks you for information concerning the Company. You must not discuss internal Company matters with anyone outside the Company, except as required in the performance of your duties and after a confidentiality agreement is in place. You must use the Company’s assets only for legitimate business purposes and not use them for any personal benefit or for the benefit of any third party.

If you are unsure whether or not you should share information with a third party, contact your manager or the General Counsel for guidance.

Client information

We are all responsible for protecting the confidentiality and security of our clients’ proprietary and confidential information. Unauthorized disclosure of client information to third parties, or internal parties not having a need to know the information, is prohibited. We must take care to safeguard client information and to ensure that client information is communicated within the Company only to the extent that employees, officers or directors with a need to know are able to perform their duties. This obligation continues even after our employment with the Company ends.

Protecting Information

Send requests for company information to Investor Relations

To further protect the Company’s information and make certain that it is released to the public in a manner that is both accurate and consistent, only designated spokespersons may communicate with the public on behalf of the Company. This applies particularly to requests from the media, market professionals (including securities analysts, institutional investors, investment advisors, brokers and dealers) and security holders.

If you receive any requests, you must decline to comment and refer the inquirer to Investor Relations: 800-895-4283 or info@fmd.com

Our employees’ personal information deserves protection too

Just as we are committed to maintaining the privacy and confidentiality of our Company and client information, we are also committed to maintaining the privacy and confidentiality of our employees’ personal information.

Employment information or medical records must not be shared or discussed inside or outside of the Company except as authorized by the employee or officer or as is required by law. Within the Company access must be limited only to those who have a substantial and legitimate need to know the information or who require information due to legal process.

Gifts and Entertainment

Before accepting a gift, check the guidelines

In the course of our work with clients and to build or strengthen good working relationships, it may be acceptable to give gifts or entertainment to, or accept gifts or entertainment from suppliers, vendors or business partners. However, good judgment, discretion and moderation should always be guides in these situations. We may never solicit, accept or give gifts or entertainment that may influence or be perceived to influence business decisions.

You must not accept, or permit any member of your immediate family to accept any gifts or gratuities from any client, supplier, vendor or other person doing or seeking to do business with the Company, other than items of insignificant value (<$50 in total from anyone in any calendar year).

Any gifts you receive that are of significant value (>$50) should be returned immediately and reported to your manager and the General Counsel. If immediate return is not practical, the gift should be given promptly to the Company for charitable donation or such other disposition as the Company believes appropriate.

If you are unsure about whether a gift or specific event is in compliance, please ask your manager or a member of the Code of Conduct Committee for guidance.

Example:

Q. A vendor has offered Tim two tickets to a Celtics playoff game.  The vendor cannot make the game but told Tim to take a friend and enjoy himself.  Can Tim accept the tickets?

A. No.  Since the vendor is not accompanying Tim to the game, the tickets are really a gift and not business entertainment.  The Company limit for accepting gifts without approval is less than $50.  Tim cannot accept the tickets.

Before you give to others, consider how it may be perceived

Gifts, gratuities or other favors from you to clients, suppliers, vendors or other persons doing or seeking to do business with us that are of insignificant value (<$50 in total to anyone in any calendar year) are permitted if made in compliance with the terms of this paragraph.

All gifts, gratuities or other favors of significant value (>$50 in total to any party in any calendar year) from you to clients, suppliers, vendors or other persons doing or seeking to do business with us are prohibited unless approved in advance by the General Counsel.

Bribes and kickbacks are criminal acts, prohibited by law. You must not offer, give, solicit or receive any form of bribe or kickback anywhere in the world where we conduct business.

All gifts, gratuities or other favors, regardless of value, are prohibited if:

·not made in compliance with applicable law and our Code or policies to which the recipient may be subject, or

·given in consideration or expectation of any action by the recipient, or

·given to government officials. Requests for exceptions should be submitted to the General Counsel.

What’s reasonable (<$50)

·A bottle of wine of reasonable value from a client or vendor

·Tickets to a local sporting or cultural event with a value of less than $50

·An unsolicited gift of modest value given by a vendor

·Modest gifts of gratitude or to acknowledge personal events such as weddings, births or anniversaries

What’s excessive (>$50)

·A case of fine wine

·Front row tickets to a professional sports team playoff game

·A golf outing which includes tee time, hotel and other accommodations

·Cash, gift cards or other stored value products that are similar to cash

·A lavish gift, such as a leather briefcase, fine jewelry or art

Fair Dealing and Conflicts of Interest

We are committed to dealing fairly with other businesses

Our actions in the student loan marketplace define who we are as a company. We support vigorous yet fair competition. We not only have a responsibility to the regulatory, client and shareholder communities, but we also have an obligation to deal fairly and responsibly with our suppliers and competitors.

Fair dealing requires that we recognize and strive for the highest standards of honesty and integrity in the business community. We concentrate on anticipating and satisfying the needs of our clients and customers. While we will vigorously compete in our marketplace each and every day, we will not seek to restrict the competitive opportunities of our rivals in any way that may be considered deceitful or unethical.

Avoid conflicts of interest

A “conflict of interest” is defined as engaging in an activity in which you have a personal interest that intersects with or interferes with the interests of the Company. A conflict of interest can arise whenever you take action or have an interest that prevents you from performing your duties and responsibilities honestly and objectively.

You must act in the best interests of the Company and may not engage in any activity or have a personal interest, like a substantial financial investment, that presents a conflict of interest. For these reasons you may not perform services as a consultant, employee, officer, advisor or in any other capacity for, or have a financial interest in, a competitor of the Company, other than services performed at our request, a financial interest representing less than one percent (1%) of the outstanding shares of a publicly-held company or as may otherwise be approved by our Board of Directors.

In addition, no one may use his or her position with our Company to influence a transaction with a supplier or client in which such a person, or an immediate family member, has any personal interest, other than a financial interest representing less than one percent (1%) of the outstanding shares of a publicly-held company.

You are responsible for immediately disclosing any material transaction, or personal or financial relationship that might reasonably be expected to create a conflict of interest to the General Counsel. If you are a senior manager, you are also responsible for reporting such a transaction or relationship to the Board of Directors, which will be responsible for determining whether the transaction or relationship constitutes a conflict of interest.

Example:

Q.  Mike runs a small home business selling magazine subscriptions.  He does most of his work on weekends and it in no way conflicts with his performance at work.  Recently, Mike has been eating lunch at his desk and using his First Marblehead computer to process pending orders.  The Code says limited personal use of Company equipment is OK.  Is this limited activity acceptable?

A.  No.  Under our Code, engaging in any activity which potentially interferes with the interests of the Company presents a conflict of interest.  Our Company’s digital resources are used for business purposes, and personal use, especially in today’s resource and content rich website environment, does strain the system.  Mike must run his “home” business from home.

Compliance with the Law

In addition to the regulatory requirements regarding the disclosure of Company financial information, we are also subject to federal, state and local laws that govern the way we do business. You are expected to use good judgment and common sense in complying with all applicable laws, rules and regulations. If you are in doubt, ask for advice and guidance from your manager, General Counsel or the Chief Risk Officer. Inside information and insider trading In the course of your employment with us, you may come into possession of inside information. “Inside information” is non-public information about the Company or other companies with which we have a relationship that, if publicly disclosed, might be of use to our competitors, or otherwise harmful to us or our clients. Material inside information about a company is inside information that would be considered important by a reasonable investor in determining whether to buy, sell or hold securities of that company. Information concerning any of the following subjects, or our plans with respect to any of these subjects could be considered to be material inside information:

·our revenues or earnings

·our capital markets activities

·a new loan program or a significant development with regard to an existing one

·the establishment, modification or termination of agreements with business partners or strategic partners

·the loss of, delay or gain of a significant contract regarding our clients

·a merger or acquisition involving us

·a change in our control or a significant change in our management

·a change in or dispute with our auditors

This list is illustrative only. There are many other circumstances that could give rise to material inside information.

Ask before you trade

If you have material inside information about us or other companies, including our suppliers and clients, as a result of their relationship with us, you are prohibited by law and Company policy from trading in our securities or those of other such companies, as well as communicating such information to others who might trade on the basis of that information. Buying, selling or tipping (disclosing inside information to someone who trades a security based on the information you provided) violates not only our policy but the laws of many countries. Violations may carry both civil and criminal penalties for those involved. If you are in doubt, ask for guidance from your manager, the General Counsel or the Chief Risk Officer.

Example:

Q. Stephen knows about a potential business development that will likely make our Company’s stock price rise.  He knows that he cannot trade on this information but wants to tell his friend this information and encourage him to buy shares of the Company’s securities.  Can Stephen do this?

A. No.  The potential business development is considered material nonpublic information.  If Stephen shares this information with his friend, he would be engaging in tipping, which violates our Code and the Company’s Insider Trading Policy.  Stephen and his friend might also be subject to criminal penalties for violating insider trading laws.

Respect for the Individual

We should respect and value one another

We strive to maintain a workplace that allows everyone to contribute at the highest level in an atmosphere that fosters growth and innovation. In our daily decisions and actions, we should all be responsible for maintaining a workplace that is free of harassment and discrimination and that promotes respect for individuals.

We make employment, pay and promotion decisions without regard to race, color, religion, gender, age, national origin or ancestry, sexual orientation or other protected class status. The Company is committed to full compliance with all anti-discrimination laws, including state and federal laws against discrimination and harassment in employment, the Americans with Disabilities Act and the guidelines under the Massachusetts Commission Against Discrimination and the Equal Employment Opportunity Commission. (Please refer to the First Marblehead Employee Handbook for additional information on your rights under these laws.)

Harassment and discrimination are not tolerated

We are committed to maintaining a workplace that is free of harassment and discrimination. “Harassment” includes offensive behavior that interferes with another individual’s work environment or that has the purpose or effect of creating an intimidating or hostile work environment. Harassment may include conduct done physically or verbally, or done in person or by other means. It may also include conduct that is sexual in nature or otherwise inappropriate. To that end, we are committed to upholding the existing laws regarding sexual harassment and equality of employment opportunities. We will not tolerate retaliation against an individual who reports sexual or other forms of harassment or discrimination.  Retaliation is unlawful.

“Sexual harassment” is defined by Massachusetts law as requests for sexual favors, and other verbal or physical conduct of a sexual nature when submission to or rejection of such advances, requests or conduct is made either explicitly or implicitly a term or condition of employment or as a basis for employment decisions; or when such advances, requests or conduct have the purpose or effect of unreasonably interfering with an individual’s work

performance by creating an intimidating, hostile, humiliating, or sexually offensive work environment. Discrimination on the basis of sex includes, but is not limited to, sexual harassment.

We will investigate all complaints of sexual or other harassment and take appropriate disciplinary or corrective action when necessary. For further information on how to initiate a complaint or investigation, please see the First Marblehead Employee Handbook, or call the HOTLINE.

Example:

Q.  Linda feels harassed by her manager, Justin.  He frequently makes improper comments about her appearance when alone, making her uncomfortable.  Linda has told Justin his comments bother her on more than one occasion, but he has not changed or stopped the behavior.  What should she do?

A.  Linda should report Justin’s conduct to Human Resources or a member of the Code of Conduct Committee immediately.  Justin’s actions are unwanted and violate the Code and our Company’s policy against harassment.  The harassing behavior will not be tolerated.

Workplace Policies

Employee safety and health

Our greatest asset is you, so we are committed to the highest standards of your safety and protection. In addition to maintaining a harassment-free environment, we are also committed to a drug- and violence-free workplace.

Workplace violence includes intimidation, threats, physical attack or property damage directed at a fellow employee, officer or director. Anyone who engages in these behaviors may be subject to disciplinary action up to and including termination.

No illegal drugs or alcohol on the job. In addition, the Company is committed to fostering the health and well-being of all of us. That commitment is jeopardized when someone uses illegal drugs or alcohol on the job, comes to work with these substances present in his or her body or possesses, sells or distributes drugs in the workplace.

It is a violation of our policy and our Code for anyone to possess, sell or trade or offer for sale illegal drugs or otherwise engage in the illegal use of drugs, intoxicants or alcohol on the job. Anyone who engages in the behaviors outlined may be considered in violation and may be subject to disciplinary action, up to and including termination.

Report violence promptly:

If you know of actual or potential workplace violence, call or e-mail the HOTLINE. If you believe someone is in immediate danger dial 911 and contact building security:

Medford Security: (781) 396-2559
Prudential Security: (617) 236-3114

Political activities and contributions

You are encouraged to exercise your rights as voters and citizens. However, political activity must take place on your own time and you may not use Company resources or assets directly or indirectly for any political activities, except as otherwise approved by the Board of Directors or in connection with your job responsibility. You may not allow your status as an employee or officer to be used in support of a particular political candidate or issue, except if approved by the Board of Directors or in connection with your job responsibilities.

In addition, you may not pressure, either directly, or indirectly, employees, officers or directors to make political contributions or to participate in support of a political party, issue or candidate. Finally, corporate funds or assets

may not be used to support a political party, an elected official or the campaign of any candidate for local, state or federal elected office.

Workplace Policies

Responsible use of e-mail and the internet at work

Systems facilitating access to e-mail and the internet are Company resources that are provided primarily for business use, so you need to exercise good judgment in using these assets.  All e-mails and documents residing on Company systems are the property of the Company and employees, officers and directors should have no expectation of privacy.

Any use of e-mail or internet access for inappropriate purposes, including gaining access to pornographic or other unsuitable websites, is strictly prohibited.  In addition, employees, officers and directors are legally responsible for their blog and social network postings and may be subject to liability if contents are found to be defamatory, harassing or in violation of any applicable law.  It is expected that e-mail and internet usage is business appropriate.

Example:

Q.  Samantha notices that several individuals who sit near her regularly play games and watch movies on their Company computers.  She finds out that some of the websites these individuals are accessing are restricted and should be blocked by the Company’s internet filtering tools.  When testing access to these websites from her work computer, Samantha was redirected and received a message saying the websites were blocked.  What should Samantha do?

A.  Samantha should report her concerns to her manager or any member of the Code of Conduct Committee and she can choose to do so confidentially.  The situation will be investigated.  If it is determined that individuals intentionally bypassed security controls allowing them access, they will be disciplined.  Further, any retaliation against Samantha for reporting this information will not be tolerated.

Working together to protect the environment

We are firmly committed to protecting the environment. We comply with all applicable environmental laws and regulations, as well as any guidelines set forth by the Company. Our commitment means that we must operate with respect for the environment by working to minimize environmental hazards, conserve and protect natural resources, and manage our energy usage.

We encourage individuals to do their part too. We should recycle, turn off lights and computers when they are not in use, and take public transportation whenever possible. If you have ideas, please share them with your manager or e-mail: facilitiesdept@fmd.com.

Supporting Our Code of Conduct

We have to work together to uphold the Code

Our Code not only outlines our operating responsibilities and guidelines, it is an agreement that we share about the ethics and values which guide our business actions and decisions. We are all responsible for upholding and enforcing it.

If you develop any questions or concerns about ethical behavior in our workplace we encourage you to raise them or report them.

Waivers of the Code

While most of the policies contained in our Code must be strictly adhered to, in some cases exceptions may be possible. If you believe that an exception to any of these policies may be appropriate, you should first contact your

manager. If your manager agrees that an exception is appropriate, the written approval of the General Counsel must then be obtained. The General Counsel is responsible for maintaining a record of all requests for exceptions to any of these policies and the disposition of the requests.

Any executive officer who seeks an exception to any of these policies should contact the General Counsel. Any waiver of our Code for executive officers must be made only by the Board of Directors of the Company and will be disclosed as required by the law or regulation.

As First Marblehead employees, we agree:

·To prepare and maintain accurate business and financial reports

·Not to mislead or inappropriately influence auditors or regulators

·To protect the confidential information and intellectual property of our company, clients and partners and to keep private consumer information secure

·Not to give or accept inappropriate gifts (generally gifts of >$50 per year)

·To use company resources—especially e-mail and internet—only for appropriate purposes

·To deal fairly with business partners, vendors and competitors

·Not to engage in insider trading or any other illegal activities

·To maintain a safe workplace

The Code of Conduct is available online via the Human Resources Intranet page. Hard copies of the Code are available in the mail room or by request from HR.

Contact Information

Code of Conduct Committee Member = (M)

Bill Baumer (M)

Managing Director & Chief Risk Officer

The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199-8157

(617) 638-2093

bbaumer@fmd.com

Greg Woods (M)

Managing Director & General Counsel

The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199-8157

(617) 638-2176

gwoods@fmd.com

Jo-Ann Burnham (M)

Managing Director, Human Resources

The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199-8157

(617) 638-2005

jburnham@fmd.com

Ken Klipper (M)

Managing Director & Chief Financial Officer

The First Marblehead Corporation

800 Boylston Street, 29th Floor

Boston, MA 02199-8157

(617) 638-2163

kklipper@fmd.com

Daniel Meyers

Chairman & Chief Executive Officer

The First Marblehead Corporation

800 Boylston Street, 34th Floor

Boston, MA 02199-8157

(617) 638-2001

dmeyers@fmd.com

Peter Drotch

Chairman – Audit Committee

The First Marblehead Corporation Board of Directors

800 Boylston Street, 34th Floor

Boston, MA 02199-8157

(508) 872-6647

Outside Counsel

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, MA 02105

(617) 526-6000

Attention: Susan Murley, Esquire

Code of Conduct HOTLINE: CodeOfConduct@fmd.com or 866.709.9950

EXHIBIT J

FMER License Applications

Massachusetts – Small Loan Company license

New Jersey – Consumer Lender license

EX-10.40

Exhibit 10.40

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission.  Asterisks denote omissions.

CERTIFICATE OF SATISFACTION and

FIRST AMENDMENT TO LOAN PROGRAM AGREEMENT

This Certificate of Satisfaction and First Amendment to Loan Program Agreement (the “Certificate and Amendment”) is entered into this 15th day of July, 2010, by and among First Marblehead Education Resources, Inc., a Delaware corporation having its principal offices at One Cabot Road, Medford, Massachusetts 02155 (“FMER”), The First Marblehead Corporation, a Delaware corporation having its principal offices at 800 Boylston Street, 34th Floor, Boston, Massachusetts 02199 (“FMC”), and SunTrust Bank, a Georgia state-chartered banking corporation having an office located at 1001 Semmes Avenue, Richmond, Virginia 23224 (“SunTrust”).  Capitalized terms used in this Certificate and Amendment without definition have the meanings assigned to them in the Loan Program Agreement (as defined below).

WHEREAS, FMER, FMC, and SunTrust executed the Loan Program Agreement by and among the Parties dated as of April 20, 2010 (the “Loan Program Agreement”); and

WHEREAS, pursuant to Section 18.1.1 of the Loan Program Agreement, the Parties agreed to the Effectiveness Conditions, the satisfaction or waiver of which was required prior to the establishment of the Effective Date of the Loan Program Agreement; and

WHEREAS, the Parties agree that each of the Effectiveness Conditions has been satisfied or waived, as more fully set forth in this Certificate and Amendment; and

WHEREAS, the Parties desire to execute this Certificate and Amendment as the Effective Date Communication contemplated by Section 18.1.1 of the Loan Program Agreement, and hereby to establish the Effective Date as July 15, 2010; and

WHEREAS, the Parties desire to amend the Loan Program Agreement as set forth in this Certificate and Amendment.

NOW THEREFORE, in consideration of the promises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.Satisfaction or Waiver of Effectiveness Conditions. The Parties agree that, as of July 15, 2010:

(a) Each of SunTrust, FMC, and the Servicer has executed the Servicing Agreement, a copy of which is attached hereto as Exhibit A;

(b) SunTrust, FMC and FMER have agreed to amend the Loan Program Agreement in lieu of entering into a Participation Account Deposit Agreement, and accordingly each of them hereby (i) waives the Effectiveness Condition with respect to a Participation Account Deposit Agreement set forth in Section 18.1.1(b) of the Loan Program Agreement, and (ii) agrees to amend the Loan Program Agreement as set forth in Section 3 of this Certificate and Amendment;

(c) Except for items identified by SunTrust prior to the date hereof as items to be addressed by the Parties after the Effective Date, the Program Guidelines attached to this Certificate and Amendment as Exhibit B are hereby approved and adopted by the Parties, including the Servicing Guidelines, the forms of Credit Agreements and Truth-in-Lending Disclosures contained therein;

(d) Documents attached hereto as Exhibits C1, C2, and C3 establishing and governing the purchase of Charged Off Loans by MG Student Loan Trust 2010-1 are hereby approved by FMC and SunTrust in substantially the form attached hereto;

(e) Except for items identified by SunTrust prior to the date hereof as items to be addressed by the Parties after the Effective Date, SunTrust hereby approves the Online Application System, including processes for complying with Title X, as set forth in the Program Guidelines;

(f) Except for items identified by SunTrust prior to the date hereof as items to be addressed by the Parties after the Effective Date, SunTrust hereby approves the FMC Website and FMC Materials, as provided to SunTrust prior to the Effective Date; and

(g) The TransUnion Addenda (TransUnion Master Services and FICO Score Services) required by TransUnion LLC have been executed, copies of which are attached to this Certificate and Amendment as Exhibits D1 and D2, and the Agreement for Fair Isaac Score Services entered among TransUnion, Fair Isaac Corporation, and SunTrust has been executed as of the date of this Certificate and Amendment.

2.Effective Date Communication; Establishment of Effective Date. The Parties agree that:

(a) this Certificate and Amendment shall and hereby does constitute the Effective Date Communication required pursuant to Section 18.1.1 of the Loan Program Agreement; and

(b) the Effective Date is hereby established as July 15, 2010.

3.Amendments to Loan Program Agreement Related to Participation Account. The Parties hereby agree to amend the Loan Program Agreement, effective immediately, to:

(a) delete the first paragraph of Section 7.1, prior to the beginning of Section 7.1.1, in its entirety and insert in place thereof and in substitution therefor the following:

“7.1Participation by FMC.  In connection with Loans originated and funded under the terms of this Agreement, FMC agrees to fund the Participation Account for charge off coverage and credit enhancement purposes.  The Participation Account shall be governed by this Article VII and the other provisions of this Agreement relating to the Participation Account (including, for example, Section 18.3.1) or otherwise necessary for the interpretation of this Article VII or any such provisions, including any definitions or other provisions set forth in Article I.  SunTrust agrees to compensate FMC, by paying to FMC an undivided fractional interest in the Portfolio Yield from its portfolio of such Loans, in addition to the other fees and amounts payable to FMC pursuant to Article VI and this Article VII.”

(b) add the following sentence as the new final sentence of Section 7.1.6:

“SunTrust shall be required to withdraw the amount of each such Participation Account Payment from the Participation Account and make each such Participation Account Payment to FMC no later than thirty (30) days after receipt of monthly reporting from the Servicer for the month in question.”

(c) delete Section 7.1.8 in its entirety and insert in place thereof and in substitution therefor the following:

“7.1.8 Monthly Statement; Review of Participation Reporting.  For so long as there are any funds in the Participation Account, SunTrust shall deliver to FMC, at its address provided pursuant to Section 19.1, no later than fifteen (15) days following the end of any calendar month, a written statement for the previous calendar month setting forth the balance of the Participation Account as of the last date of such month and all transactions with respect to funds in the Participation Account during such month, including all deposits, withdrawals, payments

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of interest (and the associated Effective Interest Rate during such period) and any other changes in the balance of the Participation Account, and the corresponding dates thereof within the period.  FMC shall review such monthly Participation Account statement during the first ten (10) days after receiving it and shall notify the SunTrust in writing (which may be in the form of an email communication) if it in good faith disputes any items in such report during such 10-day period.  If FMC disputes any item in the statement, the payments required in Section 7.1.4 relating to a disputed item shall be withheld until such dispute is resolved to the satisfaction of FMER, SunTrust and FMC.  If, within thirty (30) days of receiving a notice of dispute, the Parties are unable to resolve the dispute, any Party may invoke the dispute resolution procedures of this Agreement.”

(d)  delete the third and fourth sentences of Section 7.1.10 in their entirety;

(e)  add the following paragraphs as a new Sections 7.1.12, 7.1.13 and 7.1.14, respectively, of the Agreement:

“7.1.12Interest on the Participation Account.  For so long as any funds or other amounts remain in the Participation Account, all such amounts shall bear interest on a monthly variable rate. The rate for each month shall be no less than the three-month London interbank offered rate, as published in the “Money Rates” table of The Wall Street Journal Eastern Edition (“LIBOR”) on a particular calendar day of the previous month, as established by SunTrust from time to time with prior notice to FMC, [**] basis points ([**]%) (the “Effective Interest Rate”). If The Wall Street Journal Eastern Edition is no longer available, FMC and SunTrust shall mutually adopt an alternate source for the three-month LIBOR index.

7.1.13Additional Provisions Related to the Participation Agreement.  SunTrust acknowledges and agrees that the Participation Account shall be a restricted account to be used solely for the purposes described in this Agreement.  SunTrust further agrees that it shall not, and has no right to pursuant to this Agreement or otherwise, to withdraw, release, assign or otherwise transfer any funds, accrued interest, or other amounts or assets contained in the Participation Account (any of the foregoing, “Participation Account Assets”) for any purpose or to pay any funds or other amounts from the Participation Account to SunTrust or to any other Person except as and to the extent specifically authorized by this Article VII.  Except with respect to withdrawals, releases, payments and the enforcement of its security interest specifically authorized by this Agreement, SunTrust further acknowledges and agrees that it shall not transfer, assign or grant any control over the Participation Account or any Participation Account Assets to any other financial institution or other Person, including any Affiliate of SunTrust, without the prior written consent of FMC.  In the event that SunTrust desires to request such consent of FMC, SunTrust acknowledges and agrees that FMC shall be entitled to require that an agreement among FMC, SunTrust and such other Person regarding deposits, withdrawals, procedures and other matters with respect to the Participation Account and this Agreement be entered into prior to any such movement or transfer of the Participation Account or any Participation Account Assets, such agreement to be reasonably satisfactory to FMC.

7.1.14Additional Representations, Warranties and Covenants of SunTrust Related to Participation Account.  SunTrust hereby represents, warrants and covenants to FMC and FMER that, as of the Effective Date, throughout the Term of this Agreement and until such time as no Participation Account Assets remain in the Participation Account:

(a) it is an organization engaged in the business of banking and is acting in such capacity in maintaining the Participation Account at SunTrust hereunder;

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(b) it has established the Participation Account as set forth in this Agreement, and will maintain it in the manner set forth herein until such time as no funds remain in the Participation Account;

(c) it has not entered into any currently effective agreement with any Person under which SunTrust may be obligated to comply with any instructions with respect to the Participation Account or any Participation Account Assets originated by a Person other than SunTrust or FMC; and SunTrust will not enter into any agreement with any Person under which SunTrust may be obligated to comply with any such instructions originated by a Person other than SunTrust or FMC;

(d) except for the claims and interests of SunTrust and FMC, SunTrust does not know or have notice of any claim to, or interest in, the Participation Account; SunTrust will keep the Participation Account and the Participation Account Assets free from all other security interests and all liens, encumbrances, garnishments, attachments, executions, levies and rights of any Person other than SunTrust or FMC;

(e) if SunTrust obtains any knowledge of any Person asserting any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Participation Account, SunTrust will promptly notify FMC thereof;

(f) all cash and money delivered to SunTrust by FMC pursuant to this Agreement for deposit in the Participation Account will be promptly credited to the Participation Account;

(g) it shall not change a name, account number or designation of the Participation Account without the prior written consent of FMC.

4.Amendments to Loan Program Agreement Related to Compensation Schedule. In addition, the Parties hereby agree to amend the Loan Program Agreement to delete that portion of the Compensation Schedule (Exhibit B to the Loan Program Agreement) labeled “FMC Variable Rate Compensation” and adopt in place thereof and in substitution therefor the Compensation Schedule labeled “Amended FMC Variable Rate Compensation” and attached to this Certificate and Amendment as Exhibit E.

5.Multiple Counterparts.  This Certificate and Amendment may be executed in multiple counterparts, each of which shall be deemed an original for all purposes and all of which shall be deemed, collectively, one agreement.

6.GOVERNING LAW.  THIS CERTFICIATE AND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN TO THOSE OF THE STATE OF GEORGIA.  EACH PARTY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS CERTIFICATE AND AMENDMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS.

7.Permitted Filing.  Each Party may file this Certificate and Amendment (with redactions as permitted by Requirements of Law) with the appropriate state or federal regulators, including the Securities and Exchange Commission, as required by such regulators.

8.Full Force and Effect. As amended in this Certificate and Amendment, the Loan Program Agreement remains in full force and effect according to its terms.

[Signatures appear on next page]

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IN WITNESS WHEREOF, the parties hereto have caused this Certificate and Amendment to be executed by their respective officers, being first duly authorized, as of the day and year first above written.

SUNTRUST BANK
By:	/s/ W. Mark Smith
Name:	W. Mark Smith
Title:	Executive Vice President
THE FIRST MARBLEHEAD CORPORATION
By:	/s/ Daniel Maxwell Meyers
Name:	Daniel Maxwell Meyers
Title:	President and CEO
FIRST MARBLEHEAD EDUCATION RESOURCES, INC.
By:	/s/ Michael Plunkett
Name:	Michael Plunkett
Title:	President

TABLE OF EXHIBITS

Exhibit A—Servicing Agreement

Exhibit B—Program Guidelines**

with Servicing Guidelines, Forms of Credit Agreements and Truth-in-Lending Disclosures

Exhibit C1—Trust Agreement for MG Student Loan Trust 2010-1

Exhibit C2—Administration Agreement

Exhibit C3—Special Servicing Agreement

Exhibit D1—TransUnion Addendum

Exhibit D2—TransUnion FICO Addendum

Exhibit E—Amended Compensation Schedule for Variable Rate Loans**

**Confidential treatment has been requested for this exhibit in its entirety.

EXHIBIT A

Servicing Agreement

PRIVATE STUDENT LOAN SERVICING AGREEMENT

FOR THE CUSTOM CHOICE PROGRAM

AMONG

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY,

SUNTRUST BANK

AND

THE FIRST MARBLEHEAD CORPORATION

THIS PRIVATE STUDENT LOAN SERVICING AGREEMENT FOR THE CUSTOM CHOICE PROGRAM (this “Agreement”) is made and dated as of July 15, 2010 (the “Effective Date”) , by and among the Pennsylvania Higher Education Assistance Agency (d/b/a American Education Services), a public corporation and governmental instrumentality organized under the laws of the Commonwealth of Pennsylvania, having an address at 1200 North Seventh Street, Harrisburg, Pennsylvania 17102 (“Servicer”), SunTrust Bank, a Georgia State Bank, having an address at 1001 Semmes Avenue, Richmond Virginia 23224 (“Lender”) and The First Marblehead Corporation, a Delaware corporation, having an address at 800 Boylston Street, 34th Floor, Boston, Massachusetts 02199 (“FMC”).

RECITALS

WHEREAS, Servicer was created by the Commonwealth of Pennsylvania by the Act of August 7, 1963, P.L. 549 for the purpose of improving higher educational opportunities and to that end Servicer is empowered to make, guarantee, undertake commitments to make or acquire and participate with lending or postsecondary institutions in the making of loans, servicing of loans, or otherwise providing loans of money to students; and

WHEREAS, Servicer has developed its loan servicing system (the “Loan Servicing System”) for the purpose of servicing Loans (as defined herein); and

WHEREAS, Servicer has developed various web-based products (“PHEAA Web-based Products”), which provide on-line automated capabilities to enhance services rendered to student borrowers; and

WHEREAS, Servicer has developed support services (“Support Services”) to enhance the Loan Servicing System and the PHEAA Web-based Products (collectively the “PHEAA System”), to include technical support, help desk, communications support, and information technology staff time; and

WHEREAS, the Servicer has expertise in the business of servicing private student loans and other education loans for lenders; and

WHEREAS,  Lender and FMC have created the Custom Choice education loan program (“Program”),which is described in the Program Guidelines (defined below), and FMC and Lender are responsible for structuring and assisting in implementing the Program; and

WHEREAS, Servicer, Lender and FMC will work collaboratively on future refinements and enhancements to the servicing procedures for the Programs; and

WHEREAS, the Lender desires to have FMC and/or one or more of its Affiliates provide Administrator Services (as defined below) in connection with this Agreement; and

WHEREAS, Lender and FMC desire to utilize the expertise of the Servicer to service such education loans in the Program consistent with this Agreement on behalf of FMC and Lender;

NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, Servicer, Lender and FMC (hereinafter, collectively, the “Parties” and each, individually, a Party) do hereby agree to the following:

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SECTION 1.  DEFINITIONS

1.01“Account” means the Loans collectively of an individual Borrower owned by Lender and for which FMC (and its Affiliates) serves as Program Administrator, which are serviced pursuant to this Agreement.

1.02“Additional Deferment for Re-enrollment” has the meaning given to it in Section F.4 of the Servicing Guidelines.

1.03“Adequately Protected” has the meaning given to it in Section 11.14.

1.04“Administrator Services” means the services provided by FMC or its Affiliates, and includes, but is not limited to post-disbursement portfolio administration, as further described in Section 2.03 of this Agreement.

1.05“Affiliate” means, with respect to an entity, another entity that at the time in question, directly or indirectly, owns or controls, is owned or controlled by, or is under common ownership or common control with the first entity.  For purposes of this Agreement, “control” shall mean the power to direct the management or affairs of an entity, the terms “common control” and “controlled by” shall have meanings correlative to the foregoing, and “ownership” shall mean the beneficial ownership of more than fifty per cent (50%) of the equity securities of the entity.

1.06“Agreement” means this Private Student Loan Servicing Agreement, including each Schedule and Exhibit provided for herein and each amendment hereafter adopted.

1.07“Applicant” means all co-applicants for a Loan under the Program Guidelines, including any proposed Borrower and any proposed Cosigner who begins an Application, regardless of whether the Application is completed.

1.08“Application” means a consumer’s application, whether in whole or in part, for a Loan under this Program.

1.09“Approval Disclosure” means the disclosure required by 12 C.F.R. § 226.47(b) and Section 128(e)(2) of the federal Truth-in-Lending Act, provided to the Borrower(s) by FMER, a copy of which FMER forwards to Servicer as part of the Loan file.

1.10“Approved School” means an institution of higher education eligible for participation in programs under Title IV of the Higher Education Act of 1965, as amended.

1.11“Armed Forces Forbearance” has the meaning given to it in Section G.8 of the Servicing Guidelines.

1.12“Borrower” means an individual who is the maker of a Credit Agreement and who obtains a Loan. “Borrower” includes both the primary obligor and any Cosigner.

1.13“Breach”, for purposes of Section 11.20, has the meaning given to it in Section 11.20.

1.14“Business Days” means any day other than a Saturday or Sunday, or a day on which the Servicer, Lender, or FMC is required or authorized by law to remain closed and on which any such Party does remain closed.

1.15“Cancellation Window” has the meaning given to it in Section D.1 of the Servicing Guidelines.

1.16“Change of Control” means, with respect to Servicer, the sale to any entity, individual or group of all or substantially all of Servicer’s assets used to perform the Services or the reorganization, merger or consolidation of Servicer with or into another entity.

1.17“Charged Off Loan” means a Loan that is at least [**] days delinquent in principal and interest or interest only or partial interest payments or that has experienced a “Charge Off”, as set forth in Section L.1 of the Servicing

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Guidelines.

1.18“Charged Off Loan Roster” has the meaning given to it in Section L.2 of the Servicing Guidelines.

1.19“Clearinghouse” has the meaning given to it in Section F.1 of the Servicing Guidelines.

1.20“Confidential Business Information” has the meaning assigned to it in Section 11.02(c).

1.21“Cosigner” means a person other than the Student Borrower who executes a Credit Agreement with a Student Borrower and thereby assumes joint and several liability for the Loan.

1.22“Cosigner Release” has the meaning given to it in Section E.7.b of the Servicing Guidelines.

1.23“Credit Agreement” shall mean the promissory note or credit agreement executed by a Borrower or a Cosigner evidencing a Loan.

1.24“Custom Choice” means the Program.

1.25“Default Prevention Vendor” has the meaning given to it in Section 4.20.

1.26“Delinquency Guidelines” has the meaning given to it in Section 4.20.

1.27“Disclosing Party” has the meaning given to it in Section 11.02(e).

1.28 “Early Termination Fees” shall mean the fees for early termination set forth in the Fee Schedule.

1.29“Effective Date” means the date this Agreement has been executed by all Parties and is approved as to form and legality by the Office of Attorney General of the Commonwealth of Pennsylvania.

1.30“Existing Servicing Agreement” means, together (i) as to FMC, the Amended and Restated Private Loan Servicing Agreement between FMC and Servicer dated as of September 28, 2006, as amended and (ii) as to Lender, any servicing agreement between Lender and Servicer which predates the Effective Date.

1.31“Fee Schedule” means the Schedule C attached hereto, as such schedule may be amended, modified or supplemented by the Parties from time to time pursuant to the terms and provisions hereof.

1.32“FMC” means The First Marblehead Corporation in its capacities as “FMC” and “Program Administrator” (as defined herein).

1.33“FMC Administrator Loans” shall have the meaning assigned to it in Section 2.03.

1.34“FMER” means First Marblehead Education Resources, Inc., an Affiliate of FMC.

1.35“Force Majeure” has the meaning given to it in Section 10.01.

1.36“Full Deferment” has the meaning given to it in Section E.2.b of the Servicing Guidelines.

1.37“Governmental Authority” means the federal government of the United States, any state government, or any political subdivision of either, or any agency, court or body of the federal government of the United States, of any state, or of any other political subdivision of either, exercising executive, legislative, judicial, regulatory or administrative functions.

1.38“Graduation Benefit” has the meaning given to it in Section E.7.d of the Servicing Guidelines.

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1.39“Identity Theft Procedures” means the Procedures for Fraud Notification set forth in Section I of the Servicing Guidelines and as may be amended by agreement of the Parties pursuant to the terms thereof.

1.40“Immediate Repayment” has the meaning given to it in Section E.2.a of the Servicing Guidelines.

1.41“Interest Only” has the meaning given to it in Section E.2.c of the Servicing Guidelines.

1.42“In-School Deferment” has the meaning given to it in Section F.1 of the Servicing Guidelines.

1.43“Late Fees” has the meaning given to it in Section 4.13.

1.44“Late School Notification Forbearance” has the meaning given to it in Section G.5 of the Servicing Guidelines.

1.45“Lender” means SunTrust Bank.

1.46“Loan” means a loan of funds, including all disbursements thereof and financed fees, made by Lender to a Borrower under the Program.

1.47“Loan File” means Loan documentation and records required to be maintained by the Servicer pursuant to the Servicing Guidelines.

1.48“Loan Origination Fee” means a fee that is:  (i) charged by Lender to the Borrower of a Loan; (ii); and (ii) financed as a part of the Loan amount.

1.49“Loan Program Agreement” means that certain Loan Program Agreement, executed as of April 20, 2010, between Lender and FMC.

1.50“Loss” has the meaning given to it in Section 9.

1.51“Material Adverse Change” means, with respect to the Servicer, Lender or FMC, any condition or event that is reasonably likely to have a material adverse effect on (i) the business operations, property or condition (financial or otherwise) or prospects of the Party or (ii) the validity or enforceability of this Agreement or any of the Schedules or Exhibits hereunder.

1.52“Milestone” shall have the meaning given to it in Section 4.02(d).

1.53“Natural Disaster Forbearance” has the meaning given to it in Section G.7 of the Servicing Guidelines.

1.54“Notice” has the meaning assigned to it in Section 12.01.

1.55“NPPI” has the meaning given to it in Section 11.02(d).

1.56“Operational Audit” has the meaning given to it in Section 7.01.

1.57“Original Credit Agreement” means the signed first or first two pages of the Credit Agreement (beginning with the Borrower and Lender name and ending with a signature or signatures).

1.58“Outsourced Loan” has the meaning given to it in Section 4.20.

1.59“Partial Interest Payment” has the meaning given to it in Section E.2.d of the Servicing Guidelines.

1.60“Person” means a natural person, limited or unlimited liability corporation, limited liability company, limited liability partnership, partnership, association, trust or any other legal entity having the capacity to contract.

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1.61“Personnel” means the employees, contractors, subcontractors, and agents of the specified Party.

1.62“PHEAA System” means the Loan Servicing System, the Web-Based Products and the Support Services developed and maintained by Servicer for the Servicing of Loans.

1.63“Program Guidelines” means, solely for the purpose of identifying Loans to be Serviced under the Agreement, the Servicing Guidelines for the Program as they may be modified from time to time by a writing signed by the Parties.

1.64“Program Administrator” means FMC (and its Affiliate FMER) in its performance of Administrator Services as set forth in this Agreement.

1.65“Proprietary Information” has the meaning given to it in Section 11.02(a).

1.66“Receiving Party” has the meaning given to it in Section 11.02(f).

1.67“Remedial Action Plan” has the meaning given to it in Section 4.02(d).

1.68“Repayment Date” has the meaning given to it in Section E.1 of the Servicing Guidelines.

1.69“Repayment Option” has the meaning given to it in Section E.2 of the Servicing Guidelines.

1.70“Required Reports Schedule” means the Schedule A attached hereto, as such schedule may be amended, modified or supplemented by the Parties from time to time pursuant to the terms and provisions hereof.

1.71

1.72“Sarbanes-Oxley” has the meaning given to it in Section 7.02.

1.73“Sensitive Customer Information” has the meaning given to it in Section 11.20.

1.74“Service”, “Services”, “Serviced”, “Servicing” shall mean to perform, in full compliance with terms and conditions of the Credit Agreements, the Servicing Guidelines, and the terms and conditions of this Agreement including, but not limited to, all duties, obligations, and procedures that are required of Servicer hereunder in connection with Loans.

1.75“Servicing Guidelines” means the Servicing Guidelines for the Program and approved by FMC and Servicer attached hereto as Exhibit A and as may amended by the Parties pursuant to the terms thereof.

1.76“Student Borrower” means the individual person who is enrolled at an institution of higher education eligible for the Program at the time of Application, executes a Credit Agreement for the purpose of obtaining a Loan from Lender under the Program, and who has proceeds disbursed under the Credit Agreement.

1.77“Subject Delinquency Period” has the meaning given to it in Section 4.20.

1.78“System Access Schedule” means the Schedule B attached hereto, as such schedule may be amended, modified or supplemented by the Parties from time to time pursuant to the terms and provisions hereof.

1.79“Third Party Service Provider” has the meaning given to it in Section 11.21.

1.80“Trade Secrets” has the meaning given to it in Section 11.02(b).

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SECTION 2.  SCOPE OF AGREEMENT

2.01Existing Servicing Agreement.  The Parties hereby agree that, this Agreement shall not supersede or replace any Existing Servicing Agreement between Lender and Servicer and any such Existing Servicing Agreement remains in full force and effect in accordance with its terms.

2.02Services.  The Servicer agrees, in consideration of certain fees, to perform the Services set forth in this Agreement, including the Services set forth on each Schedule and Exhibit hereto, and any additional Services which Lender requests and the Servicer agrees to provide with respect to the Servicing of Loans in accordance with the Servicing Guidelines, for which account information and/or documentation shall be delivered to the Servicer.

2.03Role of FMC as Program Administrator.  Lender hereby appoints FMC (including its Affiliate FMER), as Program Administrator with respect to the Loans. Accordingly, Servicer shall (a) perform all services set forth in this Agreement for the Loans originated by the Lender and identified (at the loan program level) by FMC and Lender in product set-up and conversion (the “FMC Administrator Loans”), and (b) where appropriate, communicate with Program Administrator on behalf of the Lender for the Loans so originated and identified. All actions of the Program Administrator shall be made on behalf of Lender.   Directives provided by the Program Administrator to the Servicer and all modifications to this Agreement or the Servicing Guidelines shall be subject to Lender’s prior written approval, which shall not be unreasonably withheld. Program Administrator, and not Servicer, shall be required to obtain Lender’s written approval in all cases prior to providing such directive to Servicer. Without limiting the foregoing, Servicer shall provide the Services (as set forth in this Agreement and/or required by the Servicing Guidelines) to Program Administrator on behalf of Lender, including but not limited to:

i.product set-up and conversion (as set forth in further detail in Section 4.02);

ii.loan document custodial services;

iii.remote system access;

iv.reports, records, and other documents and data;

v.customer service;

vi.borrower billing and correspondence;

vii.collection of borrower payments;

viii.privacy policy distribution;

ix.due diligence and default prevention (except as set forth in Section 4.20);

x.governmental reporting and reporting to consumer reporting agencies; and

xi.copies of required notices, including but not limited to notices of failed standards, security breaches, and OFAC violations.

Notwithstanding the foregoing, Lender shall (a) have direct, view-only system access to the PHEAA System as set forth in Schedule B, (b) contact Servicer directly in the event of escalated customer service issues that require Lender’s prompt attention for regulatory, accounting, or other reasons, and (c) have the right to audit Servicer directly as set forth in Section 7.

SECTION 3.   TERM OF AGREEMENT

This Agreement shall commence on the Effective Date and shall continue until such time as the principal of and interest on the Loans which are the subject of this Agreement are paid in full, unless earlier terminated by any Party pursuant to Section 14. With respect to product set-up and conversion services (as set forth in further detail in Section 4.02), this Agreement shall continue for a period of two (2) years from the Effective Date, unless earlier terminated by any Party pursuant to the provisions of this Agreement, and shall automatically renew for an additional one (1) year period, unless terminated by any Party by written notice of non-renewal to the other Parties given at least one hundred and eighty (180) days prior to the end of the then current term.

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SECTION 4.  Servicing Duties

4.01Servicing Duties.  Servicer shall provide and perform the Services in full compliance with: the terms of this Agreement; the Servicing Guidelines; and the terms and conditions of the Credit Agreements. Lender shall be responsible for the compliance of the Servicing Guidelines, Credit Agreements, privacy policies and disclosures and notices required with all federal and state laws and regulations.

4.02Product Set-up and Conversion.Servicer agrees to perform product set-up and conversion Services with respect to the Loans which shall include, without limitation, the following:

(a)Credit Agreement Forms.  Servicer shall promptly review Credit Agreement forms that are proposed by Program Administrator and, after mutual resolution of any comments thereon that affect the Servicing of Loans in connection with such forms, accept such forms for purposes of product set-up and conversion. The Parties may propose changes to the Credit Agreement forms from time to time. After mutual resolution of any comments thereon by the Parties, the Parties shall accept such forms for the origination (by FMER) and Servicing (by Servicer) for new Loans.

(b)Servicing System Adaptation.  Servicer shall promptly review the Program product terms and pricing matrices proposed by Program Administrator for the Program launch and shall establish appropriate Servicing matrices and programs to support such product terms and pricing as of a mutually agreed Program launch date. The Parties shall publish a mutually agreeable launch date for the Program. Where changes do not require system changes other than table set-up, Servicer shall use commercially reasonable efforts to meet live Program dates requested by FMC, which date shall be no less than thirty (30) days, but not more than sixty (60) days from the date Servicer accepts (such acceptance not to be unreasonably withheld) the product and pricing matrix (or similar document containing the same information) for the Program; provided, however, that the Servicer agrees to use commercially reasonable efforts to complete the set-up process in a shorter time frame on a case-by-case basis in order to accommodate the business needs of Lender.   All changes or modifications must be provided to Servicer in writing, and formal amendments or addenda shall be signed prior to implementation.

It is understood and agreed by the Parties that Program Loans have both a fixed rate and variable rate option. The fixed rate for each Borrower who chooses the fixed rate option shall be provided by FMER to the Servicer in the servicer disbursement file at the Loan level. Program Administrator shall provide Servicer with updated pricing matrices (or similar document containing the same information) reflecting (i) changes to variable rate tiers, and, notwithstanding the time frames set forth in the previous paragraph, such changes shall be effective in the PHEAA System no less than fourteen (14) days, but not more than thirty (30) days from the date Servicer receives the updated pricing matrix (or similar document containing the same information), and (ii) changes to fixed rate tiers, and, notwithstanding the time frames set forth in the previous paragraph, such changes shall be effective in the PHEAA System not more than fourteen (14) days from the date Servicer receives the updated pricing matrix (or similar document containing the same information).

(c) Conversion.  Servicer agrees to accurately convert all Loan origination data provided by Program Administrator, which is necessary for servicing hereunder onto the PHEAA System. Servicer shall also, in a timely manner, return to the Program Administrator all Loan Files sent to the Servicer in error. Upon the identification of files which were sent in error, Servicer shall have no responsibility for such files other than the return of such files to Program Administrator or Lender.

(d)Periodic Audit. Servicer agrees that no more than twice a year, upon no less than thirty (30) days after receipt of written notice, it shall cooperate with audits by Program Administrator of the product set-up and conversion services and communication and other protocols necessary for the efficient and accurate performance thereof. If any audit reveals any failure to adequately perform any such matter, Servicer shall within thirty (30) days of its receipt of the results of such audit, publish a remedial action plan that includes a schedule of tasks and objectives to be completed (each such task or objective, a “Milestone”) and provides for reports to Program Administrator or Lender with respect to each Milestone (“Remedial Action Plan”). Upon completion of the Remedial Action Plan, Program Administrator may, at a time mutually agreeable to the Parties, perform an additional audit to validate successful completion of the

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Remedial Action Plan.

4.03Service Levels. Servicer agrees that, with respect to the Program, it shall adhere to the Service Level Agreement and customer service schedule set forth in the Private Student Loan Program Agreement between Servicer and Program Administrator dated as of February 5, 2010.

4.04Custody Procedure.  If an applicable document has been forwarded to the Servicer, the Servicer shall hold all Original Credit Agreements and related documents Serviced hereunder on behalf of the Lender and shall retain each such Credit Agreement and Loan File until seven (7) years after the earlier of (a) the date upon which the Loan evidenced by such Credit Agreement and related documents is paid in full or (b) the date upon which the Loan is removed from Servicer’s Loan Servicing System.  The Servicer shall maintain all Original Credit Agreements that have an original, wet signature in a fire resistant vault equipped with a fire suppression system which is connected to an alarm and a security locking system.  Servicer shall create electronic records of all Original Credit Agreements and related documents at no additional cost to Lender and shall maintain such electronic records on-site at the Servicer’s Servicing center at Harrisburg, PA and at an off-site facility, including but not limited to copies of electronic records of Credit Agreements, and related documents. Upon request by the Lender, the Servicer shall supply Lender electronic copies of Original Credit Agreements and all related documents.  Lender or its designated agent shall have the right to inspect all security procedures during Servicer’s regular business hours.  The Servicer shall provide Lender with sixty (60) days advance notice of any change in the physical location of the Original Credit Agreements and related documents or any relocation of the Servicer’s Servicing center.  All Original Credit Agreements at all times shall be stored in a state other than the State of Louisiana.

4.05Lost or Damaged Records.  In the event that records or other data submitted to the Servicer in connection with the Servicing is lost or damaged while in the possession, control or custody of the Servicer or its agents, such lost or damaged records or data shall be reproduced by the Servicer at the Servicer’s own cost and expense from image duplicates in the Servicer’s possession or under the Servicer’s control and the Servicer shall pay all liabilities, damages, costs, losses, fees and expenses, incurred by Lender as a result of such lost or damaged records or data, including but not limited to reasonable attorney’s fees.  If a Loan becomes uncollectible or unenforceable due to loss or destruction of the Credit Agreement or Truth-in-Lending Disclosure Statements in the possession, control or custody of the Servicer (including the loss of the signature page of any Borrower on a Credit Agreement) or its agents the Servicer shall, on demand, pay to the Lender, the principal balance (including capitalized interest) plus any unpaid interest due on any such Loan and the Lender shall thereupon assign all of its right, title and interest in any such loan to the Servicer.

4.06System Changes.  The Servicer has the right to change any part or all of its equipment, the PHEAA System, computer programs, and its procedures relating to the manner of or the methodology used in servicing the Loans, subject to the following:

(a)In no event shall such change abrogate or in any way modify the obligations of the Servicer to Service the Loans in full compliance with the terms and conditions of the Credit Agreements, the Servicing Guidelines, or this Agreement.

(b)The Parties agree that they shall make reasonable efforts to provide information about the nature and effect of changes that the Parties reasonably believe may affect the operations or processes of the other Parties and shall determine the extent to which the other Parties need to be involved in the testing of changes to its own system.  The Parties shall discuss proposed implementation dates for system changes and shall make best efforts to avoid implementation dates that will have a material adverse impact on the operations of any other Party.

(c)Collaborative Efforts for Refinements and Enhancements and Statements of Work.

(i)Servicer and FMC shall meet, not less than quarterly, for the purpose of discussing future enhancements to the functions performed by Servicer consistent with the Program Guidelines.

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(ii)Servicer and FMC shall negotiate and execute a Statement of Work to outline the requirements, expectations and fees relating to any enhancement, modification, or change to the PHEAA System or to the procedures necessary for the Servicer to fulfill its obligations under this Agreement.

4.07System Access.   Servicer shall, at the direction of Lender, provide to the Program Administrator or its Affiliates as requested by Program Administrator, web-based access to Loan Files, or portions thereof, in accordance with the terms of the System Access Schedule, which shall set forth, without limitation, the type of access and/or online services that must be available to each type of user and the minimum user access security requirements that must be implemented on Servicer’s PHEAA System.   Servicer shall at all times maintain the security of user access to the PHEAA System in conformity with the security provisions of the System Access Schedule, which shall include, without limitation, Servicer’s review of the individual user access rights of Servicer employees and other users no less frequently than every six months.

4.08System Parameters.  The Servicer shall design, implement and maintain the PHEAA System in order to remain in compliance with the requirements of this Agreement.

4.09Training.Servicer shall assume responsibility, at its expense, for training of its staff to meet the requirements of this Agreement, including all Schedules and Exhibits hereto.

4.10Customer Service.  Servicer shall implement, maintain and monitor all Services which interface with Borrowers in accordance with the Customer Service Schedule, which shall include without limitation:

(a)Minimum customer service hours of operation;

(b)Call monitoring and quality control; and,

(c)Borrower customer satisfaction surveys.

4.11Borrower Correspondence.  Lender shall have the right to request changes to, and approve the form and substance of, all correspondence sent to Borrowers that is customizable by the Servicer at the Lender level, including but not limited to pre-repayment letters and collection correspondence that Servicer is required to send to Borrowers pursuant to the Servicing Guidelines or any federal or state regulation. Servicer’s inability to customize at the Lender level shall not excuse its obligation to comply with all applicable laws. Lender shall bear all compliance responsibility for the language of correspondence changes requested by Lender and implemented by Servicer. Requested changes to letters shall be completed within a timely manner in accordance with a schedule adopted by mutual agreement of the Parties.

Program Administrator and Servicer have instituted the functionality to identify specific loans for which correspondence with Borrowers may be enhanced.  From time to time, Program Administrator, on behalf of Lender, shall designate those borrower segments that will receive enhanced correspondence. Fees for such correspondence shall be paid by Program Administrator.

4.12Payment Collections.  All sums received by the Servicer with respect to any Loans, whether attributable to principal, interest, or late fees shall be received in trust for the benefit of the Lender.  All funds received by or on behalf of Borrowers shall be deposited in a Servicer-owned and maintained clearing account.  Within an average of [**] Business Days, all cleared, identified, and available funds from Loans shall be electronically transmitted to an account designated by Lender. Lender authorizes Servicer to withdraw monies from Servicer-owned clearing accounts to refund overpayments made by a Borrower or to correct monies deposited therein in error. Servicer shall obtain Lender’s authorization prior to making any withdrawals made necessary by circumstances that are not enumerated in this Section 4.12.

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4.13Late Fees.  Lender and Servicer agree that a Borrower in repayment status (which refers to a Borrower’s Loan(s) Serviced under the terms of this Agreement for which, under the terms of the Borrower’s Credit Agreement(s), the repayment period has commenced, and includes Accounts in post-grace period deferment or forbearance) may be assessed late fees when principal and interest payments (and not interest only payments, partial interest payments, or payments in any reduced payment plan) are overdue, to the extent allowed by applicable law and the terms of the Credit Agreement(s) (herein referred to as “Late Fees”).    Any application of Late Fees is subject to Program Administrator’s approval of the Late Fee system, and in accordance with this section.  At the direction of Lender, the Program Administrator shall notify Servicer, in writing, of the Late Fees criteria which Lender desires the Servicer to apply to each Loan type.  Such criteria shall include, but not be limited to, Late Fee amounts, time period and applicable state law in which Late Fees will be assessed to Loan Accounts.  At Lender’s direction, Program Administrator on behalf of Lender shall establish different Late Fee criteria for Loans having different Lender codes.  Directions as to Late Fee criteria shall apply to all loans for the Lender code in question.  Late Fee criteria for some product types may include “no late fee.”  The Servicer reserves the right to submit questions pertaining to the requirements regarding the assessment of Late Fees to a particular Loan portfolio and Program Administrator shall respond to Servicer’s questions within thirty (30) days. Late Fees shall be deducted from any payment(s) received from Borrowers as directed by Program Administrator.  The Parties agree that no late fees charged on any Loan shall be included in any settlement between Servicer and Lender related to such Loan.

4.14Reports and Forms. During the term of this Agreement, the Servicer shall promptly and routinely furnish to Lender and Program Administrator, on behalf of Lender, copies of all material reports, records, and other documents and data as required by the Servicing Guidelines or as otherwise required by this Agreement, including the reports set forth on the Required Reports Schedule.  All monthly reports shall be delivered in accordance with (a) the data security requirements of a secure communication protocol developed by the Parties from time to time, and (b) the Required Reports Schedule, unless otherwise expressly provided for herein. The Servicer shall furnish to Lender and Program Administrator, on behalf of Lender, in good condition all forms and supplies necessary or appropriate to perform the Services, including, but not limited to, letters, invoices, and forbearance applications, as specified in the Schedules hereto and any written and signed amendments thereto.  In addition, Servicer shall provide Program Administrator with additional reporting as reasonably requested from time to time, upon the express direction and authorization by Lender.  In the event that any reports are not delivered as provided for by the Servicing Guidelines or as otherwise required by this Agreement, including the reports set forth on the Required Reports Schedule, all fees due and owing the Servicer under this Agreement may be withheld until such reports are received by the Lender and the Program Administrator.  The Servicer shall not have failed this standard if reports are delayed for any reason beyond its control. The Servicer shall furnish in good condition all forms and supplies necessary or appropriate to perform the Services, including, but not limited to, letters, invoices, and forbearance applications, as specified in the Schedule(s) and any written and signed amendments thereto.

4.15Governmental Reporting.  The preparation and submission of any and all governmental reports or requests for data shall be the responsibility of Lender.  The Servicer shall, however, supply supporting data and reports as required by this Agreement, including all Schedules and Exhibits hereto, without additional charge. Subject to Servicer’s reasonable charges, Servicer shall also provide such other information (not otherwise required hereunder) as may be requested by Lender which may be required under applicable law or this Agreement to enable Lender to fulfill any governmental reporting requirements.

4.16 Tax Reporting. Servicer shall provide tax information reporting on IRS Form 1098 and IRS Form 1099 to Borrowers and the U.S. Internal Revenue Service.  If applicable, the Servicer will be responsible for remittances to the Federal government of these tax returns.

4.17Reports to Consumer Reporting Agencies. The Servicer shall provide any and all reports on Accounts serviced hereunder required by this Agreement to the appropriate consumer reporting agencies or credit information service and shall correct any errors caused by the incorrect reporting of information as set forth in Section M.1 of the Servicing Guidelines. If Lender (or Program Administrator on behalf of Lender) directs Servicer to make a report or change of credit information which had been reported to a consumer reporting agency, and such report or change is outside the Servicer’s customary practices, including but not limited to as part of a legal settlement

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with a Borrower, then the Servicer may condition making such report or change on the completion of an acceptable writing that allocates the compliance, regulatory, and legal risk of making the requested report or correction.

4.18Data Error Correction; Account Adjustment.  In the event that any data file transmitted to Lender and/or Program Administrator contains a material error, Servicer shall, within [**] Business Day of discovery of such error, notify Program Administrator and/or Lender, as applicable, of such error. Servicer shall use best efforts to provide a corrected file as soon as possible but no later than [**] Business Days. For purposes of this Section 4.18, a material error includes, without limitation:

(a)Failure to follow data format requirements or file naming conventions established by the Parties;

(b)Data corruption;

(c)More than [**] percent ([**]%) of the entries in the file are substantively incorrect (e.g., misposting);

(d)Failure of the file properly to link data to other files delivered by Servicer; or

(e)Any systemic error in the file (e.g., failure to update LIBOR Index).

In addition, notwithstanding Section 9 of this Agreement, if Servicer or Lender (or Program Administrator on behalf of Lender) becomes aware of any material error in any Account, and Lender (or Program Administrator on behalf of Lender) requests that the Servicer make any correction or adjustment to such Account, the Servicer shall make such correction or adjustment as promptly as practicable and, upon request, provide written confirmation that the correction or adjustment has been made. The Servicer shall make such corrections and adjustments without charge to the extent that the error was a result of its action or omission.

4.19Identity Theft Procedures. The Parties hereby adopt the Identity Theft Procedures, as set forth in the Servicing Guidelines attached hereto and as amended from time to time by agreement of the Parties.  Program Administrator, Lender, and the Servicer may suggest changes to the Identity Theft Procedures from time to time.

4.20Outsourced Default Prevention; Modification of Responsibilities. Lender and the Servicer acknowledge and agree that due diligence and skip tracing activities contemplated by the Delinquency section of the Servicing Guidelines (the “Delinquency Guidelines”) during the [**] through [**] day of delinquency (the “Subject Delinquency Period”) for Loans may, at the option of the Lender, be performed by a vendor approved by the Parties in writing and managed by Program Administrator or its Affiliates (each, a “Default Prevention Vendor”) for all or part of such period and not by Servicer (each such loan, for that time period, and for the purpose of due diligence activities only, an “Outsourced Loan”). All Parties acknowledge the transmission of information to and from Default Prevention Vendors will require programming by Servicer, and therefore, reasonable notice is necessary before any such activity can commence or terminate.  Lender hereby authorizes, as of the Effective Date, the use of Default Prevention Vendors as contemplated in this Section 4.20 and authorizes the Servicer to provide loan-level data on a daily basis to FMER and the Default Prevention Vendors as necessary for performing default prevention activities for Outsourced Loans. Any reversal of or modification to an outsourcing program will require reasonable notice, and may require programming changes to allow Servicer to resume Servicing of such loans. More specifically:

(a)For any Outsourced Loan, Servicer shall not be responsible for performing the Delinquency Guidelines for the Subject Delinquency Period.

(b)For any Loan not outsourced to a Default Prevention Vendor, Servicer will be responsible for delinquency servicing and skip tracing requirement for loans not in the Subject Delinquency Period.

(c)Servicer shall maintain responsibility for filing for pre-claim assistance in accordance with the Servicing Guidelines, with the information that exists on the Servicer’s system.

(d)For any Outsourced Loan, Servicer will not be responsible for initiating skip-tracing activities during the Subject Delinquency Period.  Servicer shall update contact information within its system, if in the normal course of business Servicer or Default Prevention Vendor obtains or receives new contact information.

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(e)For any Outsourced Loan, Servicer will remain responsible for all loan servicing activities other than the Delinquency Guidelines, including but not limited to, the processing of deferments, forbearance, and MGRS forms, general correspondence, and borrower payments.

(f)For rolling delinquent accounts, i.e., Outsourced Loans which have Borrower payments applied that result in the account falling into the prior delinquency bucket or being brought current, Servicer will follow the Servicing Guidelines, which state that in the event of a rolling account, the servicer will resume scheduled delinquency servicing activities at the point in which the delinquency rolls into the previous delinquency bucket.  Servicer will not be required to make up missed due diligence activities in the bucket the delinquency rolls into if the day delinquent on which the servicing resumes is after the first scheduled activity.

(g)Servicer shall remain responsible for the reporting of loan information to the credit bureaus for all Loans in compliance with the Servicing Guidelines, with the information that exists on the Servicer’s system as of the day of reporting.

(h)For all Loans, Servicer shall remain responsible for sending final demand letters for the amount delinquent on the loan at the appropriate day of delinquency to both the primary Borrower and the Cosigner, if any.

(i)Program Administrator, and not Servicer, shall be responsible to Lender for the actions of Default Prevention Vendors. In all situations where the Default Prevention Vendor performed or performs activities which include procedures not in compliance with the Remote Access, Confidentiality and Indemnification Agreement, and such activities have an impact on Servicer’s due diligence obligations or cause incorrect information to exist on the PHEAA System, Program Administrator shall be responsible to Lender, and Lender waives any and all noncompliance by Servicer which may result.

SECTION 5.  AFFIRMATIVE COVENANTS

From the date hereof, Servicer covenants and agrees to the following:

5.01 Government Approvals.  The Servicer shall maintain all licenses, permits, approvals and qualifications necessary to carry out its obligations under this Agreement.

5.02Insurance.  Servicer and subcontractors engaged by Servicer to provide Services under this Agreement (which shall not include the Default Prevention Vendors) shall also be required to maintain the insurance described herein at limits acceptable to Servicer and Lender:

(a)Commercial General Liability insurance on an occurrence basis, on Insurance Services Office (“I.S.O.”) form CG 00 01 or its equivalent, at a limit not less than $1,000,000 per occurrence/$2,000,000 aggregate.  The required limits may be arranged through a combination of primary and excess policies, as needed.

(b)Automobile Liability insurance for any vehicles operated by the Servicer or its employees in connection with work or Services performed under this Agreement, including owned, non-owned, borrowed, and hired autos, at limits not less than $1,000,000 per accident.

(c)For contracts where Servicer’s Personnel will have access to or control over physical or electronic property of Lender and/or their customers and/or clients, Employee Dishonesty coverage (also known as a Fidelity Bond), covering all employees and agents of the Servicer, at a limit not less than $10,000,000 for each occurrence. This policy shall extend to the misappropriation of physical or electronic property of others in the possession or control of Servicer Personnel.

All coverage shall be maintained with insurers licensed to transact insurance business in the state(s) where Servicer maintains offices or operations. The Insurers shall have an A. M. Best rating of A1 or better; deviations from that standard are subject to review and written approval by Lender. All certificates of insurance shall include

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an undertaking by the insurer to provide 30 days prior written notice of cancellation or material change in coverage(s).

Upon Lender’s request, Servicer shall provide Lender or FMC with a copy of the certificate of insurance. Regardless of any limitations to any indemnification by Servicer as may be stated elsewhere in this Agreement, Servicer expressly understands and agrees that if Servicer fails to maintain any of the required insurance coverages, Servicer shall be directly liable for claims that would otherwise be covered by the insurance required of Servicer, its vendors and/or subcontractors. Servicer shall also be responsible for the payment of any applicable deductibles.

Insurance requirements for Default Prevention Vendors and the Program Administrator shall be as set forth in the Loan Program Agreement.

5.03Notification.  Servicer shall promptly notify Lender in writing within five (5) Business Days after its General Counsel has knowledge of (a) the occurrence of any event which, if it had existed on the date of this Agreement, would have required qualification of the representations and warranties set forth in Section 6 (Representations and Warranties) herein; (b) a Material Adverse Change, including but not limited to, material financial difficulty, other catastrophic event, material change in strategic goals, or significant staffing changes; or (c) any litigation which if adversely determined would cause a Material Adverse Change.

5.04Accuracy of Reports.  All reports, transmittals, records or data files required, maintained or provided by Servicer hereunder shall be accurate in all material respects, and Lender shall have the right to rely thereon.

5.05Work Performed in United States.  Unless this Agreement specifically provides otherwise, all Services must be performed in the United States and all Proprietary Information and NPPI must be stored, maintained, accessed from, and utilized only by employees and sub-contractors in the United States.

5.06No Subcontractors. With the exception of skip tracing and collection or default prevention services (with respect to the latter, in accordance with the parameters set forth in this Agreement and/or the Servicing Guidelines), the Servicer shall not utilize or engage a subcontractor to perform any Services under this Agreement without the prior written consent of Lender.  To the extent subcontractors perform any services under this Agreement, the Servicer shall be liable for the performance of such subcontractors.  The Servicer shall cause each subcontractor agreement or agreement relating to skip tracing services to contain terms at least as restrictive as Section 11 hereof with respect to confidentially and privacy and security obligations. Servicer shall advise Lender upon periodic request of the entities to which it has subcontracted skip tracing services.

5.07OFAC Check.  All Servicer employees performing services or supporting Servicer activities under this Agreement, regardless of their location, shall be validated by Servicer to not be on any list published and maintained by the United States government of Persons with whom any U.S. Person is prohibited from conducting business.  Currently, the lists of such Persons can be found on the following web sites:

(i)Denied Persons List on the Bureau of Industry and Security at

http://www.bis.doc.gov/dpl/Default.shtm.

(ii)The Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control — Department of Treasury at

http://www.treas.gov/offices/enforcement/ofac/sdn/.

(iii)Office of Foreign Assets Control — Recent OFAC Actions

http://www.treas.gov/offices/enforcement/ofac/actions/.

(iv)Palestinian Legislative Council (PLC) List http://www.treas.gov/offices/enforcement/ofac/programs/terror/ns/index.shtml.

Servicer shall conduct periodic reviews, no less frequently than annually, of the lists mentioned above.  Servicer shall report to Lender and Program Administrator immediately if the name of any Servicer employee performing

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the services matches with the name of any Person listed on any list published by the United States government of Persons with whom any U.S. Person is prohibited from doing business.

5.08FACT Act.  Servicer’s performance of its Servicing obligations under this Agreement shall include, without limitation, compliance with the requirements imposed on Lender, as identified by Lender and as included in this Agreement or the Servicing Guidelines, as a user and furnisher of consumer report information under the Fair and Accurate Credit Transactions Act of 2003 and all regulations issued pursuant thereto, including, without limitation, timely and lawful response to any identity theft report received from any Borrower or consumer reporting agency and the obligation to respond to a credit report reinvestigation request in accordance with the Identity Theft Procedures.  Servicer shall notify Lender if it becomes aware that any Borrower is on any list published and maintained by the government of the United States of America of persons or entities with whom the Lender’s transaction of business is restricted, as those lists are currently set forth in Section 5.07 above.

5.09Further Assurances.  At any time, upon the reasonable request of Lender (or the Program Administrator on its behalf) and subject to Servicer’s reasonable charges and reimbursement of any out-of-pocket expenses, Servicer shall execute and deliver to such requesting Party or its designee such other certificates, agreements and instruments and take such actions as such requesting Party or its designee may reasonably request in connection with the requesting party’s compliance with any legal or regulatory requirements, including, without limitation, any certifications required to be delivered by such requesting Party under any Securities and Exchange Commission or other securities requirement or in connection with the Sarbanes-Oxley Act of 2002.

5.10Change of Control. Servicer shall provide Lender and Program Administrator written notice within five (5) Business Days after a public announcement that a Change of Control transaction involving Servicer is pending.

SECTION 6.  REPRESENTATIONS AND WARRANTIES.   Each Party is bound by the representations and warranties specifically designated to it within this Agreement and any Exhibit attached hereto.

Servicer Representations and Warranties.  The Servicer represents and warrants to Lender and Program Administrator (and these warranties and representations shall be deemed continuing and repeated as of the date each Loan shall become subject to this Agreement) as follows:

6.01Existence.The Servicer is a public corporation duly organized and validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, and is duly qualified to do business in all jurisdictions where its failure to so qualify would materially impair its ability to perform its obligations under this Agreement.

6.02Right to Act.No registration with or approval of any governmental agency (except for approval as to form and legality by the Attorney General for the Commonwealth of Pennsylvania) is required for the due execution and delivery or enforceability of this Agreement. The Servicer has legal power to execute and deliver this Agreement under the laws of Pennsylvania and to perform such Services and observe the provisions herein under the laws of Pennsylvania. By executing and delivering this Agreement, and by performing and observing the provisions of this Agreement, the Servicer will not violate any existing provision of its Articles of Incorporation or its bylaws or any applicable law or violate or otherwise become in default under any existing contract or other obligation binding upon the Servicer. The officers executing and delivering this Agreement have been duly authorized to do so, and this Agreement is legally binding upon the Servicer and enforceable against the Servicer in every respect.

6.03Intellectual Property and Software Rights. Servicer’s performance of its obligations under this Agreement will not infringe any patent, trademark, copyright, or any trade secret or other proprietary right of any third party. Servicer is the lawful owner or licensee of any software programs or other materials used by Servicer in the performance of the Services called for in this Agreement.

6.04Accuracy and Continued Validity of Servicer’s Financial Status. The Servicer has published on its web site financial reports, which in the reasonable opinion of the Servicer fairly and accurately reflect the financial operations of the Servicer and that there has been no Material Adverse Change with respect to the Servicer since the date the report was provided which would require revision of the same.  No representation or warranty made by the Servicer under this Agreement and no statement made by the Servicer in any financial statement,

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certification, report, exhibit or document furnished by the Servicer to Lender pursuant to or in connection with this Agreement is false or misleading in any material respect (including by omission of material information necessary to make such representation, statement or warranty not misleading) as of the date given or made.

6.05OFAC Check.  Neither Servicer, nor any of its subsidiaries, Affiliates, directors, officers, agents, or employees is:

(a)an individual or entity that is listed in the annex to, or is otherwise subject to the prohibitions contained in, Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 or the Office of Foreign Asset Control (“OFAC”) regulations;

(b)an individual or entity with whom Lender is prohibited from dealing or otherwise engaging in business under any U.S. law, regulation, executive order and/or lists published by OFAC (including those executive orders and lists published by OFAC);

(c)an individual or entity that is named on the most current list of “Specially Designated Nationals and Blocked Persons” published by OFAC on its official website or any replacement website or other replacement official publication of such list; or

(d)an individual or entity with which any financial institution is prohibited from dealing or otherwise engaging in any transaction under any laws or regulations related to terrorism or money laundering.

6.06Litigation.  There is no action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, labor dispute, arbitral action or investigation pending, or to the actual knowledge of the Servicer threatened, against or relating to the Servicer that would likely have a material adverse effect on this Agreement or on its business or financial condition, its ability to consummate the transactions contemplated hereby or perform its obligations hereunder, or which could materially impair the enforceability of the Loans.

6.07No Conflicts or Consents.  The Servicer is not a party to or bound by any agreement or instrument or subject to any charter or other restriction or any judgment, order, writ, injunction, decree, law or regulation which now or in the future may substantially and adversely affect the ability of the Servicer to perform its obligations under this Agreement or which requires the consent of any third person, other than the Office of the Pennsylvania Attorney General, to the execution of this Agreement or the consummation of the transactions contemplated herein.

6.08True Statements. No information, certificate of an officer of Servicer, statement furnished in writing, or report required hereunder delivered to the Lender or FMC will, to the knowledge of Servicer, contain any untrue statement of a material fact or omit a material fact necessary to make the information, certificate, statement or report not misleading.

6.09Compliance with Laws.   Notwithstanding the language set forth in Section 4.01, in performing the Services hereunder, Servicer will comply with:  the Fair Debt Collection Practices Act, as amended; the Fair Credit Reporting Act, as amended; and the consumer protection laws created by the Federal Trade Commission, pursuant to the FTC Act, as amended.  Servicer further agrees in performing services hereunder, it shall not, directly or indirectly knowingly, discriminate against a consumer on the basis of gender, age, race, color, religion, national origin, childbearing or familial status, marital status, ethnic group, veteran status, disability, receipt of income from any public assistance program, or any classification protected by applicable federal law. Servicer shall use reasonable commercial efforts to comply with other applicable state or federal laws or regulations relating to the administering, communicating, servicing, and collection of educational loans, which have been identified by Lender or FMC to Servicer.  In the event Servicer has not violated any applicable provisions of the Fair Debt Collection Practices Act and Servicer must engage in a legal proceeding solely as a result of the mini-Miranda contained in a letter received by a party to a lawsuit, Lender will indemnify Servicer for such litigation costs; provided, however, such indemnification would not apply where the mini-Miranda is required under applicable state law as identified by Lender.

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6.10Ongoing Obligation.  If at any time during the term of this Agreement, any of the representations contained in this Section 6 are no longer true, Servicer will immediately notify Lender and Lender shall have the right to terminate this Agreement pursuant to Section 14.02.

Representations And Warranties of Lender and First Marblehead. Lender and Program Administrator represent and warrant to each other and to Servicer (and these warranties and representations shall be deemed continuing and repeated as of the date each Loan shall become subject to this Agreement) as follows:

6.11Organization.  It is duly organized, validly existing and in good standing under the laws of its state of organization and/or the United States, and has full power and authority to conduct its business as it is presently being conducted.

6.12Authorization.  It has all necessary authority and has taken all necessary action to enter into this Agreement, to consummate the transactions contemplated hereby and to perform its obligations hereunder.  This Agreement has been duly executed and delivered by each of FMC and Lender and is a legal, valid and binding obligation of each Party, enforceable against it in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, rearrangement, reorganization or similar debtor relief legislation affecting the rights of creditors generally from time to time in effect and by general principles of equity (regardless of whether such enforcement is sought in a proceeding at law or in equity) and the discretion of the court before which any such proceeding may be brought.

6.13Absence of Conflicts.  Neither the execution and delivery of this Agreement by either FMC or Lender nor the performance by either Party of its obligations hereunder will result in (i) a violation of the articles of incorporation or charter documents of such Party, or (ii) a breach of, or a default under any contract, agreement, instrument, lease, commitment, franchise, license, permit or authorization to which such Party is a party or by which it or its assets are bound, which breach or default would have a material adverse effect on its business or financial condition or its ability to consummate the transactions contemplated hereby, or (iii) a violation by such Party of any Requirements of Law, which violation would have a material adverse effect on such Party’s business or financial condition, its ability to consummate the transactions contemplated hereby or perform its obligations hereunder, or which could materially impair the enforceability of the Loans.

6.14Consents and Approvals.  Each of FMC and Lender has obtained any and all consents, approvals or authorizations of, and made any and all declarations, filings or registrations with, any governmental authority, or any other Person, required to be obtained or made by such Party in order to execute, deliver and perform its obligations under this Agreement or consummate the transactions contemplated hereby, except where the failure to do so would not have a material adverse effect on its business or financial condition, its ability to consummate the transactions contemplated hereby or perform its obligations hereunder, or which would not materially impair the enforceability of the Loans.

6.15Litigation.  There is no action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, labor dispute, arbitral action or investigation pending, or to the actual knowledge of either FMC or Lender threatened, against or relating to such Party that would likely have a material adverse effect on this Agreement or on its business or financial condition, its ability to consummate the transactions contemplated hereby or perform its obligations hereunder, or which could materially impair the enforceability of the Loans.

6.16Compliance with Law.  It does and will at all times comply with all applicable Requirements of Law, in all material respects including the provisions of Title X and the marketing and conduct requirements of Section 1011 thereof, 15 U.S.C. § 1650, and its implementing regulations set forth in 34 C.F.R. § 601.21, as applicable to activities conducted in connection with the Program.

6.17Intellectual Property.  It owns, or has the right to use under valid and enforceable agreements, all intellectual property rights reasonably necessary for and related to its performance under this Agreement and such performance will not infringe or violate any intellectual property rights of any other Person.

SECTION 7.  INSPECTIONS: AUDITS

7.01Audit of Books and Records. Lender, its accountants, auditors, representatives, Program Administrator on its behalf, and any Federal, state or local governmental or quasi-governmental officials with regulatory authority over

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Lender shall have the absolute right, at Lender’s expense, upon not less than thirty (30) days prior written notice (or such shorter notice period as required by law), at any time during or after the term hereof:

(i) to audit or examine all books, records, documents, other writings, information, whether in hard copies, electronic form or otherwise, relating to Services to be provided by Servicer under this Agreement at the location(s) where Servicer maintains such books, records, documents, writings and information;

(ii) to conduct such other examinations, tests or investigations with respect to the Services to be provided under this Agreement as Lender may deem necessary or desirable in Lender’s sole and absolute discretion and at Lender’s expense, it being acknowledged and agreed by Servicer that Lender shall have rights of access to books, records, documents, other writings and information, whether in hard copies, electronic form or otherwise, relating to the Services to be provided by Servicer under this Agreement, at any time during normal business hours.

On-site examination of documents held in safekeeping and imaged records or related documentation will be performed with as little disruption as possible to Servicer’s normal operation.  All questions arising during the course of the audit will be coordinated by the chief auditor and directed to the individual(s) designated by Servicer.  Servicer will designate a sufficient number of liaison personnel so as to be able to respond timely to audit questions.  All Lender out-of-pocket expenses, non-Servicer personnel costs and copying expenses relating to such review, audit and copying shall be borne by Lender.

Notwithstanding the foregoing, Program Administrator shall, on behalf of Lender, conduct each calendar quarter an operational audit to test the Servicer’s compliance with the requirements of this Agreement and the Servicing Guidelines (each, an “Operational Audit”). If in an Operational Audit Program Administrator determines that Servicer has failed to adequately and/or properly perform its obligations hereunder or under the Servicing Guidelines, Program Administrator and Servicer shall work in good faith to remedy the errors or inadequacies prior to the next Operational Audit, and shall present to Lender for its approval recommended modifications to this Agreement and/or the Servicing Guidelines designed to improve efficiency, customer service, and/or loan performance.

7.02 Sarbanes Oxley Compliance.If requested by Lender, Servicer shall participate in Sarbanes-Oxley Act of 2002 (“Sarbanes Oxley”) compliance testing conducted by Lender with respect to the Services on a quarterly basis and shall provide documents and information as reasonably requested by Lender to conduct such compliance testing. Servicer agrees to provide any assistance reasonably requested by Lender to enable Lender to comply with Sarbanes Oxley, the rules of the Public Company Accounting Oversight Board and rules of the Securities and Exchange Commission relating to disclosure controls and procedures and inquiries by the SEC or other regulatory agency. Such assistance shall include but shall not be limited to: (i) documenting Servicer’s controls and procedures relating to the Services; (ii) cooperating with Lender’s auditors in connection with the testing of such controls and procedures; (iii) making quarterly representations or certifications to Lender regarding any material changes to such controls and procedures; (iv) remediating any material weakness or significant deficiency that would prevent Lender from complying with Sarbanes Oxley or any rules or regulations promulgated thereunder; and (v) providing an unqualified SAS 70 Type 2 Report issued by an independent certified public accounting (CPA) firm in connection with its provision of the Services.

7.03 SAS 70 Audit. Servicer will engage, at its expense, an independent CPA firm that adheres to professional standards established by the American Institute of Certified Public Accountants (AICPA) to conduct reviews of Servicer’s general controls associated with Servicer’s facilities, as well as the controls associated with the Services and the programs used to provide the Services, including but not limited to controls over information technology and related processes.  The scope of the audit shall include all such matters as Servicer’s auditor deems necessary or required to meet regulatory compliance standards, including but not limited to an examination of the record keeping system and other equipment and software used by Servicer. Such reviews shall be performed at such frequency and times as Servicer shall determine, but shall be performed at least once annually. Within thirty (30) days of the receipt by Servicer, Servicer shall provide Lender with a copy of each report submitted by Servicer’s independent accountants regarding any of the matters set forth in this paragraph. All such reviews shall comply with AICPA Statement on Auditing Standards (SAS) No. 70, and the reports obtained shall be of the type generally referred to (depending on the publication) as either Type “II” or “B”. In a Type II report, the Servicer’s auditor will express an opinion on (1) whether the Servicer’s description of its controls presents

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fairly, in all material respects, the relevant aspects of the Servicer’s organizational controls that had been placed in operation as of a specific date, and (2) whether the controls were suitably designed to achieve specified control objectives, and (3) whether the controls that were tested were operating with sufficient effectiveness to provide reasonable, but not absolute, assurance that the control objectives were achieved during the period specified. If the Servicer’s audit of procedures reveals exceptions or control deficiencies, then Servicer shall take steps to correct the control objective, at no cost to Lender.

7.04Operational Audits. Upon thirty (30) days prior written notice from Lender, and subject to Servicer’s reasonable security requirements, Servicer shall provide to Lender (and Lender’s internal and external auditors, inspectors, regulators and other representatives that Lender may designate from time to time) access at reasonable hours to Servicer’s Personnel, to the facilities at or from which Services are then being provided, and to Servicer’s records and other pertinent information, all to the extent relevant to the Services and Servicer’s obligations under this Agreement. Such access shall be provided for the purpose of performing audits and inspections of Servicer and its businesses and to examine Servicer’s performance of loan servicing under this Agreement including (i) verifying the integrity of the Servicer data; (ii) examining the controls (e.g., organizational controls, input/output controls, system modification controls, system design controls and access controls) and the security, disaster recovery and back-up practices and procedures; (iii) examining Servicer’s measurement, monitoring and management tools; and (iv) enabling Lender to meet applicable legal, regulatory and contractual requirements. Servicer shall provide any assistance reasonably requested by Lender or its designee in conducting any such audit.

7.05Regulatory Audits. Within thirty (30) days of its receipt, Servicer shall provide Lender with a summary of any audit results performed by a federal or state regulator concerning the Services provided under this Agreement, including but not limited to the Department of Education. The content of any such summary shall be subject to Servicer’s reasonable security requirements. When the regulatory auditor’s procedures reveal exceptions or control deficiencies, then Servicer shall take steps to correct the control design deficiency or operating effectiveness deficiency in all material respects. If such audit reveals that the services provided by Servicer do not cause Servicer’s operations to meet the auditor’s recommendation, then Servicer shall provide such further services as are necessary to bring its operations into conformance with the auditor’s recommendations to such level and degree, at no cost to Lender.

7.06Financial and Other Information. Servicer shall provide Lender with the following:

(a)Within forty-five (45) days after the end of each of the first three quarters of each fiscal year, unaudited financial statements of Servicer for such quarter, setting forth the information called for as of the end of, and for such quarter as described in paragraph (b) of this Section 7.06 will be posted to the Servicer’s web site; and

(b)Within one hundred twenty (120) days after the close of each fiscal year of Servicer, a copy of an annual report as to the obligations and activities of Servicer during such fiscal year will be posted to Servicer’s web site, and financial statements for such fiscal year, setting forth in reasonable detail:

(i)the balance sheet for Servicer and its programs showing the assets and liabilities of such programs at the end of such fiscal year;

(ii)a statement of Servicer’s revenues and expenses in accordance with the categories or classifications established by Servicer for its operating and program purposes and showing the revenues and program expenses during such fiscal year; and

(iii)a statement of changes in financial position, including changes in financial position of Servicer’s programs, as of the end of such fiscal year.

The annual report shall be accompanied by a report of an independent auditor stating that the financial statements present fairly, in all material respects, the net assets of the Servicer as of the years stated, and its changes in net assets and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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7.07 Annual Statement as to Compliance.  Upon request, the Servicer shall deliver an annual report to Lender on or prior to March 31 of each year commencing March 31 of the year following execution of this Agreement, signed by the Chief Executive Officer (“CEO”) of the Servicer, stating that (a) a review of the activities of the Servicer, and the Servicer’s performance under this Agreement, for the previous twelve (12) months ending September 30 has been made under such CEO’s supervision and (b) to the best of such CEO’s knowledge, based on such review, the Servicer has or has caused to be performed all of its obligations under this Agreement throughout such year and that no default has occurred, or if such a default has occurred and is continuing, specifying each such event, the nature and status thereof and the steps necessary to remedy such affair. In the event that the Servicer has delegated any servicing responsibilities with respect to the Loans to a subservicer or subcontractor, the Servicer shall deliver a similar annual report by any such subservicer or subcontractor as described above as and when required with respect to the Servicer.

7.08 Cooperation with Audits; Follow-Up. Servicer shall fully cooperate with any audit(s) conducted by either Lender, Lender’s agent, or a U.S. federal agency pursuant to this Agreement. Servicer shall be entitled to charge Lender for the management hours or fees with respect to the time spent by Servicer’s management and employees reasonably necessary in providing assistance to Lender, Lender’s internal and external auditors, or any governmental authority performing any audits, compliance, security and control testing. If any audit report establishes that Servicer’s performance of the Services is not in compliance with the terms of this Agreement, Servicer shall submit to Lender within thirty (30) days of its receipt of the relevant audit report a plan to improve Servicer’s performance to the level required by this Agreement.

7.09Accelerated and Emergency Audits.  In the event that Lender has the right to terminate this Agreement under Section 14 (Termination), whether or not such right is exercised, Lender shall have the right to perform or cause to be performed any audit, examination or inspection described in this Agreement, upon providing to the Servicer proof of the cause for such right of termination, without any limitations or requirements as to notice, frequency, duration, business interruption, or other such limitation or requirement for the benefit of the Servicer. All costs of such an accelerated or emergency audit shall be borne by Lender.

SECTION 8.  CHARGES AND PAYMENTS.

8.01Fees.The Servicer shall provide all aspects of the Services at its sole cost and expense, except as otherwise provided in this Agreement, and shall be compensated by Lender as set forth in this Agreement and in the Fee Schedule. The fee for the Services provided by Servicer, together with services provided by FMC as Program Administrator, both under this Agreement and the Loan Program Agreement between Lender and FMC, shall be payable by the Lender to the Servicer, on a pro-rated monthly basis and shall be equal to 100 basis points per annum based upon the ending principal balance of the Student Loans at each month end, as reflected in the Servicer’s monthly MR-53 report or any similar report that replaces such MR-53 report.

8.02Invoices.  Invoices for the Servicer’s Services and the Program Administrator’s charges, including the collection of Late Fees collected on behalf of Lender as set forth in Section 4.13 herein and the Fee Schedule, shall be rendered by the Program Administrator after each month end with payment to be paid by Lender to Servicer. All invoices are payable net forty-five (45) days from the date of the invoice.  If full payment is not received within sixty (60) days from date of invoice, except as to amounts which are under dispute, such non-payment shall constitute a default hereunder and, shall entitle Servicer at any time thereafter, to notify Lender of such default and if such default is not cured within thirty (30) days from the date of such written notice, Servicer at its option, may immediately terminate this Agreement. Lender shall report any disputes to the Program Administrator regarding an invoice within sixty (60) days of the date of the invoice, and the Program Administrator shall research the disputed item and respond to Lender.

8.03Adjustments to Programs.Servicer, Lender and Program Administrator, on behalf of the Lender, shall discuss future enhancements to the Services, the PHEAA System, and the Servicing Guidelines as identified in Section 4.06(c).

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SECTION 9.  LIABILITY

Servicer agrees to pay Lender or FMC, as applicable, for any claim, loss, liability or expense, including reasonable attorney’s fees (collectively referred to herein as “Loss”), which arises out of or relates to the Servicer’s acts or omissions with respect to the Services provided under this Agreement, including but not limited to Losses (a) that arise from Servicer’s failure to perform its obligations under this Agreement in compliance with the Servicing Guidelines, or (b) related to the Servicer’s performance of its obligations under this Agreement or the Servicing Guidelines, where the final determination of liability on the part of the Servicer to Lender or FMC, as applicable, is established by a court of law with competent jurisdiction over the Servicer, or by way of settlement agreed to by the Servicer. Further, nothing herein shall be read or construed as a waiver of the sovereign immunity of the Commonwealth of Pennsylvania, except to the extent authorized by the laws of said Commonwealth.

Lender and/or FMC, as applicable, agrees to pay Servicer for any Loss arising out of or relating to Lender’s or FMC’s acts or omissions with respect to the Loans covered by this Agreement, including but not limited to a determination that the procedures in the Servicing Guidelines are found to be in violation of a state or federal law, where the final determination of liability on the part of Lender and/or FMC, as applicable, is established by a court of law or by way of settlement agreed to by Lender and/or FMC.

The maximum liability on the part of Servicer under this Agreement for all Losses incurred by Lender on Loans Serviced by the Servicer as a result of Servicing deficiencies shall not exceed [**] percent ([**]%) of the total dollar value of the Loans Serviced by Servicer for Lender under this Agreement.

This provision shall take effect as of the date on which each individual Loan is converted to the Servicer’s Loan Servicing System.

This provision shall not be construed to limit the Servicer’s or Lender’s rights, obligations, liabilities, claims or defenses which arise as a matter of law or pursuant to any other provision of this Agreement.

SECTION 10.  FORCE MAJEURE

10.01Neither Servicer nor Lender shall be liable for any failure or delay in the performance of its obligations under this Agreement to the extent such failure or delay is caused by any acts of war, terrorism, civil riots or rebellions, fires, earthquakes, floods, storms, lightning, epidemics, quarantines, embargoes and other similar unusual governmental actions, extraordinary elements of nature or acts of God, expropriation or confiscation or property, failure or delay by carriers, judicial or governmental action, interference by civil and military authorities whether by legal proceeding or in fact and whether purporting to act under some constitution, decree, law, or otherwise, emergency regulation or labor dispute or unrest, provided that and only to the extent that Servicer or Lender could not reasonably circumvent the failure or delay through the use of commercially reasonable alternate sources, workaround plans or other means (“Force Majeure”). An event shall not be considered a Force Majeure event to the extent that proper implementation of the Business Continuity Plan (as defined below) would have enabled the Party to continue performance hereunder in a timely manner. The occurrence of a Force Majeure event shall not excuse any Party from having in place reasonable safeguarding plans and procedures adequate for protecting all Proprietary Information and NPPI of Lender.

Notwithstanding any other provision of this Section, a Force Majeure event shall obligate and require the affected Party to commence its Disaster Recovery Plan (as defined below). If any Force Majeure event prevents, hinders or delays performance of the critical Services for more than three (3) Business Days or results in data loss in excess of forty-eight (48) hours, Lender may procure any affected Services from an alternate source at Lender’s cost and expense.  If the Force Majeure event continues to prevent, hinder or delay performance of any Services which are of a critical nature for an additional four (4) Business Days, Lender shall have the right to terminate this Agreement on not less than fifteen (15) days prior written notice to Servicer, provided that Servicer will be responsible to continue Services up to the effective date of such termination.  Lender shall not be required to pay any Early Termination or Record Return/Deconversion Fees for a termination of this Agreement pursuant to this Section.

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SECTION 11.  CONFIDENTIAL INFORMATION/PRIVACY/SECURITY

11.01Proprietary Information Access or Exchange.  In the performance of this Agreement, each Party may disclose to the other Parties certain Proprietary Information.

11.02Definitions.  For the purposes of this Agreement, the following terms will have the definitions set forth below.

(a) “Proprietary Information” means Trade Secrets, Confidential Business Information, and NPPI.

(b)“Trade Secrets” will include without limitation and without regard to form, technical or non-technical data, formulae, patterns, design, business logic, presentation or strategy, new products, marketing plans, ideas, know-how, inventions, compilations, programs, software programs, devices, methods, techniques, drawings, processes, financial data, financial plans, product plans, non-public forecasts, studies, projections, analyses, all customer data of any kind, lists of actual or potential customers, business and contractual relationships, literary, artistic, graphical or other works and improvements, or any other information similar to the foregoing that: (a) derives economic value, actual or potential, from not being generally known and not being readily ascertainable by proper means to other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.  In each case whether or not patentable, copyrightable or otherwise subject to intellectual or industrial property protection, and whether or not registrable or subject to any registrations or applications therefore, and any of the same relating to or owned by any subsidiary or affiliate of the Disclosing Party.  For the sake of clarity, “Trade Secrets” will include information provided to any Party by any third parties, which such Party is obligated to hold in confidence.

(c)“Confidential Business Information” means any valuable, secret business information, other than Trade Secrets, that is designated or identified as confidential at the time of the disclosure or is by its nature clearly recognizable as confidential information to a reasonably prudent person with knowledge of the Disclosing Party’s business and industry.  Confidential Business Information includes but is not limited to default and recovery statistics, loan program parameters, risk management strategies, recovery strategies,

(d)“NPPI” means non-public, personally identifiable information of Disclosing Party’s customers, Disclosing Party’s Personnel or other individuals, which has been provided to Receiving Party by such persons or their representatives.  More specifically, records in any form (oral, written, graphic, electronic, machine-readable, or otherwise) relating to a Borrower, such as a Borrower’s name, address, telephone number combined with information including, but not limited to, a social security number, loan payment or transactional account history, account status, and the fact that the Borrower has a relationship with Lender; other Borrower information; or other documentation received by Servicer pursuant to the Agreement from FMC, or from the Borrower, or from the school which Borrower attends, or information prepared and maintained by Servicer in the course of its activities under this Agreement.

(e)“Disclosing Party” means the Party disclosing any Proprietary Information hereunder, whether such disclosure is directly from or through the Disclosing Party’s Personnel.

(f)“Receiving Party” means the Party receiving any Proprietary Information hereunder, whether such disclosure is received directly from or through the Receiving Party’s Personnel.

11.03Exclusions.  Notwithstanding the definition of Proprietary Information above, Proprietary Information does not include any information that: (a) was in the Receiving Party’s possession before being disclosed to it by the Disclosing Party without a duty of confidentiality on the Receiving Party; (b) is or becomes a matter of public knowledge through no fault of the Receiving Party; (c) is rightfully received by the Receiving Party from a third party without a duty of confidentiality; (d) is disclosed by the Disclosing Party to a third party without a duty of confidentiality on the third party; (e) is independently developed by the Receiving Party without use of or reference to the Disclosing Party’s Proprietary Information; or (f) is disclosed by the Receiving Party with the Disclosing Party’s prior written approval without a duty of confidentiality on the Party making such disclosure or

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the third party to which disclosure is authorized.  In addition, notwithstanding anything else contained in this Section 11 or this Agreement, nothing in this Section 11 will be construed to prohibit disclosure of any information to regulatory agencies, attorneys, accountants, who are obliged to respect the confidentiality thereof.  No such sharing with Recipient’s regulatory agencies, accountants or attorneys, however, shall relieve Recipient from its obligations or liability hereunder with respect to any unauthorized disclosure of Proprietary Information, whether by its own actions or by the actions of its regulators, accountants or attorneys.

11.04Ownership and Restrictions on Use.  The Receiving Party acknowledges and agrees that except to the extent otherwise expressly provided herein, the Proprietary Information of the Disclosing Party will remain the sole and exclusive property of the Disclosing Party or a third party providing such information to the Disclosing Party, and the disclosure of such information to the Receiving Party does not confer upon it any license, interest, or right of any kind in or to the Proprietary Information, except as provided under this Agreement.  At all times and notwithstanding any termination or expiration of this Agreement, the Receiving Party agrees that it will:  (a) hold in strict confidence and not disclose to any third party the Proprietary Information of the Disclosing Party, except as approved in writing by the Disclosing Party; (b) only permit access to the Proprietary Information of the Disclosing Party to those of its Personnel who have a need to know and have signed confidentiality agreements or are otherwise bound by confidentiality obligations substantially similar to those contained in this Agreement; (c) be responsible to the Disclosing Party for any third party’s use and disclosure of the Proprietary Information provided to such third party by the Receiving Party; (d) only use Proprietary Information that it receives to carry out the purposes of the Agreement and for no other purpose whatsoever; and (e) use at least the same degree of care it would use to protect its own Proprietary Information of like importance, but in no event less than a reasonable degree of care, including maintaining information security standards for such Proprietary Information as are commercially reasonable and customary for the type of information.  Specifically, with regard to NPPI, Servicer will comply with the information security standards specific to such information set forth in this Agreement.  No Party will communicate any information to the other Party in violation of the proprietary rights of any third party.  All Parties agree not to disclose Proprietary Information to any competitors of the Disclosing Party The Parties further agree the Disclosing Party retains all right, title and interest in and to all of its Proprietary Information and any intellectual property and industrial rights therein, including (without limitation) any patents, copyrights and registrations thereof and applications therefor, and the Disclosing Party will have all the rights and remedies available to it as a result of such right, title and interest.  This Agreement does not grant or constitute an assignment of or license in or to any such Proprietary Information or intellectual or industrial property, including, without limitation, for the development, manufacture or sale by Receiving Party of products or services based on Proprietary Information or for any other use of Proprietary Information by Receiving Party except as expressly provided herein.

11.05Required Disclosures.  Receiving Party’s duty hereunder shall not extend to such Proprietary Information which is compelled by a validly issued subpoena, court order, governmental request or request of a law enforcement agency; provided, however, if the Lender or FMC is required by a Governmental Authority or law to disclose any of the Proprietary Information of the Disclosing Party, the Receiving Party must, if legally permissible: (i) first give written notice of such required disclosure to the Disclosing Party; (ii) make a reasonable effort to obtain a protective order requiring that the Proprietary Information so disclosed be used only for the purposes for which disclosure is required; (iii) take reasonable steps to allow the Disclosing Party to seek to protect the confidentiality of the Proprietary Information which, in the opinion of its legal counsel, it is required to disclose.  The foregoing requirements will not apply and are not intended to limit any Party’s ability to fully comply with requests for information from regulators of the Internal Revenue Services, as permitted by the last sentence of Section 11.03.  FMC and Lender acknowledge, understand, and agree that any information, proprietary or otherwise, which is provided by FMC or Lender to Servicer and which qualifies as a “public record” under Pennsylvania’s Right-to-Know Law, 65 P.S. §§67.101 et seq., as amended, and as may be further amended in the future, may be subject to disclosure by Servicer.  FMC and Lender accordingly waive and release Servicer from any actions at law or in equity from compliance with any such disclosure.  FMC and Lender further acknowledge, understand, and agree that any such disclosure does not constitute breach of any confidentiality provision otherwise provided for in this Agreement.  In the event Servicer is required to make such disclosure, Servicer shall make commercially reasonable effort to notify FMC or Lender in writing in advance of any disclosure request or of other pending

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legal action instituted to enforce disclosure of this Agreement or any information, proprietary or otherwise, which is provided by FMC or Lender to Servicer hereunder.

11.06Notice of Unauthorized Disclosures.  Each Party to this Agreement will immediately notify the other Parties in writing upon discovery of any loss or unauthorized disclosure of the Proprietary Information of the other Parties.

11.07Limit on Reproductions.  The Receiving Party will not reproduce the Disclosing Party’s Proprietary Information in any form except as reasonably necessary to fulfill such Party’s duties and obligations and otherwise comply with the agreements of such Party under this Agreement.  Any reproduction of any Proprietary Information by the Receiving Party will remain the property of the Disclosing Party and will contain any and all confidential or proprietary notices or legends that appear on the original, unless otherwise authorized in writing by the Disclosing Party.

11.08Document Destruction — Information Erasure.  Except as otherwise set forth in this Agreement, upon the earlier of:  termination of this Agreement, the written request of the Disclosing Party, or when no longer needed by any Party for fulfillment of its obligations under this Agreement, each Receiving Party will either: (a) promptly return to the Disclosing Party all documents and other tangible (including electronic) materials containing the Disclosing Party’s Proprietary Information, including all copies thereof in its possession or control; or (b) erase or destroy all such materials by the following methods.  If return, erasure, or destruction is not feasible, then the Receiving Party may maintain the Disclosing Party’s Proprietary Information in compliance with the requirements of the confidentiality and information security provisions of this Agreement; provided, however, that when the return, destruction, or erasure of any such materials becomes feasible for the Receiving Party, the Receiving Party must comply with the requirements of (a) or (b) above within sixty (60) calendar days.  Upon request, Receiving Party shall also provide to the Disclosing Party a written certification of destruction signed by an officer of the Receiving Party duly authorized to legally bind the Receiving Party certifying and warranting that no copies of the Proprietary Information have been retained;

TYPE OF PROPRIETARY INFORMATION STORED OR USED	DESTRUCTION METHOD
Hard Copy	Shredding, pulverizing, burning, or other suitable destruction method so that any Proprietary Information is not readable at all and cannot be reassembled or reconstructed in any way so that it is practicably readable.
Electronic Tangible Media, such as CDs, Disks, Tapes	Destruction or erasure of such media so that any Proprietary Information is not readable at all and cannot be reassembled or reconstructed in any way so that it is practicably readable.
Hard Drive Storage or similar Computer or Device Storage	Erasure or elimination of Proprietary Information from such device so that any Proprietary Information is not readable at all and cannot be reassembled or reconstructed in any way so that it is practicably readable.

11.09Equitable Relief.  If any Party should breach or threaten to breach any provision of this Section 11 of the Agreement, the non-breaching Party, in addition to any other remedy it may have at law or in equity, will be entitled to seek a restraining order, injunction, or other similar remedy in order to specifically enforce the provisions of this Section.  Each Party specifically acknowledges that money damages alone may be an inadequate remedy for the injuries and damages that would be suffered and incurred by the non-breaching Party as a result of a breach of any provision of this Section.  In the event that any Party should seek an injunction hereunder, the other Parties hereby waive any requirement for the submission of proof of the economic value of any Proprietary Information or the posting of a bond or any other security.

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11.10Survival.  The obligations set forth in this Section 11 as they pertain to Proprietary Information, shall survive termination of this Agreement and continue for so long as the relevant information remains Proprietary Information.

11.11Prior Agreements.  The provisions set forth in this Agreement are only relevant to the Program and this Agreement and do not affect any Prior Agreement between the Parties.

11.12Information Related to Tax Structure and Treatment.  It is the Parties’ mutual intent that the tax structure and tax treatment of the transactions contemplated by this Agreement will not be confidential and, that notwithstanding anything herein to the contrary, each Party and its Personnel may disclose to any and all Persons of any kind, the tax structure and tax treatment of the transactions contemplated herein such that the transactions will be treated as not having been offered under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations promulgated under Section 6011 of the Internal Revenue Code of 1986, as amended, and any comparable provision in the law of any other jurisdiction.

11.13General Security Requirements.  All Parties will provide information, data back-up procedures, and information security so as to reasonably ensure that any Proprietary Information provided by another Party is not lost, stolen, modified, disclosed to or accessed by any other party (other than those permitted parties under Section 11 of this Agreement) without the Disclosing Party’s prior written approval.  Such security measures will equal or exceed standard industry practices for similar entities dealing with Proprietary Information.  All Parties warrant to the other Parties that it will reasonably monitor, evaluate and adjust its information security systems and procedures, its data security systems, and its processes in response to relevant changes in technology, changes in the sensitivity of any Proprietary Information, and internal and external threats to information security.  All Parties will promptly notify the Disclosing Party of: (a) any unauthorized possession, use, or knowledge or attempt thereof, of the data-processing files, transmission messages, or other Lender Proprietary Information by any person or entity that may become known; (b) the effect of such; and (c) the corrective action the Receiving Party has taken in response thereto.

11.14Encryption.  All Parties represent and warrant not to use, reproduce, transform or store any of the Proprietary Information in any externally accessible computer or electronic information retrieval system unless such system is adequately protected against unauthorized access.  “Adequately Protected” means whole disk encryption of all laptop computers maintaining Proprietary Information on such devices; password protection on personal digital assistants (PDAs) that do not contain or provide access to NPPI; encryption on other portable devices and portable media including, but not limited to, thumb drives, tapes, and CDs which maintain or have access to Proprietary Information.  Servicer shall use a digital certificate on the web server to enable the use of SSL and HTTPS protocols. All internet transfers of Proprietary Information and screen images of the same shall be encrypted.  All encryption must meet a minimum standard of Advanced Encryption Standard algorithm with a minimum key strength of 256 bit.  Notwithstanding the foregoing, one product currently used by Servicer which allows third parties to access the Servicer’s system is in the process of being increased to at least this minimum standard.

11.15Information Security Audits.  During the term of this Agreement, and for one (1) year following termination Lender may provide prior written notice to Servicer or the intent to review the summary of the information security program, at Servicer’s Headquarters, upon reasonable notice of not less than 30 days.

11.16Servicer Firewall(s).

(a) Servicer will create its firewall rules based on the principle of least access needed.  This means that the firewall(s) will only pass the traffic necessary for the system applications utilized by Servicer in providing Services hereunder to function to the backend servers, and any unnecessary traffic will be blocked.

(b)Servicer will segregate the Internet environment used to provide service to its clients from the intranet environment used by internal Servicer personnel.

(c)An encrypted session will be used for connectivity between Lender, FMC and Servicer over the internet.

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11.17User Authentication Processes.Servicer will follow its existing policies, procedures, and standards for authentication.  Servicer will provide Lender with access to such policies and procedures at Servicer’s place of business.

11.18Intrusion Detection.Servicer will maintain a current industry standard intrusion detection monitoring system that protects its infrastructure against system risk from outside users and vendors.  Servicer will actively monitor the intrusion monitoring system and develop escalation procedures to notify Lender personnel in the event of a security breach pursuant to Section 11.20.

11.19Risk Assessment.Servicer shall comply with industry best practices and standards regarding information security.  Servicer shall at a minimum conduct external and internal scans and audits of the Servicer’s network. On an on-going basis, Servicer shall scan and audit for any malicious code, viruses or known threats so that Servicer may protect its network accordingly.  Additionally, on an annual basis, Servicer shall engage external vendors to conduct blind intrusion testing to verify Servicer’s then current information security, controls, standards, and procedures.

11.20Procedures for Security Breaches.  For purposes of this Section, “Breach” is defined as an incident of unauthorized access by a third party to Sensitive Customer Information maintained by Servicer.

“Sensitive Customer Information” shall mean a Borrower’s first and last name, address or telephone number in conjunction with the Borrower’s (a) social security number; (b) driver’s license number; (c) financial account number (other than AES account number); or (d) credit or debit card number, in conjunction with the personal identification number or password that would permit access to the customer’s debit or credit card account.

In the event Servicer knows or reasonably believes that there has been a Breach, Servicer shall take the following actions:

(a)immediately notify Lender of such unauthorized access or attempted unauthorized access;

(b)take reasonable steps to remedy the circumstances that permitted any such unauthorized access to occur;

(c)take reasonable steps to prohibit further disclosure of Proprietary Information or Consumer Information;

(d)upon request, cooperate with Lender or its agents to investigate the scope and content of the unauthorized access; and

(e)Cooperate with Lender as necessary to facilitate Lender’s compliance with any applicable federal or state law regarding unauthorized access of customer personal information.

Notwithstanding the foregoing, when the role of Servicer in the Breach is unclear, Servicer will contact Owner for guidance on a case by case basis.

11.21Lender’s Request for Disclosure of Proprietary Information.  Notwithstanding the foregoing, in the event Lender desires to utilize data or account aggregation/warehouse web sites or databases (for example, ELMNET), data or account switches or exchanges (for example, METEOR), or other similar “single inquiry” service provider or technology (hereinafter collectively “Third Party Service Provider”) which requires Servicer to disclose (via data transmission or some other similar methodology) Confidential Information of the Lender, the Lender, or Program Administrator at Lender’s direction, shall:

(a)provide Servicer prior written notice of Lender’s desire to utilize such service and provide to Servicer all information necessary for Servicer to effectuate such transmission; and

(b)in the event of misappropriation of any nature whatsoever following transmission by Servicer, indemnify, defend and hold Servicer harmless for any claim, loss, liability or expense, including reasonable attorney’s fees and court costs, arising out of or relating to the Lender’s or Third Party Service Provider’s acts or omissions.  This provision shall not be construed to limit the Lender’s or the Servicer’s rights, obligations, liabilities, claims or defenses that arise as a matter of law or pursuant to any other provision of this Agreement.

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SECTION 12.  DISPUTE RESOLUTION

12.01Except as otherwise expressly set forth in this Agreement, the Parties agree that any dispute arising in connection with the interpretation of this Agreement or the performance of any Party under this Agreement or otherwise relating to this Agreement will be treated in accordance with the procedures set forth in this Section 12, prior to the resort by any Party to litigation in connection with such dispute.  The dispute will be referred for resolution first to a Senior Vice President for Lender, the General Counsel or Chief Financial Officer for FMC, and General Counsel for Servicer.  Such procedure will be invoked by any Party presenting to the other Parties a Notice of Request for Resolution of Dispute (a “Notice”) identifying the issues in dispute sought to be addressed hereunder.  A telephone or personal conference of those executives will be held within fifteen (15) Business Days after the delivery of the Notice.  In the event that the telephone or personal conference between these executives does not take place or does not resolve the dispute, any Party may proceed to litigation pursuant to section 9.

SECTION 13. ASSIGNMENT; SALE OF LOANS.

13.01Assignment by the Servicer, Lender or FMC.  This Agreement and all the rights and obligations of any Party hereunder may not, without the prior written consent of the other Parties, which consent shall not be unreasonably withheld, be assigned or subcontracted by any Party.  Any successor must acquire all or substantially all of the assets or business of the assigning Party, and have the ability to perform the duties and obligations under the terms and conditions hereof.

13.02Assignment of Loans from Lender to FMC. The Parties acknowledge and agree that Lender shall assign Charged Off Loans to FMC (or an Affiliate thereof) for collection under the terms and conditions of the Loan Program Agreement and within the time frame set forth in the Servicing Guidelines and that after the Servicer completes the processes required in the Servicing Guidelines with respect to Charged Off Loans, such Loans shall no longer be serviced by Servicer under this Agreement.

13.03Notice Requirement Prior to Sale of Loans.  Lender shall use best efforts to notify the Servicer, in writing, sixty (60) days prior to any sale of Loans, and shall notify Servicer, in writing, no less than forty-five (45) days prior to any sale of Loan, currently housed on the Loan Servicing System as to (a) the anticipated sale date and (b) the characteristics of the Loans to be sold. The Lender will notify the Servicer of the sale date no later than five (5) days prior to the sale. Within thirty (30) days of its receipt of the above initial notice, the Servicer shall provide Lender with available transfer dates.  Actual transfer dates shall be mutually agreed upon.

SECTION 14.       TERMINATION

14.01Borrower’s Loan.This Agreement shall terminate as to a specific Borrower’s Loan on the earliest of:

(a) the month following the month during which (i) the principal, interest, Late Fees, and any other fees, if any, have been fully paid and remitted to the Lender, and (ii) the Borrower has been notified that the Loan has been paid in full;

(b) with respect to a Charged Off Loan, the end of the month during which such Charged Off Loan is transferred to FMC or its Affiliate for collection, as set forth in Section 13.02; or

(c) the end of the month following the month during which the sale or transfer of such Loan occurs where Servicer does not continue Servicing such Loan, subject to the provisions set forth in Section 13.03 (Notice Requirement Prior to Sale of Loans) hereof.

14.02.Termination by Lender/Resignation by FMC.  This Agreement may be terminated at the option of Lender upon the occurrence of any of the following:

(a)Any of Servicer’s representations or warranties made in or pursuant to this Agreement shall have been incorrect or misleading in any material respect when made;

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(b)The Servicer’s failure to perform or observe any of the provisions or covenants of this Agreement and/or its referenced Schedules and Exhibits, in any material respect (including, without limitation, any breach of the provisions of Section 4.12 (Collections), all of which shall be deemed material or Section 11.15(b));

(c)If the Servicer shall (i) discontinue business, or (ii) generally not pay its debts as such debts become due, or (iii) make a general assignment for the benefit of creditors, or (iv) admit by answer, default or otherwise the material allegations of petitions filed against it in any bankruptcy, reorganization, insolvency or other proceedings (whether federal or state), relating to relief of debtors, or (v) suffer or permit to continue unstayed and in effect for thirty (30) consecutive days, any judgment, decree or order, entered by a court of competent jurisdiction, which approves a petition seeking its reorganization or appoints a receiver, custodian, trustee, interim trustee or liquidator for itself or all or a substantial part of its assets, or (vi) take or omit any action in order thereby to effect any of the foregoing;

(d)Change of Control.  Notwithstanding Section 13.01 (Assignment by Servicer), if Servicer is the subject of a Change of Control, Lender and FMC shall have the right to terminate this Agreement upon a minimum of thirty (30) Business Days prior written notice. Such right of termination must be exercised within sixty (60) days of the date on which Lender received notice of such Change of Control from the Servicer. Following Servicer’s receipt of notice and information to support the termination hereunder from Lender, Servicer shall work diligently with Lender and Program Administrator to carry out the deconversion of the Loans off of the Servicer’s Loan Servicing System within a timeframe reasonably agreeable to the Parties but in any event shall be begun within ninety (90) Business Days from the Servicer’s receipt of notice and the Parties shall use their best efforts to complete the deconversion process within 24 months from the date it begins.  There will be a charge to Lender of Early Termination Fees as detailed in the Fee Schedule attached hereto arising from Lender’s termination of the Agreement pursuant to this Section. Lender shall be responsible for any and all fees arising under this Agreement and the attached Fee Schedule that are incurred by Lender hereunder prior to Lender’s termination of this Agreement and complete deconversion pursuant to this Section.

In the event of an event of default as set forth in Section 14.02(a) or (b) above, the Servicer shall have the right to cure any such breach or error to Lender and FMC’s full satisfaction within thirty (30) days of written notice from Lender or FMC. Notwithstanding the foregoing, Servicer shall have the right to cure any breach of Section 4.12 (Collections) within five (5) (not thirty (30)) days after written notice from Lender or FMC. In the event that: (i)  Servicer fails to cure such default and the Agreement is terminated pursuant to Section 14.02 (a) or (b) or (ii) this Agreement is terminated pursuant to Section 14.01 or 14.02 (c), or Sections 4.02(d), 6.10, 10.01, there will be no charge to Lender or FMC for Early Termination Fees or Record Return/Deconversion Fees.  In the event the Agreement is terminated prior to the end of the initial term for any reason other than those stated in the foregoing sentence (including without limitation termination under Section 14.02(d)), Lender shall be responsible for the payment of Early Termination Fees and Record Return/Deconversion Fees as detailed in the Fee Schedule.

14.03.Termination by the Servicer. This Agreement may be terminated at the option of the Servicer upon the occurrence of any of the following:

(a)Lender or FMC’s failure to perform or observe any of the provisions or covenants of this Agreement and/or its referenced Schedules and Exhibits, in any material respect; or

(b)If Lender or FMC shall (a) discontinue business, or (b) generally not pay its debts as such debts become due, or (c) make a general assignment for the benefit of creditors, or (d) admit by answer, default or otherwise the material allegations of petitions filed against it in any bankruptcy, reorganization, insolvency or other proceeding (whether federal or state) relating to relief of debtors, or (e) suffer or permit to continue unstayed and in effect for thirty (30) consecutive days, any judgment, decree or order, entered by a court of competent jurisdiction, which approves a petition seeking its reorganization or appoints a receiver, custodian, trustee, interim trustee or liquidator for itself or all or a substantial part of its assets, or (f) take or omit any action in order thereby to effect any of the foregoing;

27

In the event of an event of default as set forth in Section 14.03(a) or (b) above, Lender and FMC shall each have the right to cure any such breach or error to Servicer’s full satisfaction within thirty (30) days of written notice from Servicer.

In the event Lender or FMC fails to cure such default and the Agreement is terminated pursuant to Section 14.03(a) or (b), Lender (or FMC, to the extent termination by Servicer is attributable to the actions or omissions of FMC) shall pay Servicer the Early Termination Fees and Record Return/Deconversion Fees set forth in the Fee Schedule.

14.04.Record Return/Deconversion.  Upon termination of this Agreement in full or in part with respect to any Loan or Loans whether by virtue of the passage of time or otherwise, the Servicer shall, regardless of any Lender or FMC default or any other reason, return to Lender all records, data processing records, reports, documents and correspondence, including Original Credit Agreements, Applications, payment histories, due diligence histories, and copies of microfilm documents maintained by the Servicer in connection with the Servicing of the Loans (or such Loans as applicable). Servicer shall maintain a copy of all records and reports which related to the Servicing of Loans generally for seven (7) years after any deconversion.  Upon the return of the Loan records, Lender agrees to pay the Record Return/Deconversion Fee, as set forth in the Fee Schedule, except under the circumstances specifically set forth in this Agreement, and such records will be returned to Lender by Servicer as provided below or as otherwise mutually agreed in writing by the Parties.  Upon any termination or expiration of this Agreement, any deconversion and transfer of the Accounts to Lender or its new servicer shall be on an orderly schedule reasonably determined by the Servicer, with Lender’s approval.  To the extent that the Servicer continues to provide Servicing for any Accounts after the termination or expiration date pending such scheduled deconversion and transfer, the terms of this Agreement shall remain in effect and the Servicer’s fees shall continue to be paid hereunder with respect to such Accounts during such period.

14.05Transition Period Rights.  If this Agreement is terminated pursuant to Sections 14.02, 4.02(d), 6.10, or 10.01, upon demand by the Lender, Servicer shall continue to Service the Loans at rates charged to the Program Administrator for Lender’s Program at the time of such termination, until such time as all loans have been successfully deconverted.  Lender shall have the right to access the Servicer’s facilities and access to Loan data in the same manner as was permitted during the term of this Agreement.  Servicer has the obligation upon termination or expiration to provide, and Lender has the absolute right to obtain, all of its Proprietary Information and NPPI at any time.

SECTION 15.  MISCELLANEOUS PROVISIONS

15.01  Notices.  All notices, approvals, consents, requests or other written communications regarding this Agreement are to be addressed as noted below.

If to FMC:	General Counsel
	The First Marblehead Corporation
	The Prudential Tower
	800 Boylston Street, 34th Floor
	Boston, Mass. 02199-8157

28

If to Lender:	SunTrust Bank
	Attn: W. Mark Smith
	Executive Vice President
	1001 Semmes Avenue
	Mail Code CS-RVW-7900
	Richmond, VA 23224
	With a copy to:
	SunTrust Bank
	Legal Department
	303 Peachtree Street, N.E., 36th Floor
	Atlanta, GA 30308
If to Servicer:	General Counsel
	Pennsylvania Higher Education Assistance Agency
	1200 North Seventh Street
	Harrisburg, Pennsylvania 17102

15.02Relationship.  The Parties to this Agreement intend that the Servicer shall render the Services contemplated by this Agreement as an independent contractor.  The Servicer and its employees, agents, and servants are not to be considered agents or employees of Lender or FMC, for any purpose whatsoever. Nothing herein contained, nor any action taken by the Servicer under this Agreement, shall be deemed or construed to give the Servicer any right, title or interest either in law or in equity in and to any Loan being Serviced by Servicer.

15.03Non-Exclusive Agreement for FMC and Lender.  Nothing contained herein shall be construed to create an exclusive arrangement as to Lender or FMC. The Servicer understands and agrees that Lender and FMC may enter into other agreements for the servicing of Private Loans in the future.

15.04Survival.  Any and all provisions, promises, and warranties contained herein, which by their nature or effect are required or intended to be observed, kept or performed after expiration or termination of this Agreement (including , without limitation, representations and warranties, confidentiality, information security, audit rights, indemnification, limitation of liability, dispute resolution and miscellaneous provisions), will survive the expiration or termination of this Agreement and remain binding upon and for the benefit of the Parties hereto.

15.05Entire Understanding.  This Agreement, including without limitation all Schedules and Exhibits attached hereto, represent the entire understanding of the Parties with respect to their subject matter, and supersede all previous discussions and correspondence with respect thereto, and no representations, warranties or agreements, express or implied, of any kind with respect to such subject matter have been made by any Party to the other Parties, except as expressly set forth herein or in such other agreements.

15.06Interpretation of Documents.  In the event of a conflict between this Agreement and a Schedule or Exhibit attached hereto, this Agreement shall control.

15.07Cooperation.  Lender, FMC and the Servicer agree that they will cooperate fully with one another in order to carry out the terms and provisions of the Agreement during the term of this Agreement and during all periods in which Loans are processed and Serviced by Servicer.  Cooperation under this Section shall include, but not be limited to, each Party using reasonable means to ensure successful, normal, daily processing of Loans and related operations and functions.  Each Party agrees to support the reasonable routine efforts of the other Party and to work to resolve any disputes which may arise during such periods referenced above, and to continue to work together in a professional, business-like manner during all phases, functions and processes defined in this Agreement.

15.08Authorization. Each of the undersigned represent that he or she has the authority to execute this Agreement on behalf of the respective Party.

15.09Amendments; Changes; Modifications.  This Agreement (a) may be amended, supplemented, or modified only by written instrument duly executed by the Parties; (b) such written instrument shall be incorporated into this

29

Agreement; and (c) shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and assigns.  The Servicing Guidelines may be amended or modified by addendum duly executed by the Parties outside this Agreement.

15.10No Waiver.Any failure by Lender, FMC or the Servicer to insist upon the strict performance by the other of any of the terms and provisions of this Agreement shall not be deemed to be a continuing waiver of any such terms and provisions, and notwithstanding any such failure, such Party shall have the right thereafter to insist upon the resumption of strict performance by the other of any and all of the terms and provisions hereof.  The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law.

15.11Law Governing.This Agreement is being delivered in and shall be construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to any principles of conflict of laws.

15.12Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one of and the same document.

15.13Unenforceability.  If any provision of this Agreement shall be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect or impair the validity or enforceability of the remaining provisions of this Agreement, which shall remain in full force and effect, and the Parties hereto shall continue to be bound thereby.

SECTION 16.  REMOVAL OF PROGRAM ADMINISTRATOR

16.01Upon the occurrence of any of the events set forth in Section 14.02(a) — (d), FMC may at its option resign as Program Administrator upon thirty (30) days written notice to Lender and Servicer. In addition, Lender may remove FMC as Program Administrator upon the terms and conditions set forth in the Loan Program Agreement. Upon the effective date of such resignation or removal, Lender shall become Program Administrator hereunder without the taking of further action by Lender, and Servicer’s fees for services provided hereunder shall thereafter be only the Servicing fees previously charged by Servicer to Program Administrator for Lender’s Program, unless otherwise agreed by Lender and Servicer in writing. If additional Services are requested by Lender, pricing for such services shall be negotiated between Servicer and Lender.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the month, day and the year first-above written.

PENNSYLVANIA HIGHER EDUCATION		THE FIRST MARBLEHEAD
ASSISTANCE AGENCY		CORPORATION
	/s/ James L. Preston		/s/ Michael Plunkett
Name:	James L. Preston	Name:	Michael Plunkett
Title:	President and CEO	Title:	Managing Director
SUNTRUST BANK
	/s/ W. Mark Smith
Name:	W. Mark Smith
Title:	Executive Vice President
Approved as to form and legality		Approved as to form and legality
	/s/ Jason Swartley		/s/ Robert A. Mulle
PHEAA General Counsel		Deputy Attorney General

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INDEX TO SCHEDULES AND EXHIBITS

Schedule A	Required Reports Schedule
Schedule B	System Access Schedule
Schedule C	Fee Schedule
Exhibit A	Servicing Guidelines

32

Schedule A

PRIVATE STUDENT LOAN SERVICING AGREEMENT

AMONG

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY,

SUNTRUST BANK,

AND

THE FIRST MARBLEHEAD CORPORATION

REQUIRED REPORTS SCHEDULE

Servicer shall electronically deliver to Program Administrator and/or Lender (as specified below), within the time periods specified below, the data elements that are, as of the Effective Date, contained in the reports specified below:

1.MR-01 Report, delivered weekly to Program Administrator and Lender.

2. MR-50 Report, delivered to Program Administrator and Lender within five (5) Business Days after the end of each calendar month.

3.MR-53 Report, delivered to Program Administrator and Lender within five (5) Business Days after the end of each calendar month.

4.Asset Management Reports (AMR), delivered to Lender within five (5) Business Days after the end of each calendar month.

5.Such other reports identified and mutually adopted.

33

Schedule B

PRIVATE STUDENT LOAN SERVICING AGREEMENT

AMONG

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY,

SUNTRUST BANK,

AND

THE FIRST MARBLEHEAD CORPORATION

SYSTEM ACCESS SCHEDULE

All system access shall be limited to view only option.

1. LENDER AND PROGRAM ADMINISTRATOR.

Servicer shall provide Lender and/or Program Administrator, upon approval by Lender, with web-based, view-only Account access, which shall include the ability to view loan servicing screens including but not limited to Borrower information,  Account history and due diligence records.

Individual users shall obtain remote access within five (5) Business Days of receipt of notice and additional necessary information from Lender and/or Program Administrator, as applicable, that such individual requires remote access.

2. BORROWERS.

Servicer shall provide Borrowers and Cosigners with limited access to their Account information through Servicer’s established borrower portal.  Access is limited to view-only, with the ability to submit queries and request or print forms as necessary.

3. FMC/FMER AND LENDER USER ACCESS SECURITY REQUIREMENTS

Upon approval by Lender of the Program Administrator’s access, the Servicer Operations Group of Program Administrator will be responsible for notifying the Servicer to add and delete Program Administrator Personnel who need, or no longer need, access as appropriate.  On a quarterly basis, Servicer will provide Program Administrator with a report of Program Administrator Personnel who have system access to Borrower information.  Program Administrator shall confirm the accuracy of such reports within ten (10) days of receipt thereof and, to the extent notice of any inaccuracies is not provided to Servicer by such time, Program Administrator shall be liable for the inaccuracy thereof in accordance with Section 9 (Liability) of this Agreement.

Lender will be responsible for notifying the Servicer to add and delete Lender Personnel who need, or no longer need, access as appropriate.  On a quarterly basis, Servicer will provide Lender with a report of Lender Personnel who have system access to Borrower information.  Lender shall confirm the accuracy of such reports within ten (10) days of receipt thereof and, to the extent notice of any inaccuracies is not provided to Servicer by such time, Lender shall be liable for the inaccuracy thereof in accordance with Section 9 (Liability) of this Agreement.

Schedule C

PRIVATE STUDENT LOAN SERVICING AGREEMENT

AMONG

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY,

SUNTRUST BANK,

AND

THE FIRST MARBLEHEAD CORPORATION

FEE SCHEDULE

1.	Deconversion to Lender	$[**] per loan
2.	Record Return Fee to Lender	$[**] per loan
3.	Reconversion Fee:	$[**] per loan
4.	Early Termination Fee	$[**] per Account
5.	Ad Hoc Projects/Reporting (fees to be pre-identified by the Servicer in a Statement of Work and billed to Program Administrator)
6.	Late Fees	[**]% of all late fees collected on delinquent Loans

Exhibit A —Servicing Guidelines

[**]

A total of twenty-three pages were omitted pursuant to a request for confidential treatment.

EXHIBIT B

Program Guidelines

with Servicing Guidelines, Forms of Credit Agreements and Truth-in-Lending Disclosures

[**]

A total of two hundred thirty-four pages were omitted pursuant to a request for confidential treatment.

EXHIBIT C1

Trust Agreement

MG STUDENT LOAN TRUST 2010-1

TRUST AGREEMENT

Among

[U.S. BANK NATIONAL ASSOCIATION]

as TRUSTEE

[U.S. BANK TRUST NATIONAL ASSOCIATION]

as RESIDENT TRUSTEE

THE NATIONAL COLLEGIATE FUNDING II, LLC

as OWNER

and

SUNTRUST BANK

with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06,

10.01(ii), 12.01 and 13.01 and Articles V and VI only

Dated as of

July     , 2010

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS		1
Section 1.01	Capitalized Terms	1
ARTICLE II ORGANIZATION		4
Section 2.01	Name	4
Section 2.02	Office	4
Section 2.03	Purposes and Powers	4
Section 2.04	Appointment of the Trustees	5
Section 2.05	Appointment of Special Servicer	5
Section 2.06	Declaration of Trust	6
Section 2.07	No Liability of Owners for Expenses or Obligations of Trust	6
Section 2.08	Situs of Trust	6
ARTICLE III TRUST CERTIFICATES AND TRANSFER OF INTEREST		6
Section 3.01	Issuance of Trust Certificate	6
Section 3.02	Registration and Transfer of Certificates	6
Section 3.03	Lost, Stolen, Mutilated or Destroyed Certificates	7
Section 3.04	Limitation on Transfer of Ownership Rights	7
Section 3.05	Assignment of Right to Distributions	8
ARTICLE IV CONCERNING THE OWNERS		8
Section 4.01	Action by Owners with Respect to Certain Matters	8
Section 4.02	Action Upon Instructions	9
Section 4.03	Majority Control	9
Section 4.04	Representations and Warranties of NCF II	10
Section 4.05	Power of Attorney	10
ARTICLE V INVESTMENT, APPLICATION OF TRUST FUNDS		10
Section 5.01	Investment of Trust Funds	10
Section 5.02	Application of Funds	11
Section 5.03	Remittance of Recoveries to the Participation Account	11
Section 5.04	Distribution Date Statement	11
Section 5.05	Method of Payment	12
Section 5.06	No Segregation of Funds; No Interest	12
ARTICLE VI TRUST LOANS		12
Section 6.01	Acquisition of Trust Loans	12
Section 6.02	Application of Funds in the Participation Account	12

i

ARTICLE VII TAX CHARACTERIZATION		12
Section 7.01	Tax Characterization	12
ARTICLE VIII FEDERAL INCOME TAX ALLOCATIONS		13
Section 8.01	Federal Income Tax Allocations	13
ARTICLE IX AUTHORITY AND DUTIES OF THE TRUSTEES		13
Section 9.01	General Authority	13
Section 9.02	Specific Authority	13
Section 9.03	General Duties	13
Section 9.04	Accounting and Reports to the Owners, the Internal Revenue Service and Others	13
Section 9.05	Signature of Returns	14
Section 9.06	Right to Receive and Rely Upon Instructions	14
Section 9.07	No Duties Except as Specified in this Agreement or in Instructions	14
Section 9.08	No Action Except Under Specified Documents or Instructions	14
Section 9.09	Restriction	14
ARTICLE X CONCERNING THE TRUSTEES		15
Section 10.01	Acceptance of Trusts and Duties	15
Section 10.02	Furnishing of Documents	15
Section 10.03	Reliance; Advice of Counsel	16
Section 10.04	Not Acting in Individual Capacity	16
Section 10.05	Representations and Warranties of Resident Trustee	16
ARTICLE XI COMPENSATION OF TRUSTEES		16
Section 11.01	Fees and Expenses of the Trustees	16
Section 11.02	Indemnification	16
Section 11.03	Payments to the Trustees	17
ARTICLE XII TERMINATION OF TRUST		17
Section 12.01	Termination of Trust	17
Section 12.02	Distribution of Assets	17
Section 12.03	No Termination by Owners	18
ARTICLE XIII SUCCESSOR TRUSTEES AND ADDITIONAL TRUSTEES		18
Section 13.01	Resignation of Trustees; Appointment of Successor	18
Section 13.02	Appointment of Additional Trustees	19
ARTICLE XIV TAX MATTERS PARTNER		19
Section 14.01	Tax Matters Partner	19
Section 14.02	Notice of Tax Audit	19
Section 14.03	Authority to Extend Period for Assessing Tax	19

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Section 14.04	Choice of Forum for Filing Petition for Readjustment	19
Section 14.05	Authority to Bind Owners by Settlement Agreement	19
Section 14.06	Notices Sent to the Internal Revenue Service	20
Section 14.07	Indemnification of Tax Matters Partner	20
Section 14.08	Approval of Tax Matters Partner’s Decisions	20
Section 14.09	Participation by Owners in Internal Revenue Service Administrative Proceedings	20
ARTICLE XV MISCELLANEOUS		20
Section 15.01	Supplements and Amendments	20
Section 15.02	No Legal Title to Trust Property in Owner	20
Section 15.03	Limitations on Rights of Others	21
Section 15.04	Notices	21
Section 15.05	Severability	21
Section 15.06	Separate Counterparts	21
Section 15.07	Successors and Assigns	21
Section 15.08	Headings	21
Section 15.09	Governing Law	21
Section 15.10	Third Party Beneficiaries	22
Section 15.11	General Interpretive Principles	22
SCHEDULE I	CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS
EXHIBIT A	FORM OF TRUST CERTIFICATE
EXHIBIT B	FORM OF ACCESSION AGREEMENT
EXHIBIT C	FORM OF CERTIFICATE OF TRUST

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TRUST AGREEMENT, dated as of July     , 2010, among The National Collegiate Funding II, LLC, a Delaware limited liability company (“NCF II”), [U.S. Bank National Association], a national banking association (the “Trustee”), [U.S. Bank Trust National Association], a national banking association (the “Resident Trustee” and, together with the Trustee, the “Trustees”), and, with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii), 12.01 and 13.01 and Articles V and VI only, SunTrust Bank, a Georgia state-chartered banking corporation (“SunTrust”).

WHEREAS, the trust created hereby shall be known as the “MG Student Loan Trust 2010-1” (the “Trust”), in which name the Trustees may conduct the business of the Trust, make and execute contracts, and sue and be sued; and

WHEREAS, the Trust has been created to hold Trust Loans (as defined below) pursuant to the terms and conditions of the Loan Program Agreement (as defined below) for the benefit of SunTrust and The First Marblehead Corporation, a Delaware corporation (“FMC”).

NOW THEREFORE, in consideration of the premises and of the mutual agreements herein contained and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01           Capitalized Terms.  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Loan Program Agreement.  For all purposes of this Agreement, the following terms shall have the meanings set forth below:

“Administration Agreement” means the Administration Agreement, dated as of July    , 2010, among the Trust, the Trustee, and First Marblehead Data Services, Inc., as Administrator, as it may be amended from time to time.

“Administrator” means First Marblehead Data Services, Inc., a Massachusetts corporation, as Administrator under the Administration Agreement, or any successor Administrator as appointed pursuant to the terms of the Administration Agreement.

“Affiliate” means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person.  For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agreement” means this Trust Agreement, as it may be amended or restated from time to time.

“Authorized Officer” means any officer of the Trustee or the Resident Trustee who is authorized to act for the Trustee or the Resident Trustee, as the case may be, in matters relating to, and binding upon, the Trust and whose name appears on a list of such authorized officers furnished by the Trustee or the Resident Trustee, as the case may be, as such list may be amended or supplemented from time to time.

“Bankruptcy Action” has the meaning set forth in Section 4.01(b)(iv).

“Beneficial Interest” as to any Owner, means all or any part of the interest of that Owner in the Trust, including without limitation its (a) right to a distributive share of the assets of the Trust, and (b)

right to direct or consent to actions of the Trustee and otherwise participate in the management of and control the affairs of the Trust.

“Business Day” means any day that is not a Saturday, Sunday or any other day on which commercial banking institutions in Delaware, Georgia or Massachusetts are authorized or obligated by law or executive order to be closed.

“Capital Contribution” means the amount of money contributed or deemed to have been contributed by an Owner to the capital of the Trust, which shall be as set forth on Schedule I to this Agreement.

“Certificate of Trust” means the Certificate of Trust of the Trust filed with the Secretary of State.

“Code” means the Internal Revenue Code of 1986, as amended.

“Deemed Distribution” shall have the meaning set forth in Section 5.03.

“Distribution” means any money or other property distributed to an Owner with respect to its Beneficial Interest; provided that any money in the Participation Account shall not be eligible for Distribution to an Owner.

“Distribution Date” means the third Business Day following a day on which the Trustee receives instructions from the Administrator pursuant to Section 5.02 (provided that the Administrator shall not deliver such instructions more than three times in any calendar month), or such other Business Day as the Administrator and Trustee shall agree in writing.

“Distribution Date Statement” means the statement described as such in Section 5.04.

“Eligible Investments” means those investments designated in writing from time to time by the Administrator to the Trustee or, if no written directions are given, shall mean [**].

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Fiscal Year” means the twelve-month period ending on June 30 each year or such portion thereof as the Trust may be in existence.

“FMC” means The First Marblehead Corporation, a Delaware corporation.

“FMC Deemed Distribution” shall have the meaning set forth in Section 5.03.

“FMER” means First Marblehead Education Resources, Inc., a Delaware corporation.

“Loan Program Agreement” means the Loan Program Agreement, executed April 20, 2010, by and among FMER, FMC and SunTrust.

“Majority Owners” shall have the meaning set forth in Section 4.03.

“1933 Act” has the meaning set forth in Section 3.02(a).

“Owner” means NCF II and any other Person who becomes an owner of a Beneficial Interest.

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“Participation Account Deposit Agreement” means the Participation Account Deposit Agreement, dated as of July           , 2010 by and between SunTrust and FMC.

“Percentage Interest” means the initial undivided beneficial interest in the Trust Property of an Owner expressed as a percentage of the total initial undivided beneficial interests in the Trust Property. References to Percentage Interests herein shall be solely for the purpose of certificating Owners’ interests hereunder and for any other purpose specified in this Agreement.

“Periodic Filings” means any filings or submissions that the Trust is required to make with any state or federal regulatory agency or under the Code.

“Person” means any individual, corporation, partnership, joint venture, limited liability company, association, trust (including any beneficiary thereof), estate, custodian, nominee, unincorporated organization or government or any agency or political subdivision thereof.

“Plan” has the meaning set forth in Section 3.04(b).

“Plan Assets” has the meaning set forth in Section 3.04(b).

“Regulations” means the federal income tax regulations promulgated by the United States Treasury Department under the Code as such Regulations may be amended from time to time.

“Resident Trustee” means [U.S. Bank Trust National Association, a national banking association with its principal place of business in the State of Delaware], not in its individual capacity but solely as trustee, or any successor thereto, duly appointed in accordance with Section 13.01 hereof.

“Secretary of State” means the office of the Secretary of State of the State of Delaware.

“Special Servicer” means FMER as Special Servicer under the Special Servicing Agreement, or any successor Special Servicer as appointed pursuant to the terms of the Special Servicing Agreement.

“Special Servicing Agreement” means the Special Servicing Agreement, dated as of July     , 2010, between FMER, FMC, the Trust and, solely for purposes of Sections 2(B)(v), 2(B)(vi), 5, 7, 18(A) and 18(G) only, SunTrust.

“Statutory Trust Statute” means the Delaware Statutory Trust Act, 12 Del. Code §3801 et seq.

“SunTrust” means SunTrust Bank, a Georgia state-chartered banking corporation.

“Transfer” means the sale, transfer or other assignment of all of an Owner’s right, title and interest in all or a portion of such Owner’s Beneficial Interest.

“Trust” means the MG Student Loan Trust 2010-1 established by this Agreement.

“Trust Certificate” means a certificate evidencing the Beneficial Interest of an Owner in substantially the form attached hereto as Exhibit A.

“Trust Loan” means (i) any Charged Off Loan and (ii) any Purchased Loan, in each case which has been assigned to the Trust from time to time pursuant to the Loan Program Agreement.

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“Trust Property” means all right, title and interest of the Trust or the Trustee on behalf of the Trust in and to any property contributed to the Trust by the Owners or otherwise acquired by the Trust.

“Trust Related Agreements” means any instruments or agreements signed by the Trustee on behalf of the Trust, including without limitation, the Administration Agreement and the Special Servicing Agreement.

“Trustee” means [U.S. Bank National Association], not in its individual capacity but solely as trustee, or any successor thereto, duly appointed in accordance with Section 13.01 hereof.

“Trustees” mean the Resident Trustee and the Trustee.  For the avoidance of doubt, unless the context requires otherwise, the singular term “Trustee” does not include the Resident Trustee.

ARTICLE II

ORGANIZATION

Section 2.01Name.  The Trust continued hereby shall be known as the MG Student Loan Trust 2010-1, in which name the Trustees may take any action as provided herein.

Section 2.02Office.  The principal place of business and principal office of the Trust shall be in care of the Resident Trustee, at the address set forth in Section 15.04.  The Trust shall also have an office at [One Federal Street, Boston, Massachusetts 02110].

Section 2.03Purposes and Powers.

(a)The purpose of the Trust is, and the Trust shall have power and authority and is hereby authorized, and each of the Trustees in the name and on behalf of the Trust is hereby authorized, to engage in the following activities and only these activities:

(i)To acquire and manage Trust Loans in accordance with the terms and conditions of the Loan Program Agreement and the Special Servicing Agreement;

(ii)To engage in those activities and to enter into such agreements that are required in connection with the Participation Account, including distributions made to the Participation Account pursuant to the Loan Program Agreement and the Participation Account Deposit Agreement;

(iii)To enter into, execute, deliver and perform the Trust Related Agreements and to provide for the administration of the Trust and the servicing and management of Trust Loans;

(iv)To engage in those activities and to enter into such agreements that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith; and

(v)To engage in such other activities as may be required in connection with the acquisition, management or disposition of the Trust Property and Distributions to Owners.

(b)The operations of the Trust shall be conducted as follows:

(i)The Trust will act solely in its own name and the Trustee or other agents selected in accordance with this Agreement will act on behalf of the Trust subject to direction by the

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Owners or SunTrust, as applicable, and as provided herein, but such action shall not be in violation of the terms of this Agreement;

(ii)The Trust shall ensure that all Recoveries on the Charged Off Loans shall be deposited into the Participation Account in accordance with the terms and conditions of the Loan Program Agreement and the Special Servicing Agreement;

(iii)The Trust shall ensure that all collections on the Purchased Loans shall be deposited into the [NCF II Account] in accordance with the terms and conditions of the Special Servicing Agreement;

(iv)The Trust’s funds and assets shall at all times be maintained separately from those of the Owners and any of their respective Affiliates;

(v)The Trust shall maintain complete and correct books, minutes of the meetings and proceedings of the Owners, and records of accounts;

(vi)The Trust shall conduct its business at the office of the Resident Trustee and will use stationery and other business forms of the Trust under its own name and not that of the Owners or any of their respective Affiliates, and will avoid the appearance (A) of conducting business on behalf of any Owner or any Affiliate of an Owner or (B) that the assets of the Trust and the Trust Loans are available to pay the creditors of the Trustees or any Owner.  For the avoidance of doubt, the assets of the Trust shall not include the Participation Account;

(vii)To the extent not otherwise paid by another Person, the Trust’s operating expenses shall be paid out of its own funds, which shall not include any funds in the Participation Account; and

(viii)The Trust shall not incur, guarantee or assume any debt nor hold itself out as being liable for the debts of any entity, including any Owner or any Affiliates of any Owner.

(c)For the avoidance of doubt, the Trust shall not have the power or authority to sell or otherwise dispose of any Charged Off Loans except for depositing Recoveries in the Participation Account in accordance with the terms and conditions of the Loan Program Agreement and the Special Servicing Agreement.

Section 2.04Appointment of the Trustees.  NCF II hereby appoints the Trustee and the Resident Trustee as trustees of the Trust, to have all the rights, powers and authority set forth herein and in the Statutory Trust Statute.  The Trustee acknowledges receipt in trust from NCF II, of the sum of One Dollar ($1.00), constituting the initial Trust Property.

Section 2.05Appointment of Special Servicer.

(a)The Trust hereby hires, designates and appoints FMER as the Special Servicer under the Special Servicing Agreement to perform the Special Services (as defined in the Special Servicing Agreement), and the Special Servicer accepts such appointment and agrees to perform such duties with respect to the Trust Loans in accordance with the terms of this Agreement and the Special Servicing Agreement.

(b)In the event of the resignation or removal of the Special Servicer pursuant to the Special Servicing Agreement, SunTrust shall, in accordance with the terms and conditions of the Special

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Servicing Agreement, appoint a successor to the Special Servicer to perform the Special Services for the Charged Off Loans held by the Trust.

Section 2.06Declaration of Trust.  The Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the use and benefit of the Owners, subject to the obligations of the Trustee under this Agreement.  It is the intention of the parties hereto that the Trust constitute a statutory trust under the Statutory Trust Statute and that this Agreement constitute the governing instrument of the Trust.  The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Secretary of State in the form attached as Exhibit C hereto.

Section 2.07No Liability of Owners for Expenses or Obligations of Trust.  No Owner shall be liable for any liability, expense or other obligation of the Trust.

Section 2.08Situs of Trust.  The Trust will be located in the State of Delaware.  The Trust shall not have any employees in any state other than in the State of Delaware and payments will be received by the Trustee on behalf of the Trust only in the Commonwealth of Massachusetts, the State of Delaware or the State of Georgia and payments will be made by the Trustee on behalf of the Trust only from the Commonwealth of Massachusetts, the State of Delaware or the State of Georgia.

ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTEREST

Section 3.01Issuance of Trust Certificate.

(a)As of the date hereof, as set forth on Schedule I attached hereto, NCF II has been issued a Trust Certificate evidencing one hundred percent (100%) of the Beneficial Interest in the Trust.

(b)Each Trust Certificate shall be executed by manual signature on behalf of the Resident Trustee by one of its Authorized Officers.  Trust Certificates bearing the manual signature of an individual who was, at the time when such signature was affixed, authorized to sign on behalf of the Resident Trustee shall bind the Trust, notwithstanding that such individual has ceased to be so authorized prior to the delivery of such Trust Certificate or does not hold such office at the date of such Trust Certificate.  Each Trust Certificate shall be dated the date of its issuance.

Section 3.02Registration and Transfer of Certificates.

(a)The Resident Trustee shall maintain at its office referred to in Section 2.02, or at the office of any agent appointed by it and approved in writing by the Owners at the time of such appointment, a register for the registration and Transfer of Trust Certificates.  No Transfer of a Beneficial Interest shall be made unless such Transfer is made pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “1933 Act”), and state securities laws, or is exempt from the registration requirements under the 1933 Act and state securities laws.

(b)The registered Owner of any Trust Certificate may Transfer all or any portion of the Beneficial Interest evidenced by such Trust Certificate upon surrender thereof to the Resident Trustee accompanied by the documents required by Section 3.04.  Such Transfer may be made by the registered Owner in person or by its attorney duly authorized in writing upon surrender of the Trust Certificate to the Resident Trustee accompanied by a written instrument of Transfer and with such signature guarantees and evidence of authority of the Persons signing the instrument of Transfer as the Resident Trustee may reasonably require.  Promptly upon the receipt of such documents and receipt by the Resident Trustee of the transferor’s Trust Certificate, the Resident Trustee shall (i) record the name of such transferee as an

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Owner and its Percentage Interest in the Trust Certificate register, (ii) in the name and on behalf of the Trust issue, execute and deliver to such Owner a Trust Certificate evidencing such Percentage Interest and (iii) notify the Trustee in writing of such transfer and the details thereof.  In the event a transferor Transfers only a portion of its Beneficial Interest, the Resident Trustee shall register and issue to such transferor a new Trust Certificate evidencing such transferor’s new Percentage Interest.  Subsequent to a Transfer and upon the issuance of the new Trust Certificate or Trust Certificates, the Resident Trustee shall cancel and destroy the Trust Certificate surrendered to it in connection with such Transfer.  Each of the Trustees may treat the Person in whose name any Trust Certificate is registered as the sole Owner of the Beneficial Interest in the Trust evidenced by such Trust Certificate.

(c)As a condition precedent to any registration of Transfer, the Resident Trustee may require the payment of a sum sufficient to cover the payment of any tax or taxes or other governmental charges required to be paid in connection with such Transfer and any other reasonable expenses connected therewith.

(d)The Trust Certificates may not be acquired or held by or for the account of a Plan, except as permitted under Section 3.04(b) herein.

Section 3.03Lost, Stolen, Mutilated or Destroyed Certificates.  If (a) any mutilated Trust Certificate is surrendered to the Resident Trustee, or (b) the Resident Trustee receives evidence to its satisfaction that any Trust Certificate has been destroyed, lost or stolen, and upon proof of ownership satisfactory to the Resident Trustee together with such security or indemnity as may be requested by the Resident Trustee to save it harmless, unless the Trust has notice that the Trust Certificate has been acquired by a protected purchaser and the Resident Trustee has actual knowledge or has received written notice thereof, the Resident Trustee in the name and on behalf of the Trust shall execute and deliver a new Trust Certificate for the same Percentage Interest as the Trust Certificate so mutilated, destroyed, lost or stolen, of like tenor and bearing a different issue number, with such notations, if any, as the Resident Trustee shall determine.  In connection with the issuance of any new Trust Certificate under this Section 3.03, the Resident Trustee may require the payment by the registered Owner thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the reasonable fees and expenses of the Resident Trustee) connected therewith.  Any replacement Trust Certificate issued pursuant to this Section 3.03 shall constitute complete and indefeasible evidence of ownership of a Beneficial Interest, as if originally issued, whether or not the lost, stolen or destroyed Trust Certificate shall be found at any time.

Section 3.04Limitation on Transfer of Ownership Rights.

(a)No Transfer of all or any part of a Beneficial Interest after the date hereof shall be made to any Person unless (i) such Person delivers to the Resident Trustee an accession agreement substantially in the form of Exhibit B hereof, and (ii) the Resident Trustee shall have received a written opinion of counsel in form and substance satisfactory to the Resident Trustee stating that such Transfer is exempt from the 1933 Act and any applicable state securities laws.

(b)No Transfer of all or any part of a Beneficial Interest shall be made to any employee benefit plan or certain other retirement plans and arrangements, including individual retirement accounts and annuities, Keogh plans and bank collective investment funds and insurance company general or separate accounts in which such plans, accounts or arrangements are invested, that are subject to ERISA or Section 4975 of the Code (collectively, “Plan”), nor to any Person acting, directly or indirectly, on behalf of any such Plan or any Person acquiring the Beneficial Interest with “plan assets” of a Plan within the meaning of the ERISA and Department of Labor regulation promulgated at 29 C.F.R. § 2510.3-101 (“Plan Assets”) unless the Resident Trustee is provided with an opinion of counsel which establishes to

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the satisfaction of the Resident Trustee that the purchase of the Beneficial Interest is permissible under applicable law, will not constitute or result in any prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Owners, the Trustees or the Trust to any obligation or liability (including obligations or liabilities under ERISA or Section 4975 of the Code) in addition to that undertaken in this Agreement, which opinion of counsel shall not be an expense of the Owners, the Trustees or the Trust.

(c)No Transfer of all or any part of a Beneficial Interest shall be permitted, and no such transfer shall be effective hereunder, if such transfer would potentially cause the Trust to be classified as a publicly traded partnership, taxable as a corporation for federal income tax purposes, by causing the Trust to have more than 100 Owners at any time during any taxable year of the Trust.

(d)Notwithstanding any other provision herein or elsewhere, to the fullest extent permitted by law, other than to receive and examine the same to determine whether any accession agreement, opinion of counsel or other document or instrument that is required to be and is delivered to the Resident Trustee pursuant to this Section 3.04 substantially conforms on its face to the requirements therefor set forth in this Section 3.04, the Resident Trustee shall have no obligation or responsibility for determining or ensuring that any issuance, Transfer, or exchange or proposed or purported issuance, Transfer or exchange of all or any part of a Beneficial Interest or Trust Certificate is permitted under or in accordance or compliance with this Agreement, the 1933 Act or any other applicable federal or state securities law, and neither of the Trustees shall have any personal liability to any Person in connection with any issuance, Transfer or exchange or proposed or purported issuance, Transfer or exchange (and/or registration thereof) that is not permitted under or in accordance or compliance with this Agreement, the 1933 Act or any other applicable federal or state securities law.

Section 3.05Assignment of Right to Distributions.  An Owner may assign all or any part of its right to receive Distributions hereunder, but such assignment (in the absence of a permitted Transfer) shall effect no change in the ownership of the Trust.

ARTICLE IV
CONCERNING THE OWNERS

Section 4.01Action by Owners with Respect to Certain Matters.

(a)Each of the Trustees will take such action or refrain from taking such action under this Agreement or any Trust Related Agreement as it shall be directed in writing to take or refrain from taking pursuant to an express provision of this Agreement or such Trust Related Agreement or, with respect to nonministerial matters, as it shall be directed by the Majority Owners.

(b)Without limiting the generality of the foregoing, in connection with the following nonministerial matters, neither of the Trustees will take any action, nor will they have authority to take any such action, unless they receive prior written approval from the Majority Owners:

(i)Initiate any claim or lawsuit by the Trust and compromise any claim or lawsuit brought by or against the Trust, except for claims or lawsuits initiated in the ordinary course of business by the Trust or its agents or nominees for collection on the Trust Loans;

(ii)Amend, change or modify this Agreement or any Trust Related Agreement;

(iii)To the fullest extent permitted by applicable law, file a voluntary petition in bankruptcy for the Trust; and

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(iv)To the fullest extent permitted by applicable law, (A) institute proceedings to have the Trust declared or adjudicated bankrupt or insolvent, (B) consent to the institution of bankruptcy or insolvency proceedings against the Trust, (C) file a petition or consent to a petition seeking reorganization or relief on behalf of the Trust under any applicable federal or state law relating to bankruptcy, (D) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or any similar official) of the Trust or a substantial portion of the property of the Trust, (E) make any assignment for the benefit of the Trust’s creditors, (F) cause the Trust to admit in writing its inability to pay its debts generally as they become due, or (G) take any action, or cause the Trust to take any action, in furtherance of any of the foregoing (any of the above, a “Bankruptcy Action”).  To the fullest extent permitted by applicable law, no Owner shall have the power to take, and no Owner shall take, any Bankruptcy Action with respect to the Trust or direct either of the Trustees to take any Bankruptcy Action with respect to the Trust.

(c)No Owner shall take any action to cause the filing of an involuntary petition in bankruptcy against the Trust.

Section 4.02Action Upon Instructions.

(a)The Trustees shall take such action or actions as may be specified in this Agreement or in any instructions delivered in accordance with this Article IV or Article IX; provided, however, that neither of the Trustees shall be required to take any such action if it shall have reasonably determined, or shall have been advised by counsel, that such action (i) is contrary to the terms hereof or of any document contemplated hereby to which the Trust or either of the Trustees is a party or is otherwise contrary to law, (ii) is likely to result in personal liability on the part of either of the Trustees, unless the Owners shall have provided to the Trustees indemnification or security reasonably satisfactory to the Trustees against all costs, expenses and liabilities arising from the Trustees’ taking of such action, or (iii) would adversely affect the status of the Trust for federal income tax purposes.

(b)No Owner shall direct the Trustees to take or refrain from taking any action contrary to this Agreement or any Trust Related Agreement, nor shall the Trustees be obligated to follow any such direction, if given.

(c)Notwithstanding anything contained herein or in any Trust Related Agreement to the contrary, the Trustees shall not be required to take any action in any jurisdiction other than in the State of Delaware if the taking of such action will (i) require the consent or approval or authorization or order from, or the giving of notice to, or the registration with or taking of any action in respect of, any state or other governmental authority or agency of any jurisdiction other than the State of Delaware; (ii) result in any fee, tax or other governmental charge under the laws of any jurisdiction or any political subdivision thereof in existence on the date hereof other than the State of Delaware becoming payable by either of the Trustees; or (iii) subject either of the Trustees to personal jurisdiction in any jurisdiction other than the State of Delaware for causes of action arising from acts unrelated to the consummation of the transactions by the Trustees contemplated hereby.

(d)The Trustees shall not have the power to remove the Administrator under the Administration Agreement or appoint a successor Administrator pursuant to the Administration Agreement without written instruction by the Owners and SunTrust.

Section 4.03Majority Control.  Except as otherwise expressly provided in this Agreement, any action which may be taken or consent or instructions which may be given by the Owners under this Agreement may be taken by the Owners holding in the aggregate more than fifty percent (50%) of the Percentage Interests at the time of such action (the “Majority Owners”).  Any written notice of the

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Owners delivered pursuant to this Agreement shall be effective only if signed by the Majority Owners at the time of the delivery of such notice.

Section 4.04Representations and Warranties of NCF II.  NCF II hereby represents and warrants to the Trustees as follows:

(a)Upon the receipt of the Trust Property by the Trustees under this Agreement, the Trustees on behalf of the Trust will have good title to the Trust Property free and clear of any lien.

(b)Except for the filing of the Certificate of Trust with the Secretary of State, no consent, approval, authorization or order of, or filing with, any court or regulatory, supervisory or governmental agency or body is required under current law in connection with the execution, delivery or performance by NCF II of this Agreement or the consummation of the transactions contemplated hereby; provided, however, that no representation or warranty is made herein as to compliance with federal securities laws, the securities or “blue sky” laws of any state or any state statute or regulation that requires licensure or registration of small loan lenders, loan brokers or loan arrangers.

(c)This Agreement has been duly and validly authorized, executed and delivered by, and constitutes a valid and binding agreement of, NCF II, enforceable in accordance with its terms.

Section 4.05Power of Attorney.

(a)General.  Each Owner hereby irrevocably constitutes and appoints the Administrator, with full power of substitution, such Owner’s true and lawful attorney-in-fact, in such Owner’s name, place and stead, with full power to act jointly and severally, to make, execute, sign, acknowledge, swear to, verify, deliver, file, record and publish the following documents:

(i)Any certificate, instrument or document to be filed by the Owners under the laws of any state, or with any governmental agency in connection with this Agreement;

(ii)Any certificate, instrument or document which may be required to effect the continuation or the termination of the Trust, including any amendments to this Agreement; provided that such continuation or termination is in accordance with the terms of this Agreement; and

(iii)Any written notice, instruction, instrument or document under Article XIII of this Agreement.

(b)Duration of Power of Attorney.  It is expressly intended by each of the Owners that the Power of Attorney granted under this Section 4.05 is coupled with an interest, and it is agreed that such Power of Attorney shall survive (i) the dissolution, death or incompetency of any Owner and (ii) the assignment by any Owner of the whole or any portion of such Owner’s Beneficial Interest.

ARTICLE V
INVESTMENT, APPLICATION OF TRUST FUNDS

Section 5.01Investment of Trust Funds.  Unless otherwise directed in writing by the Owners, income with respect to and proceeds of the Trust Property which is received by the Trustee more than one day prior to a Distribution Date shall be invested and reinvested by the Trustee in Eligible Investments; provided, however, that Recoveries shall, at no time, be invested by the Trustee in Eligible Investments.  Interest earned from such investment and reinvestment shall be credited to the Trust Property.

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Section 5.02Application of Funds.  Income with respect to and proceeds of Trust Property (other than Recoveries) held by the Trustee on a Distribution Date shall be applied by the Trustee on such Distribution Date in accordance with written instructions of the Administrator received by the Trustee not less than three Business Days prior to such Distribution Date, in the following order:

(a)First, to the extent not paid by another Person, to pay any amounts due to the Trustee or the Resident Trustee under this Agreement;

(b)Second, to the extent not paid by another Person, to pay any amounts due to the Administrator under the Administration Agreement;

(c)Third, to the extent not paid by another Person, to pay any amounts then due to the Special Servicer under the Special Servicing Agreement and to any other Person under the Trust Related Agreements;

(d)Fourth, to the extent not paid by another Person, to pay any other expenses of the Trust; and

(e)Fifth, to the Owners, pro rata based upon their Percentage Interests.

All payments to be made under this Agreement by the Trustee shall be made only from the income and proceeds of the Trust Property (other than Recoveries) and only to the extent that the Trustee has actually received such income or proceeds.

Section 5.03Remittance of Recoveries to the Participation Account.  All Recoveries received by the Trustee or the Trust (including any such amounts received by the Special Servicer and deposited into the FMER Collection Account (as defined in the Special Servicing Agreement)) shall be remitted to the Participation Account on a [weekly] basis in accordance with the terms and conditions of the Special Servicing Agreement.  Any amounts remitted to the Participation Account by the Trustee or the Trust, including but not limited to Recoveries, shall be deemed to be a distribution by the Trust to the Owners with respect to their Beneficial Interest (each a “Deemed Distribution”); provided that, for so long as the sole Owner of the Trust is NCF II, NCF II hereby agrees that any amounts remitted to the Participation Account by the Trustee or the Trust and which is a Deemed Distribution to the Owner shall further be deemed a distribution to FMC in its capacity as the sole member of NCF II pursuant to and in accordance with the terms and conditions of that certain Limited Liability Company Agreement of NCF II effective as of April 13, 2009 (each, a “FMC Deemed Distribution”).  Notwithstanding the Deemed Distribution and the FMC Deemed Distribution, once any amounts, including but not limited to Recoveries, are remitted to the Participation Account by the Trustee or the Trust, (a) such amounts shall be the property of FMC or SunTrust, as determined in accordance with the Loan Program Agreement, (b) such amounts shall be distributed pursuant to the terms and conditions of the Loan Program Agreement, and (c) FMC’s rights to such amounts deposited into the Participation Account shall be limited to those rights set forth in the Loan Program Agreement and shall be subject to the rights of SunTrust pursuant to the Loan Program Agreement.

Section 5.04Distribution Date Statement.  Unless otherwise instructed in writing by the Administrator or the Majority Owners, with each Distribution to an Owner pursuant to Section 5.02, the Trustee shall deliver a “Distribution Date Statement” setting forth, for the period since the preceding Distribution Date (or in the case of the initial Distribution Date, since the formation of the Trust):

(a)Income and proceeds received by the Trustee with respect to the Trust Property (other than Recoveries);

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(b)Amounts paid to the Trustee and the Resident Trustee;

(c)Amounts paid to any Person pursuant to a Trust Related Agreement; and

(d)Amounts paid for other expenses of the Trust.

Section 5.05Method of Payment.  Except as set for in Section 5.03, all amounts payable to an Owner pursuant to this Agreement shall be paid by the Trustee to the Owner by check payable to the Owner, mailed first class to the address of the Owner appearing on the register maintained pursuant to Section 3.02, or by crediting the amount to be distributed to the Owner to an account maintained by the Owner with the Trustee or by transferring such amount by wire transfer in immediately available funds to a banking institution with bank wire transfer facilities for the account of the Owner, as instructed in writing from time to time by the Owner.  The Trustee may require the Owner to pay any wire transfer fees incurred in connection with any wire transfer made to the Owner.

Section 5.06No Segregation of Funds; No Interest.  Subject to Section 5.01 and except for funds to be deposited in the Participation Account pursuant to the Loan Program Agreement, the Special Servicing Agreement and the Participation Account Deposit Agreement, funds received by the Trustee need not be segregated in any manner except to the extent required by law and may be deposited under such general conditions as may be prescribed by law, and the Trustee shall not be personally liable for any interest thereon.

ARTICLE VI
TRUST LOANS

Section 6.01Acquisition of Trust Loans.  From time to time the Trustee, on behalf of the Trust, shall accept Trust Loans as are delivered to it pursuant to the Loan Program Agreement.  The Trustee, on behalf of the Trust, shall not be allowed to transfer, sell, or otherwise dispose of one or more Charged Off Loans except for depositing Recoveries in the Participation Account in accordance with the terms and conditions of the Loan Program Agreement and the Special Servicing Agreement.

Section 6.02Application of Funds in the Participation Account.  The Participation Account is not Trust Property and any amounts deposited in the Participation Account, including, but not limited to, Recoveries, shall be distributed pursuant to the terms and conditions of the Loan Program Agreement and shall not be distributed pursuant to this Agreement.

ARTICLE VII
TAX CHARACTERIZATION

Section 7.01Tax Characterization.  It is the intention of the parties hereto that, solely for purposes of federal income taxes, state and local income taxes, and any other taxes imposed on, measured by or based upon gross or net income, (a) if there is only one Owner, the Trust shall be treated as a disregarded entity of its owner pursuant to § 301.7701-2(c)(2) of the Regulations, (b) if there is more than one Owner, the Trust shall be treated as a partnership, and (c) the provisions of this Agreement shall be construed in accordance with such intent.  The parties hereto agree that, unless otherwise required by appropriate tax authorities, the Trust will file or cause to be filed annual or other necessary returns, reports and other forms consistent with such characterization of the Trust.

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ARTICLE VIII
FEDERAL INCOME TAX ALLOCATIONS

Section 8.01Federal Income Tax Allocations.  Net income of the Trust for any period as determined for federal income tax purposes (and each item of income, gain, loss and deduction entering into the computation thereof) shall be allocated to the Owners, pro rata based upon their Percentage Interests.

ARTICLE IX
AUTHORITY AND DUTIES OF THE TRUSTEES

Section 9.01General Authority.  The Trustees are authorized to take all actions required or permitted to be taken by them pursuant to the terms of this Agreement, the Trust Related Agreements and the Statutory Trust Statute.  The Trustees are further authorized from time to time to take such action as the Administrator, the Special Servicer, or SunTrust, as the case may be, directs in writing with respect to the Trust Related Agreements.

Section 9.01Specific Authority.  The Trustees are hereby authorized and directed to take the following actions:

(a)Execute the Certificate of Trust;

(b)Execute and deliver each of the Trust Related Agreements and the Trust Certificates on behalf of the Trust and any other document contemplated by the foregoing, in each case in such form as the Administrator shall approve, as evidenced conclusively by the Trustee’s or the Resident Trustee’s execution thereof; and

(c)Execute and deliver on behalf of the Trust any documents necessary or appropriate, in such form as the Administrator shall approve, as evidenced conclusively by the Trustee’s or the Resident Trustee’s execution thereof, relating to the acquisition, servicing and management of Trust Loans.

Section 9.03General Duties.  It shall be the duty of the Trustees to discharge (or cause to be discharged) all of their respective responsibilities pursuant to the terms of this Agreement in the interest of the Owners.  Notwithstanding the foregoing, the Trustees shall be deemed to have discharged their duties and responsibilities hereunder and under the Trust Related Agreements to the extent (a) the Administrator has agreed herein or in the Administration Agreement to perform such acts or to discharge such duties of the Trustees hereunder or under any Trust Related Agreement, and the Trustees shall not be held liable for the default or failure of the Administrator to carry out its obligations hereunder or under the Administration Agreement, and (b) the Special Servicer has agreed herein or in the Special Servicing Agreement to perform such acts or to discharge such duties of the Trustees hereunder or under any Trust Related Agreements, and the Trustees shall not be held liable for the default or failure of the Special Servicer to carry out its obligations hereunder or under the Special Servicing Agreement.

Section 9.04Accounting and Reports to the Owners, the Internal Revenue Service and Others.  The Administrator shall (a) maintain or cause to be maintained the books of the Trust on a fiscal year basis using the accrual method of accounting, (b) deliver to each Owner, within 90 days of the end of each Fiscal Year, or more often, as may be required by the Code and the Regulations thereunder, a copy of the annual financial statement of the Trust for such Fiscal Year and a statement in such form and containing such information as may be required by such Regulations, and as is necessary and appropriate to enable each Owner to prepare its federal and state income tax returns, (c) prepare (or cause to be prepared) and file such tax returns and reports relating to the Trust, and make such elections, as may from

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time to time be required under any applicable state or federal statute or rule or regulation thereunder, (d) cause such tax returns to be signed in the manner required by law, (e) collect or cause to be collected any withholding tax required by the Code to be withheld by the Trust with respect to Distributions to Owners who are nonresident aliens or foreign corporations, and (f) cause to be mailed to each Owner copies of all such reports and tax returns of the Trust.

Section 9.05Signature of Returns.  The Trustee shall sign on behalf of the Trust, as the same are presented to the Trustee for execution, the tax returns and other Periodic Filings of the Trust, unless applicable law requires an Owner to sign such documents, in which case, so long as NCF II is an Owner and applicable law allows NCF II to sign any such document, NCF II shall sign such document and such document shall not be presented to either of the Trustees for signature.  At any time that NCF II is not an Owner, or is otherwise not allowed by law to sign any such document, then the Owner required by law to sign such document shall sign and such document shall not be presented to either of the Trustees for signature.

Section 9.06Right to Receive and Rely Upon Instructions.  In the event that either of the Trustees is unable to decide between alternative courses of action, or is unsure as to the application of any provision of this Agreement or any Trust Related Agreement, or such provision is ambiguous as to its application, or is or appears to be in conflict with any other applicable provision, or in the event that this Agreement or any Trust Related Agreement permits any determination by the Trustees or is silent or is incomplete as to the course of action which either of the Trustees is required to take with respect to a particular set of facts, the Trustees may give notice (in such form as shall be appropriate under the circumstances) to the Owners or SunTrust, as applicable, requesting instructions and, to the extent that the Trustees shall have acted or refrained from acting in good faith in accordance with any instructions received from the Owners or SunTrust, as applicable, the Trustees shall not be liable to any Person on account of such action or inaction.  If the Trustees shall not have received appropriate instructions within ten days of such notice (or within such shorter period of time as may be specified in such notice) the Trustees may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with this Agreement or the Trust Related Agreements, as either of the Trustees shall deem to be in the best interests of the Owners, and the Trustees shall have no liability to any Person for such action or inaction.

Section 9.07No Duties Except as Specified in this Agreement or in Instructions.  The Trustees shall not have any duty or obligation to manage, make any payment in respect of, register, record, sell, dispose of or otherwise deal with the Trust Property or to otherwise take or refrain from taking any action under, or in connection with, this Agreement or any document contemplated hereby to which either of the Trustees or the Trust is a party, except as expressly provided by the terms of this Agreement, and no implied duties or obligations (including without limitation fiduciary duties) shall be read into this Agreement against the Trustees, and no authority or authorization of either of the Trustees shall be construed as a duty.  Each of the Trustees nevertheless agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any liens on any part of the Trust Property, which result from claims against the Trustees personally that are not related to the ownership or the administration of the Trust Property or the transactions contemplated by the Trust Related Agreements.

Section 9.08No Action Except Under Specified Documents or Instructions.  The Trustees shall not manage, control, use, sell, dispose of or otherwise deal with any part of the Trust Property except (a) in accordance with the powers granted to and the authority conferred upon the Trustees pursuant to this Agreement, and (b) in accordance with instructions delivered to the Trustees pursuant to Section 9.06 and Article IV hereof.

Section 9.09Restriction.  Notwithstanding anything herein to the contrary, the Trustees shall not take any action (a) that is inconsistent with the purposes of the Trust or (b) that to the actual

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knowledge of the Trustees would result in the Trust being treated as an association taxable as a corporation for federal income tax purposes.

ARTICLE X
CONCERNING THE TRUSTEES

Section 10.01Acceptance of Trusts and Duties.  Each of the Trustees accepts the trusts hereby created and agrees to perform its duties hereunder with respect to the same but only upon the terms of this Agreement.  Neither of the Trustees shall be personally liable under any circumstances, except (a) for its own willful misconduct, bad faith or gross negligence, (b) for liabilities arising from its failure to perform obligations expressly undertaken by it in the last sentence of Section 9.07, (c) for the inaccuracy of its representations and warranties contained in Section 10.05, or (d) for taxes, fees or other charges on, based on or measured by any fees, commissions or compensation received by it in connection with any of the transactions contemplated by this Agreement or the Trust Related Agreements.  In particular, but not by way of limitation:

(i)Neither of the Trustees shall be personally liable for any error of judgment made in good faith by any of its Authorized Officers;

(ii)Neither of the Trustees shall be personally liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the written instructions of the Administrator, the Special Servicer, the Owners or SunTrust, as applicable;

(iii)No provision of this Agreement shall require either of the Trustees to expend or risk its personal funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder if the Trustee or the Resident Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it;

(iv)Under no circumstance shall the Trustees be personally liable for any indebtedness of the Trust hereunder or under any Trust Related Agreement;

(v)The Trustees shall not be personally responsible for or in respect of the validity or sufficiency of this Agreement or for the due execution hereof by NCF II, or for the form, character, genuineness, sufficiency, value or validity of any Trust Loan or Trust Certificate (other than with respect to the due execution thereby by an Authorized Officer of the Resident Trustee on behalf of the Trust), or for or in respect of the validity or sufficiency of the Administration Agreement or the Trust Related Agreements; and

(vi)The Trustees shall have no duty to monitor or supervise the Administrator or the Special Servicer and shall not be liable for the default or misconduct of the Administrator or the Special Servicer under any of the Trust Related Agreements or otherwise and the Trustees shall have no obligation or liability to perform the obligations of the Trust hereunder or under any Trust Related Agreement that are required to be performed by the Administrator under the Administration Agreement or by the Special Servicer under the Special Servicing Agreement.

Section 10.02Furnishing of Documents.  The Trustee shall furnish to the Owners, promptly upon receipt thereof, duplicates or copies of all material reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Trustee hereunder (other than documents originated by or otherwise furnished to such Owners).

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Section 10.03Reliance; Advice of Counsel.

(a)The Trustees shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, note or other document or paper believed by it to be genuine and believed by it to be signed by a proper Person.  The Trustees may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect.  As to any fact or matter the manner of ascertainment of which is not specifically prescribed herein, the Trustees may for all purposes hereof require and rely on a certificate, signed by the president or any vice president or by the treasurer or any assistant treasurer or the secretary of the relevant party or other appropriate Person, as to such fact or matter, and such certificate shall constitute full protection to the Trustees for any action taken or omitted to be taken by it in good faith in reliance thereon.

(b)In the exercise, performance or administration of its powers and duties hereunder and in the performance of its duties and obligations under any of the Trust Related Agreements, the Trustees (i) may act directly or, at the expense of the Trust, through agents or attorneys pursuant to agreements entered into with any of them, and the Trustees shall not be liable for the default or misconduct of such agents or attorneys if such agents or attorneys shall have been selected by either of the Trustees with reasonable care; and (ii) may, at the expense of the Trust, consult with counsel, accountants and other skilled persons to be selected with reasonable care and employed by it, and the Trustees shall not be liable for anything done, suffered or omitted in good faith by them in accordance with the advice or opinion of any such counsel, accountants or other skilled persons.

Section 10.04Not Acting in Individual Capacity.  Except as expressly provided in this Article X, in accepting the trusts hereby created, each of the Trustees acts solely as trustee hereunder and not in its individual capacity, and all Persons having any claim against the Trustees by reason of the transactions contemplated by this Agreement or the Trust Related Agreements shall look only to the Trust Property (other than Recoveries) for payment or satisfaction thereof.

Section 10.05Representations and Warranties of Resident Trustee.  The Resident Trustee represents and warrants to NCF II that it meets the requirements of section 3807(a) of the Statutory Trust Statute.

ARTICLE XI
COMPENSATION OF TRUSTEES

Section 11.01Fees and Expenses of the Trustees.  The Trustees shall be entitled to compensation for their services hereunder from the Trust and, to the extent not paid by the Administrator on behalf of the Trust, each of the Trustees shall receive such compensation from FMC, as set forth in a separate fee agreement with FMC and NCF II.  Each of the Trustees shall be entitled to be reimbursed by the Trust for its reasonable expenses hereunder and, to the extent not paid by the Administrator on behalf of the Trust, the Trustees shall receive such reimbursement from FMC, including the reasonable compensation, expenses and disbursements of such agents, representatives, experts and counsel as the Trustees may employ in connection with the exercise and performance of their rights and duties under this Agreement and the Trust Related Agreements.

Section 11.02Indemnification.  The Owners shall be jointly and severally liable for, and hereby agree to, indemnify [U.S. Bank National Association], individually and as Trustee, [U.S. Bank Trust National Association], individually and as Resident Trustee, and their respective Affiliates, successors, assigns, agents and servants, from and against any and all liabilities, obligations, losses, damages, taxes

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(other than taxes incurred as the result of the payment of fees and expenses pursuant to Section 11.01), claims, actions, suits, costs, expenses and disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted at any time against the Trustee or the Resident Trustee (whether or not indemnified against by other parties) in any way relating to or arising out of this Agreement, any Trust Related Agreement, the Trust, the administration of the Trust Property, the management of the Trust Loans or the action or inaction of the Trustee or the Resident Trustee hereunder, except only that the Owners shall not be required to indemnify the Trustee or the Resident Trustee for expenses arising or resulting from any of the matters described in clauses (a) through (d) of the second sentence of Section 10.01.  The indemnities contained in this Section 11.02 and all other rights, benefits, protections, privileges, immunities, and indemnities of the Trustees shall survive the resignation or removal of either of the Trustees and termination of this Agreement.  The obligations of the Owners pursuant to this Section 11.02 shall be borne in proportion to their respective Percentage Interests.

Section 11.03Payments to the Trustees.  Any amounts paid to the Trustees from the Trust Property pursuant to this Article XI shall be deemed not to be part of the Trust Property immediately after such payment.

ARTICLE XII
TERMINATION OF TRUST

Section 12.01Termination of Trust.

(a)The Trust created hereby shall dissolve upon the last day of the month following (a) the month during which the principal and interest balance of each Trust Loan has been fully paid or otherwise discharged, whether by settlement or other means, pursuant to the Special Servicing Agreement and (b) the final Distribution by the Trustee of all funds or other property or proceeds of the Trust Property in accordance with the terms of this Agreement and the Trust Related Agreements.

(b)The bankruptcy, death, incapacity, dissolution or termination of any Owner shall not operate to dissolve the Trust or terminate this Agreement, nor entitle such Owner’s legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of the Trust Property, nor otherwise affect the rights, obligations and liabilities of the parties hereto.

(c)Upon completion of the winding up of the Trust following the dissolution of the Trust pursuant to this Article XII, the Resident Trustee shall cause a Certificate of Termination to be filed with the Secretary of State, whereupon, except as otherwise provided in this Agreement, this Agreement shall be of no further force or effect and the Trust shall terminate.

Section 12.02Distribution of Assets.  Upon dissolution of the Trust, the Trustee shall take full account of the Trust assets (which shall not include any funds in the Participation Account) and liabilities, shall liquidate the assets as promptly as is consistent with obtaining the fair value thereof, and shall apply and distribute the proceeds therefrom, in accordance with written instructions of the Administrator, in the following order:

(a)To the payment of the expenses of liquidation and the debts and liabilities of the Trust;

(b)To the setting up of reserves which may be necessary or appropriate for anticipated obligations or contingencies of the Trust arising out of or in connection with the operation of the Trust.  Such reserves may be paid over by the Trustee to an escrow agent or trustee selected by the Administrator to be disbursed by such escrow agent or trustee in payment of any of such obligations or contingencies

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and, if any balance remains at the expiration of such period as the Administrator shall deem advisable, to be distributed by such escrow agent or trustee in the manner hereinafter provided; and

(c)To each of the Owners, pro rata in accordance with its Percentage Interest.

If, at the time of liquidation, the Administrator shall determine that an immediate sale of some or all of the assets would cause undue loss to the Owners, the Administrator may, in order to avoid such loss and with the consent of the Owners, direct the Trustee to defer liquidation.

Section 12.03No Termination by Owners.  The Owners shall not be entitled to terminate or revoke the Trust established hereunder.

ARTICLE XIII
SUCCESSOR TRUSTEES AND ADDITIONAL TRUSTEES

Section 13.01Resignation of Trustees; Appointment of Successor.

(a)Either of the Trustees may resign at any time without cause by giving at least 60 days’ prior written notice to the Administrator, the Owners and SunTrust, such resignation to be effective upon the acceptance of appointment by a successor Trustee or Resident Trustee, as applicable, under Section 13.01(b).  In addition, the Majority Owners may at any time remove either of the Trustees without cause by an instrument in writing delivered to the Trustee or Resident Trustee, as applicable, the Administrator and SunTrust, such removal to be effective upon the acceptance of appointment by a successor Trustee or Resident Trustee, as applicable, under Section 13.01(b).  In case of the resignation or removal of either of the Trustees, the Owners may appoint a successor Trustee or Resident Trustee, as applicable, by an instrument signed by the Owners.  If a successor Trustee or Resident Trustee, as applicable, shall not have been appointed within 30 days after the giving of written notice of such resignation or the delivery of the written instrument with respect to such removal, the Trustee or Resident Trustee, as applicable, or the Owners may, at the expense of the Trust, apply to any court of competent jurisdiction to appoint a successor Trustee or Resident Trustee, as applicable, to act until such time, if any, as a successor Trustee or Resident Trustee, as applicable, shall have been appointed as provided above.  Any successor Trustee or Resident Trustee, as applicable, so appointed by such court shall immediately and without further act be superseded by any successor Trustee or Resident Trustee, as applicable, appointed as above provided within one year from the date of the appointment by such court.

(b)Any successor Trustee or Resident Trustee, as applicable, however appointed, shall execute and deliver to the predecessor Trustee or Resident Trustee, as applicable, an instrument accepting such appointment, and thereupon such successor Trustee or Resident Trustee, as applicable, without further act (except for the filing required under Section 13.01(e) below), shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Trustee or Resident Trustee, as applicable, in the trusts hereunder with like effect as if originally named the Trustee or Resident Trustee, as applicable, herein; but nevertheless, upon the written request of such successor Trustee or Resident Trustee, as applicable, and the payment of all fees and indemnities or other amounts due the predecessor Trustee or Resident Trustee, as applicable, such predecessor Trustee or Resident Trustee, as applicable, shall execute and deliver an instrument transferring to such successor Trustee or Resident Trustee, as applicable, upon the trusts herein expressed, all the estates, properties, rights, powers, duties and trusts of such predecessor Trustee or Resident Trustee, as applicable, and such predecessor Trustee or Resident Trustee, as applicable, shall duly assign, transfer, deliver and pay over to such successor Trustee or Resident Trustee, as applicable, all funds or other property then held or subsequently received by such predecessor Trustee or Resident Trustee, as applicable, upon the trusts herein expressed.

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(c)Any successor Trustee, however appointed, shall be a national bank and any Resident Trustee, however, appointed, shall meet the requirements of section 3807(a) of the Statutory Trust Statute.

(d)Any Person into which the Trustee or Resident Trustee, as applicable, may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee or Resident Trustee, as applicable, shall be a party, or any Person to which substantially all the corporate trust business of the Trustee or Resident Trustee, as applicable, may be transferred, shall, subject to the terms of Section 13.01(c), be the Trustee or Resident Trustee, as applicable, under this Agreement without further act.

(e)Any successor Resident Trustee appointed pursuant to this Article XIII shall file an amendment to the Certificate of Trust with the Secretary of State reflecting the name and principal place of business of such successor Resident Trustee.

Section 13.02Appointment of Additional Trustees.  At any time or times for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Property may at the time be located, the Trustee and the Administrator, acting jointly, by an instrument in writing, may appoint one or more individuals or other Persons approved by the Administrator and the Trustee to act as separate trustee or separate trustees of all or any part of the Trust Property to the full extent that local law makes it necessary or appropriate for such separate trustee or separate trustees to act alone.  If the Administrator shall not have joined in such appointment within 15 days after the receipt of such request, the Trustee, acting alone, shall have the power to make such appointment.

ARTICLE XIV
TAX MATTERS PARTNER

Section 14.01Tax Matters Partner.  The tax matters partner (within the meaning of section 6231(a)(7) of the Code and applicable Regulations) of the Trust for all federal income tax purposes set forth in the Code shall be NCF II, provided that the Trust is treated as a partnership for federal income tax purposes.  Subject to Section 14.08, the tax matters partner shall have the authority to represent the Trust and perform the duties imposed on the tax matters partner under the Code, and as set forth in this Article XIV.

Section 14.02Notice of Tax Audit.  The tax matters partner shall give prompt notice to the Owners upon receipt of advice that the Internal Revenue Service intends to examine Trust income tax returns for any year.

Section 14.03Authority to Extend Period for Assessing Tax.  Subject to Section 14.08, the tax matters partner shall have the authority to extend the period for assessing any tax imposed on any Owner under the Code by any agreement as provided for under section 6229(b)(1)(B) of the Code.

Section 14.04Choice of Forum for Filing Petition for Readjustment.  Any petition for readjustment may, but is not required to, be filed by the tax matters partner in accordance with section 6226(a) of the Code in the United States District Court for the district in which the Trust’s principal place of business is located, or the United States Claims Court.

Section 14.05Authority to Bind Owners by Settlement Agreement.  Subject to Section 14.08, the tax matters partner shall enter into a settlement agreement in accordance with section 6224(c)(3) of the Code as directed by the Owners.

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Section 14.06Notices Sent to the Internal Revenue Service.  The tax matters partner shall use its best efforts to furnish to the Internal Revenue Service the name, address, profits interest and taxpayer identification number of each Owner and any additional information it receives from each Owner regarding any change in that Owner’s name, address, profits interest and taxpayer identification number.  In no event shall the tax matters partner be liable, responsible or accountable in damages or otherwise to the Owner for any loss in connection with furnishing such information to the Internal Revenue Service if the tax matters partner acts in good faith and is not guilty of fraud or gross negligence.

Section 14.07Indemnification of Tax Matters Partner.  The Trust shall indemnify and save harmless the tax matters partner against any loss, damage, cost or expense (including attorneys’ fees) incurred by it as a result of any act performed or omitted on behalf of the Trust or any Owner or in furtherance of the Trust’s interests or the interests of the Owner, in its capacity as tax matters partner, without, however, relieving the tax matters partner of liability for bad faith, fraud or gross negligence.

Section 14.08Approval of Tax Matters Partner’s Decisions.  The tax matters partner shall call a meeting of the Owners at any time in order to discuss any decisions the tax matters partner may propose to make, notice of which shall be included in the notice of such meeting.  The tax matters partner shall make no decision and take no action with respect to the determination, assessment or collection of any tax imposed by the Code on the Owners unless and until such decision has been approved by the Owners.

Section 14.09Participation by Owners in Internal Revenue Service Administrative Proceedings.  Nothing contained in this Article XIV shall be construed to take away from any Owner any right granted to such person by the Code to participate in any manner in administrative proceedings of the Internal Revenue Service.

ARTICLE XV
MISCELLANEOUS

Section 15.01Supplements and Amendments.  This Agreement may be amended only by a written instrument signed by the Trustees and the Majority Owners at the time of such amendment; provided, however, that Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii), 12.01 and 13.01 and Articles V and VI of this Agreement may be amended only by a written instrument signed by the Trustees, the Majority Owners at the time of such amendment, and SunTrust; provided further that if, in the opinion of either of the Trustees, any instrument required to be so executed adversely affects any right, duty or liability of, or benefit, protection, privilege, immunity or indemnity in favor of, either of the Trustees under this Agreement or any of the documents contemplated hereby to which either of the Trustees or the Trust is a party, or would cause or result in any conflict with or breach of any terms, conditions or provisions of, or default under, the charter documents or by-laws of either of the Trustees or any document contemplated hereby to which either of the Trustees is a party, either of the Trustees may in its sole discretion decline to execute such instrument.

Section 15.02No Legal Title to Trust Property in Owner.  Legal title to all Trust Property shall be vested at all times in the Trust as a separate legal entity, except where the laws of any jurisdiction require title to be vested in a trustee in which case legal title shall be vested in the Trustee on behalf of the Trust.  The Trustee shall have no duty or obligation to independently investigate whether legal title to any Trust Property is deemed vested in the Trustee.  The Owners shall not have legal title to any part of the Trust Property and shall only have an undivided beneficial interest therein.  No transfer, by operation of law or otherwise, of any right, title and interest of the Owners in and to their undivided Beneficial Interests in the Trust Property hereunder shall operate to terminate this Agreement or the trusts hereunder or entitle any successor transferee to an accounting or to the transfer to it of legal title to any part of the Trust Property.

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Section 15.03Limitations on Rights of Others.  Nothing in this Agreement, whether express or implied, shall be construed to give to any Person other than the Trust, the Trustees, SunTrust, FMC, the Administrator and the Owners any legal or equitable right, remedy or claim in the Trust Property under or in respect of this Agreement or any covenants, conditions or provisions contained herein.

Section 15.04Notices.  Unless otherwise expressly specified or permitted by the terms hereof, all notices shall be in writing and delivered by hand or mailed by certified mail, postage prepaid, if to the Trustee, addressed to: [U.S. Bank National Association, One Federal Street, Boston, Massachusetts 02110, Attention: Corporate Trust Administration], or to such other address as the Trustee may have set forth in a written notice to the Owners; and if the Resident Trustee, addressed to: [U.S. Bank Trust National Association, 300 Delaware Avenue, 9th Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Administration]; if to an Owner, addressed to it at the address provided to the Resident Trustee by such Owner and set forth for such Owner in the register maintained by the Resident Trustee, and if to SunTrust, addressed to: SunTrust Bank, 1001 Semmes Avenue, Mail Code CS-RVW-7900, Richmond, Virginia 23224, Attention: W. Mark Smith, with a copy to: SunTrust Bank, 303 Peachtree Street, N.E., 36th Floor, Atlanta, Georgia 30308, Attention: Legal Department.  Whenever any notice in writing is required to be given by either of the Trustees hereunder, such notice shall be deemed given and such requirement satisfied 72 hours after such notice is mailed by certified mail, postage prepaid, addressed as provided above; any notice given by an Owner to either of the Trustees shall be effective upon receipt by an Authorized Officer of the Trustee or Resident Trustee, as applicable.  A copy of any notice delivered to either of the Trustees shall also be delivered by the Person giving such notice to the Administrator, addressed to: First Marblehead Data Services, Inc., The Prudential Tower, 800 Boylston Street - 34th Floor, Boston, Massachusetts 02199-8157, Attention: Ms. Rosalyn Bonaventure, with a copy to The First Marblehead Corporation, The Prudential Tower, 800 Boylston Street - 34th Floor, Boston, Massachusetts 02199-8157, Attention: Corporate Law Department, or to such other addresses as the Administrator may have set forth in a written notice to the Trustees.

Section 15.05Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 15.06Separate Counterparts.  This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

Section 15.07Successors and Assigns.  All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, the Trustees and their respective successors and assigns and each Owner and its successors and permitted assigns, all as herein provided.  Any request, notice, direction, consent, waiver or other instrument or action by an Owner shall bind the successors and assigns of such Owner.

Section 15.08Headings.  The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

Section 15.09Governing Law.  This Agreement shall in all respects be governed by, and construed in accordance with, the laws of the State of Delaware (excluding conflict of law rules), including all matters of construction, validity and performance.

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Section 15.10Third Party Beneficiaries.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.  FMC shall be a third party beneficiary to this Agreement for purposes of Section 2.03(c), Section 5.03 and Article VI and shall be entitled to enforce such provisions against NCF II and the Trust as if it was a party hereto.

Section 15.11General Interpretive Principles.  For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(a)The defined terms in this Agreement include the plural as well as the singular, and the use of any gender herein shall be deemed to include any other gender;

(b)Accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date hereof;

(c)References herein to “Articles,” “Sections,” “paragraphs” and other subdivisions without reference to a document are to designated Articles, Sections, paragraphs and other subdivisions of this Agreement;

(d)A reference to a paragraph without further reference to a Section is a reference to such paragraph as contained in the same Section in which the reference appears, and this rule shall also apply to subparagraphs and other subdivisions;

(e)The words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision; and

(f)The term “include” or “including” shall mean without limitation by reason of enumeration.

[Remainder of page intentionally blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to the duly executed by their respective officers hereunto duly authorized, as of the day and year first above written.

[U.S. BANK NATIONAL ASSOCIATION], not in its individual capacity except as expressly provided herein, but solely as Trustee
By:
	Name:
	Title:
[U.S. BANK TRUST NATIONAL ASSOCIATION], not in its individual capacity except as expressly provided herein, but solely as Resident Trustee
By:
	Name:
	Title:
THE NATIONAL COLLEGIATE FUNDING II, LLC, as Owner
By:
	Name:	Gary F. Santo, Jr.
	Title:	Vice President

[Signatures continue]

Trust Agreement

With respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii), 12.01 and 13.01 and Articles V and VI only:

SUNTRUST BANK
By:
	Name:
	Title:

[Signatures continue]

Trust Agreement

ACKNOWLEDGED AND AGREED AS TO SECTION 2.03, ARTICLE V AND ARTICLE VI ONLY
THE FIRST MARBLEHEAD CORPORATION
By:
	Name:
	Title:

[Signatures continue]

Trust Agreement

ACKNOWLEDGED AND AGREED
FIRST MARBLEHEAD DATA SERVICES, INC.
By:
	Name:  Rosalyn Bonaventure
	Title:  President

[End signatures]

Trust Agreement

SCHEDULE I

CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS

Owner	Capital Contribution		Percentage Interest
The National Collegiate Funding II, LLC	$	1.00	100	%

EXHIBIT A

MG STUDENT LOAN TRUST 2010-1

TRUST CERTIFICATE
UNDER THE TRUST AGREEMENT, DATED
as of July     , 2010

Certificate No.                        

THE BENEFICIAL INTEREST IN THE TRUST REPRESENTED BY THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER HEREOF UNLESS IN THE OPINION OF COUNSEL SATISFACTORY TO THE RESIDENT TRUSTEE, SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND STATE SECURITIES LAWS.  THE TRANSFER OF THIS TRUST CERTIFICATE WILL NOT BE EFFECTIVE UNLESS THE TRANSFEREE HAS DELIVERED TO THE RESIDENT TRUSTEE A LETTER IN THE FORM REQUIRED BY SECTION 3.04(a) OF THE TRUST AGREEMENT.

NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PLAN SUBJECT TO ERISA OR SECTION 4975 OF THE CODE OR ANY PERSON ACTING ON BEHALF OF SUCH A PLAN EXCEPT IN ACCORDANCE WITH SECTION 3.04(b) OF THE TRUST AGREEMENT.

[U.S. Bank Trust National Association], not in its individual capacity, but solely as resident trustee (the “Resident Trustee”) under the Trust Agreement, dated as of July        , 2010 (the “Trust Agreement”), with [U.S. Bank National Association], not in its individual capacity but solely as trustee (the “Trustee” and together with the Resident Trustee, the “Trustees”), The National Collegiate Funding II, LLC, as owner (the “Owner”) of beneficial interests in the trust created thereby, and, with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii), 12.01 and 13.01 and Articles V and VI only, SunTrust Bank, hereby certifies on behalf of the MG Student Loan Trust 2010-1 (the “Trust”) that                                  is the owner of an undivided beneficial interest equal to the percentage listed on Schedule I to the Trust Agreement in the Trust Property provided for and created by the Trust Agreement.  This Trust Certificate is issued pursuant to and is entitled to the benefits of the Trust Agreement, and each Owner by acceptance hereof shall be bound by the terms of the Trust Agreement.  Reference is hereby made to the Trust Agreement for a statement of the rights and obligations of the Owner hereof.  The Trustees may treat the person shown on the register maintained by the Resident Trustee pursuant to Section 3.02 of the Trust Agreement as the absolute Owner hereof for all purposes.

Capitalized terms used herein without definition have the meanings ascribed to them in or by reference in the Trust Agreement.

TRANSFER OF THIS TRUST CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS AND LIMITATIONS SET FORTH IN THE TRUST AGREEMENT.  In the manner more fully set forth in, and as limited by, the Trust Agreement, this Trust Certificate may be transferred upon the books of the Trust maintained by the Resident Trustee by the registered Owner in person or by his attorney duly authorized in writing upon surrender of this Trust Certificate to the Resident Trustee accompanied by a written instrument of transfer and with such signature guarantees and evidence of authority of the Persons signing the instrument of transfer as the Resident Trustee may reasonably require, whereupon the Resident Trustee shall issue in the name of the transferee a Trust Certificate or Trust Certificates

evidencing the amount and extent of interest of the transferee.  The Owner hereof, by its acceptance of this Trust Certificate, warrants and represents to the Resident Trustee, the Trustee and to the Owners of the other Trust Certificates issued under the Trust Agreement and agrees not to transfer this Trust Certificate except in accordance with the Trust Agreement.

This Trust Certificate may not be acquired or held by a Plan.  By accepting and holding this Trust Certificate, the Owner hereof shall be deemed to have represented and warranted that it is not a Plan, unless it has provided the opinion of counsel described in Section 3.04(b) of the Trust Agreement.

This Trust Certificate and the Trust Agreement shall in all respects be governed by, and construed in accordance with, the laws of the State of Delaware (excluding conflict of law rules), including all matters of construction, validity and performance.

IN WITNESS WHEREOF, the Resident Trustee, pursuant to the Trust Agreement, has caused this Trust Certificate to be issued in the name and on behalf of the Trust as of the date hereof.

	MG STUDENT LOAN TRUST 2010-1 By: [U.S. BANK TRUST NATIONAL ASSOCIATION], not in its individual capacity, but solely as Resident Trustee
	By:
		Name:
		Title:
Dated:

A-2

EXHIBIT B

FORM OF ACCESSION AGREEMENT

[Date]

[Name]
[Address]
Attention:

Dear Sirs:

We refer to the Trust Agreement, dated as of July      , 2010 (the “Trust Agreement”), among The National Collegiate Funding II, LLC (the “Company”), [U.S. Bank National Association] (in its capacity as trustee thereunder, the “Trustee”), [U.S. Bank Trust National Association] (in its capacity as resident trustee thereunder, the “Resident Trustee”), and, with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii), 12.01 and 13.01 and Articles V and VI only, SunTrust Bank.  We propose to purchase a beneficial interest in the MG Student Loan Trust 2010-1, a Delaware statutory trust (the “Trust”) formed pursuant to the Trust Agreement.  Capitalized terms used herein without definition have the meanings given them in the Trust Agreement.

1.We understand that our Trust Certificate is not being registered under the Securities Act of 1933, as amended (the “1933 Act”), or any state securities or “Blue Sky” law and is being sold to us in a transaction that is exempt from the registration requirements of the 1933 Act and any applicable state laws.

2.We have knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Trust, we are able to bear the economic risk of investment in the Trust and we are an “accredited investor” as defined in Regulation D under the 1933 Act.

3.We acknowledge that none of the Trust, the Company, the Trustee or the Resident Trustee has advised us concerning the federal or state income tax consequences of owning a beneficial interest in the Trust, including the tax status of the Trust or the likelihood that distributions from the Trust would be characterized as “unrelated business income” for federal tax purposes, and we have consulted with our own tax advisor with respect to such matters.

4.We are acquiring our Trust Certificate for our own account and not for the benefit of any other person and not with a view to any distribution of our Beneficial Interest in the Trust subject, nevertheless, to the understanding that disposition of our property shall at all times be and remain within our control.

5.We agree that our Beneficial Interest in the Trust must be held indefinitely by us unless subsequently registered under the 1933 Act and any applicable state securities or “Blue Sky” law or unless exemptions from the registration requirements of the 1933 Act and applicable state laws are available.

6.We agree that in the event that at some future time we wish to dispose of or exchange any of our Beneficial Interest in the Trust, we will not transfer or exchange any of our Beneficial Interest in the Trust unless we have satisfied the requirements set forth in Section 3.04 of the Trust Agreement, and either:

(A)(1) the transfer or exchange is made to an Eligible Purchaser (as defined below), (2) a letter to substantially the same effect as this letter is executed promptly by such Eligible Purchaser, and (3) all offers or solicitations in connection with the sale (if a sale), whether made directly or through any agent acting on our behalf, are limited only to Eligible Purchasers and are not made by means of any form of general solicitation or general advertising whatsoever; or

(B)our Beneficial Interest in the Trust is sold in a transaction that does not require registration under the 1933 Act and any applicable State “Blue Sky” law.

“Eligible Purchaser” means a corporation, partnership or other entity which we have reasonable grounds to believe and do believe can make representations with respect to itself to substantially the same effect as the representations set forth herein.

7.We understand that our Trust Certificate bears a legend to substantially the following effect:

THE BENEFICIAL INTEREST IN THE TRUST REPRESENTED BY THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER HEREOF UNLESS IN THE OPINION OF COUNSEL SATISFACTORY TO THE RESIDENT TRUSTEE SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND STATE SECURITIES LAWS. THE TRANSFER OF THIS TRUST CERTIFICATE WILL NOT BE EFFECTIVE UNLESS THE TRANSFEREE HAS DELIVERED TO THE RESIDENT TRUSTEE A LETTER IN THE FORM REQUIRED BY SECTION 3.04(a) OF THE TRUST AGREEMENT.

NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PLAN SUBJECT TO ERISA OR SECTION 4975 OF THE CODE OR ANY PERSON ACTING ON BEHALF OF SUCH A PLAN EXCEPT IN ACCORDANCE WITH SECTION 3.04(b) OF THE TRUST AGREEMENT.

8.We agree to be bound by all terms and conditions of our Trust Certificate and the Trust Agreement.

[Remainder of page intentionally left blank]

B-2

		Very truly yours,
		[PURCHASER]
		By:
			Name:
			Title:
Accepted and Acknowledged this          th day of                             ,                .
MG STUDENT LOAN TRUST 2010-1 By: [U.S. BANK TRUST NATIONAL   ASSOCIATION], not in its individual capacity, but   solely as Resident Trustee
By:
	Name:
	Title:

EXHIBIT C

FORM OF
CERTIFICATE OF TRUST
OF
MG STUDENT LOAN TRUST 2010-1

This Certificate of Trust of the MG Student Loan Trust 2010-1 (the “Trust”), is being duly executed and filed on behalf of the Trust by the undersigned, as trustees, to form a statutory trust under the Delaware Statutory Trust Act (12 Del. C. § 3801 et seq.) (the “Act”).

(i)            Name.  The name of the statutory trust formed hereby is the MG Student Loan Trust 2010-1.

(ii)           Delaware Trustee.  The name and business address of a trustee of the Trust which has its principal place of business in the State of Delaware are [U.S. Bank Trust National Association, 300 Delaware Avenue, 9th Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Administration].

(iii)          Effective Date.  This Certificate of Trust shall be effective upon filing.

IN WITNESS WHEREOF, the undersigned have duly executed this Certificate of Trust in accordance with § 3811(a)(1) of the Act.

[U.S. BANK TRUST NATIONAL ASSOCIATION], not in its individual capacity but solely as Resident Trustee
By:
	Name:
	Title:
[U.S. BANK NATIONAL ASSOCIATION], not in its individual capacity but solely as Trustee
By:
	Name:
	Title:

EXHIBIT C2

Administration Agreement

ADMINISTRATION AGREEMENT

ADMINISTRATION AGREEMENT, dated as of July     , 2010 (as amended from time to time, this “Agreement”), among MG STUDENT LOAN TRUST 2010-1, a Delaware statutory trust (the “Trust”), [U.S. BANK NATIONAL ASSOCIATION], not in its individual capacity but solely as a trustee of the Trust (the “Trustee”), and FIRST MARBLEHEAD DATA SERVICES, INC., a Massachusetts corporation having a place of business at 800 Boylston St., 34th Floor, Boston, MA 02199 (the “Administrator”). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Trust Agreement or the Loan Program Agreement (each as defined below), as applicable.

WHEREAS, the Trust (a) will be assigned (i) Charged Off Loans and (ii) Purchased Loans (collectively, the “Trust Loans”) from time to time pursuant to that certain Loan Program Agreement executed April 20, 2010 (the “Loan Program Agreement”), by and among First Marblehead Education Resources, Inc., The First Marblehead Corporation, and SunTrust Bank, a Georgia state-chartered banking corporation (“SunTrust”); and (b) has issued a trust certificate (the “Trust Certificate”) pursuant to a Trust Agreement dated as of July     , 2010 (the “Trust Agreement”) among the Trustee, The National Collegiate Funding II, LLC (the “Owner” and together with any other beneficial owner of the Trust, the “Owners”), a resident trustee (together with the Trustee, the “Trustees”) and, with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii), 12.01 and 13.01 and Articles V and VI only, SunTrust;

WHEREAS, pursuant to the Trust Agreement, the Trust, the Trustee, and one or more Owners are required to perform certain duties in connection with the Trust Loans;

WHEREAS, the Trust, the Trustee, and the Owners desire to have the Administrator perform certain of the duties of the Trust and the Trustee referred to in the Trust Agreement and the Trust Related Agreements and to provide such additional services consistent with the terms of this Agreement and the Trust Related Agreements as the Trust, the Trustee, and the Owners may from time to time request; and

WHEREAS, the Administrator has the capacity to provide the services required hereby and is willing to perform such services for the Trust, the Trustee, and the Owners on the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

1.             Duties of the Administrator.

(a)           Duties with Respect to the Trust Related Agreements.  The Administrator agrees to perform all its duties as Administrator and the duties of the Trust under the Trust Related Agreements.  In addition, the Administrator shall consult with the Trustee regarding the duties of the Trust under the Trust Related Agreements.  The Administrator shall monitor the performance of the Trust under the Trust Related Agreements and shall advise the Trustee when action is necessary to comply with the Trust’s duties under the Trust Related Agreements.  The Administrator shall prepare for execution by the Trust, or shall cause the preparation by other appropriate persons or entities of, all such documents, reports, filings, instruments, certificates and opinions that it shall be the duty of the Trust to prepare, file or deliver pursuant to the Trust Related Agreements.

(b)           Additional Duties.

(i)            In addition to the duties of the Administrator set forth above, the Administrator shall perform, or cause to be performed, its duties and obligations and the duties and obligations of the Trust, and the Trustee on behalf of the Trust, under the Trust Agreement including, without limitation, those duties and obligations set forth on Schedule A hereto.  In furtherance thereof, the Trust shall execute and deliver to the Administrator and to each successor Administrator appointed pursuant to the terms hereof, one or more powers of attorney substantially in the form of Exhibit A hereto, appointing the Administrator as the attorney-in-fact of the Trust, for the purpose of executing on behalf of the Trust all such documents, reports, filings, instruments, certificates and opinions as are required to be executed by the Trust pursuant to such agreements.  Subject to Section 5 of this Agreement, and in accordance with the written instructions of the Trust, the Owners, or the Trustee, the Administrator shall administer, perform or supervise the performance of such other activities in connection with the Trust Loans as are not covered by any of the foregoing provisions and as are expressly requested by the Trust, the Trustee, or the Owners and are reasonably within the capability of the Administrator.  The Administrator agrees to perform such obligations and deliver such notices as are specified as to be performed or delivered by the Administrator under the Trust Agreement.

(ii)           In carrying out the foregoing duties or any of its other obligations under this Agreement, the Administrator may enter into transactions or otherwise deal with any of its Affiliates.

(iii)          In carrying out any of its obligations under this Agreement, the Administrator may act either directly or through agents, attorneys, accountants, independent contractors and auditors and may enter into agreements with any of them.

(iv)          In carrying out its duties under this Agreement with respect to delinquent or defaulted Trust Loans, the Administrator may retain and employ agents to service, manage, enforce, collect or dispose of such Trust Loans and to commence any actions or proceedings the agents deem necessary, appropriate or desirable in connection therewith.

(c)           Non-Ministerial Matters.

(1)           With respect to matters that in the reasonable judgment of the Administrator are non-ministerial, the Administrator shall not be under any obligation to take any action, and in any event shall not take any action unless the Administrator shall have received instructions from the Trustee or the Owners in accordance with the Trust Agreement.  For the purpose of the preceding sentence, “non-ministerial matters” shall include, without limitation:

(A)          The amendment of or any supplement to the Trust Related Agreements; and

(B)           The initiation of any claim or lawsuit by the Trust and the compromise of any action, claim or lawsuit brought by or against the Trust, except for claims or lawsuits in the ordinary course of business brought by or against the Trust, or by its agents or nominees, relating to the enforcement or collection of the Trust Loans owned by the Trust.

(ii)           Notwithstanding anything to the contrary in this Agreement, the Administrator shall not be obligated to, and shall not, take any action that the Trustee or any Owner directs the Administrator not to take on behalf of the Trust.

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(d)           Actions on behalf of the Owners.  Pursuant to Section 4.05 of the Trust Agreement, the initial Owner has appointed the Administrator as its true and lawful attorney-in-fact with respect to certain matters described in such Section 4.05.

2.             Records.  The Administrator shall maintain appropriate books of account and records relating to services performed hereunder, which books of account and records shall be accessible for inspection by the Trustee and the Owners at any time during normal business hours. The Administrator shall maintain or cause to be maintained the books of the Trust on the basis of a fiscal year ending June 30, using the accrual method of accounting, in accordance with generally accepted accounting principles, and shall comply with the other requirements set forth in Section 9.04 of the Trust Agreement.

3.             Compensation.  As compensation for the performance of the Administrator’s obligations under this Agreement and as reimbursement for its expenses related thereto, the Administrator shall be entitled to reimbursement for all its expenses incurred in performing its obligations hereunder and any other expenses incurred by the Administrator on behalf of the Trust by the Trust in accordance with the terms and conditions of the Trust Agreement.  For the avoidance of doubt, Recoveries shall not be available to reimburse the Administrator for its expenses hereunder.

4.             Additional Information to be Furnished.  The Administrator shall furnish to the Trustee and the Owners from time to time such additional information regarding the Trust Loans as the Trustee or the Owners shall reasonably request.

5.             Independence of the Administrator.  For all purposes of this Agreement, the Administrator shall be an independent contractor and shall not be subject to the supervision of the Trust, the Trustees, or the Owners with respect to the manner in which it accomplishes the performance of its obligations hereunder.  Unless expressly authorized by the Trust, the Trustees, or the Owners, the Administrator shall have no authority to act for or represent the Trust, the Trustees, or the Owners, respectively, in any way other than as specified hereunder and shall not otherwise be deemed an agent of the Trust, the Trustees, or the Owners.

6.             No Joint Venture.  Nothing contained in this Agreement (a) shall constitute the Administrator and any of the Trust, the Trustees, or any Owner as members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (b) shall be construed to impose any liability as such on any of them, or (c) shall be deemed to confer on any of them any express, implied or apparent authority to incur any obligation or liability on behalf of the others.

7.             Other Activities of the Administrator.  Nothing herein shall prevent the Administrator or its Affiliates from engaging in other businesses or, in its or their sole discretion, from acting in a similar capacity as an administrator for any other person or entity even though such person or entity may engage in business activities similar to those of the Trust, the Trustees, or the Owners.

8.             Term of Agreement; Resignation and Removal of Administrator.

(a)           This Agreement shall continue in force until the termination of the Trust, upon which event this Agreement shall automatically terminate.

(b)           Subject to Section 8(d) of this Agreement, the Owners may remove the Administrator without cause by providing the Administrator with at least 15 days’ prior written notice; provided that the Owners simultaneously provide SunTrust with a copy of any such notice under this Section 8(b).

3

(c)           Subject to Section 8(d) of this Agreement, the Owners may remove the Administrator immediately upon written notice of termination if any of the following events shall occur:

(i)            The Administrator shall default in the performance of any of its duties under this Agreement and, after written notice of such default, shall not cure such default within ten days (or, if such default cannot be cured in such time, the Administrator shall not give within ten days such assurance of cure as shall be reasonably satisfactory to the Trustee);

(ii)           A court having jurisdiction in the premises shall enter a decree or order for relief, and such decree or order shall not have been vacated within 60 days, with respect to any involuntary case commenced against the Administrator under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or shall appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or

(iii)          The Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for it or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of its creditors or shall fail generally to pay its debts as they become due;

provided that the Owners simultaneously provide SunTrust with a copy of any such notice under this Section 8(c).  The Administrator agrees that if any of the events specified in clauses (ii) or (iii) of this Section 8(c) shall occur, it shall give written notice thereof to the Trustee within two Business Days after the happening of such event.

(d)           No removal of the Administrator pursuant to this Section 8 shall be effective until (i) a successor Administrator shall have been appointed by the Owners, on behalf of the Trust and (ii) such successor Administrator shall have agreed in writing to be bound by the terms of this Agreement in the same manner as the Administrator is bound hereunder.

9.             Action upon Termination or Removal.  Promptly upon the effective date of termination of this Agreement or the removal of the Administrator pursuant to Section 8 of this Agreement, the Administrator shall (a) be entitled to be paid by the Trust in accordance with the terms and conditions of the Trust Agreement all reimbursable expenses accruing to it to the date of such termination or removal and (b) deliver to the successor Administrator all property and documents of or relating to the Trust Loans then in the custody of the Administrator.  In the event of the removal of the Administrator pursuant to Sections 8(b) or (c) of this Agreement, the Administrator, for a period of not less than 120 days following notice of such removal, shall cooperate with the Trust and take all reasonable steps requested to assist the Trust in making an orderly transfer of the duties of the Administrator.

10.           Limitation of Liability of Trustee.  Notwithstanding anything contained herein to the contrary, this Agreement has been executed by [U.S. Bank National Association], not in its individual capacity but solely in its capacity as Trustee of the Trust, and in no event shall [U.S. Bank National Association] in its individual capacity or any Owner of the Trust have any liability for the representations, warranties, covenants, agreements or other obligations of the Trust hereunder, as to all of which recourse shall be had solely to the assets of the Trust.  For all purposes of this Agreement, in the performance of any duties or obligations of the Trustee or the Trust hereunder, the Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles IX, X and XI of the Trust Agreement.

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11.           Indemnification.  The Administrator shall indemnify the Trust and the Trustees (as such and in their individual capacities) and their respective agents (each, an “Indemnified Person”) for, and hold them harmless against, any losses, liability or expense, including reasonable attorneys fees’ and expenses, obligations, damages, claims, actions, and suits of any kind and nature whatsoever which may be imposed on, incurred by or asserted at any time against the Indemnified Person in the absence of willful misconduct, negligence or bad faith on the part of the Indemnified Person, arising out of the willful misconduct, negligence or bad faith of the Administrator in the performance of the Administrator’s duties contemplated by this Agreement; provided, however, that the Administrator shall not be required to indemnify an Indemnified Person so long as the Administrator has acted pursuant to the instructions of the Trust, the Trustee, or the Owners in accordance with Sections 1(b) or 1(c) of this Agreement.

12.           Miscellaneous.

(a)           Amendments. This Agreement may be amended only by a written instrument signed by the parties hereto; provided that any amendment must be accompanied by the written consent of the Trustee and the Owners.

(b)           Successors and Assigns.  This Agreement may be assigned by the Administrator, without the consent of the Trustee or the Owners, to a corporation or other organization that is a successor (by merger, consolidation or purchase of assets) to the Administrator; provided that such successor organization executes and delivers to the Trustee and the Owners an agreement in which such corporation or other organization agrees to be bound hereunder in the same manner as the Administrator is bound hereunder.  Subject to the foregoing, this Agreement shall bind any such permitted successors or assigns of the parties hereto.

(c)           Notices.  Any notice, report or other communication given hereunder shall be in writing and addressed as follows:

(i)If to the Trust, to:

MG Student Loan Trust 2010-1
[c/o U.S. Bank National Association, as Trustee
One Federal Street

Boston, MA 02110
Attention: Corporate Trust Administration]

(ii)If to the Administrator, to:

First Marblehead Data Services, Inc.
The Prudential Tower
800 Boylston Street, 34th Floor
Boston, MA 02199-8157
Attention:  Ms. Rosalyn Bonaventure

with a copy to:

The First Marblehead Corporation
The Prudential Tower
800 Boylston Street, 34th Floor

5

Boston, MA 02199-8157
Attention: Corporate Law Department

(iii)If to the Trustee, to:

[U.S. Bank National Association, as Trustee
One Federal Street

Boston, MA 02110
Attention: Corporate Trust Administration]

If to the Owner, to:

The National Collegiate Funding II, LLC
c/o The First Marblehead Corporation
The Prudential Tower
800 Boylston Street, 34th Floor
Boston, MA 02199-8157
Attention: Corporate Law Department

or to such other address as any party shall have provided to the other parties in writing.  Any notice required to be in writing hereunder shall be deemed given if such notice is mailed by certified mail, postage prepaid, or hand-delivered to the address of such party as provided above.

(d)           Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to conflicts of laws provisions thereof.

(e)           Headings.  The section headings hereof have been inserted for convenience of reference only and shall not be construed to affect the meaning, construction or effect of this Agreement.

(f)            Counterparts.  This Agreement may be executed in counterparts, each of which when so executed shall together constitute but one and the same agreement.

(g)           Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

(h)           No Petition.  The parties hereto will not at any time institute against the Trust any bankruptcy proceeding under any United States federal or state bankruptcy or similar law in connection with any obligations of the Trust under any Trust Related Agreement.

[Remainder of page intentionally blank]

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IN WITNESS WHEREOF, the parties have caused this Administration Agreement to be duly executed and delivered as of the day and year first above written.

MG STUDENT LOAN TRUST 2010-1
By:	[U.S. Bank National Association], not in its individual capacity but solely as Trustee
By:
	Name:
	Title:
[U.S. BANK NATIONAL ASSOCIATION],
not in its individual capacity but solely as
Trustee
By:
	Name:
	Title:
FIRST MARBLEHEAD DATA SERVICES, INC.
By:
	Rosalyn Bonaventure
	President

Administration Agreement

EXHIBIT A
POWER OF ATTORNEY

STATE OF DELAWARE	)
	)
COUNTY OF NEW CASTLE	)

KNOW ALL MEN BY THESE PRESENTS, that MG Student Loan Trust 2010-1 (the “Trust”), does hereby make, constitute and appoint First Marblehead Data Services, Inc. as administrator under the Administration Agreement dated as of July     , 2010 (the “Administration Agreement”), among the Trust; [U.S. Bank National Association], as Trustee; and First Marblehead Data Services, Inc., as Administrator, as the same may be amended from time to time, as well as its agents and attorneys, as Attorney-in-Fact to execute on behalf of the Trust all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Trust to prepare, file or deliver pursuant to the Trust Related Agreements, including, without limitation, in connection with the acquisition, servicing, management, enforcement, collection or disposition of the Trust Loans and the preparation, filing and audit of federal, state and local tax returns pertaining to the Trust, and with full power to perform any and all acts associated with such matters that the Trust could perform, including without limitation, the right to distribute and receive confidential information, defend and assert positions in response to audits, initiate and defend litigation, and to execute waivers of restrictions on assessments of deficiencies, consents to the extension of any statutory or regulatory time limit, and settlements.

All powers of attorney for these purposes heretofore filed or executed by the Trust are hereby revoked.

Capitalized terms that are used and not otherwise defined herein shall have the meanings ascribed thereto in the Administration Agreement.

EXECUTED as of July     , 2010.

MG STUDENT LOAN TRUST 2010-1
By:    [U.S. Bank National Association], not in its individual capacity but solely as Trustee
By:
	Name:
	Title:

SCHEDULE A

Duties of the Trust or Trustee
Performed by the Administrator under the Trust Agreement

(A)Paying to the Trustee its fees and expenses as are set forth in Section 11.01.

(B)Furnishing documents to the Owners under Section 10.02.

(C)Filing a Certificate of Termination of the Trust upon termination pursuant to Section 12.01.

(D)Appointing separate trustees under Section 13.02.

(E)Obtaining execution by the Owners of any amendment to the Trust Agreement thereunder.

(F)To engage in such activities as may be required for the acquisition, management, collection or disposition of Trust Property.

(G)To open one or more bank accounts on behalf of the Trust, to fund such accounts and to disburse amounts from such accounts.

Duties of the Administrator under the Trust Agreement

(A)Providing for the acquisition, management, collection or disposition of Trust Property.

(B)Providing written instructions to the Trustee as required under Section 5.02.

(C)Filing tax returns, reports and forms under Section 9.04.

(D)Interpreting and applying the provisions set forth in Articles V, VII, VIII and XII regarding application of funds, allocations of profit and loss and distributions of Trust assets, to resolve any ambiguities that may result from such application and to provide the Trustee, and the Owners with clarification of any provision as may be necessary or appropriate.

EXHIBIT C3

Special Servicing Agreement

SPECIAL SERVICING AGREEMENT

This Special Servicing Agreement, dated as of July        , 2010 (this “Agreement”), is entered into by and among First Marblehead Education Resources, Inc., a Delaware corporation having a place of business at 800 Boylston St., 34th Floor, Boston, Massachusetts 02199 (“FMER”), as the Special Servicer (together with its successors and assigns, the “Special Servicer”); MG Student Loan Trust 2010-1, a Delaware statutory trust (the “Trust”); and solely for purposes of Sections 2(B)(v), 2(B)(vi), 5, 7, 18(A) and 18(G), SunTrust Bank, a Georgia state-chartered banking corporation having an office located at 1001 Semmes Avenue, Richmond, Virginia 23224 (“SunTrust Bank”).

WHEREAS, the Special Servicer, and other subservicing agents appointed from time to time by the Special Servicer, as provided herein, are experts in the management of student loan collections; and

WHEREAS, the Trust is appointing the Special Servicer as a servicer under the Trust Agreement (as defined below), to perform certain limited duties with respect to student loans owned by the Trust (“Trust Loans”).

NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

Section 1.               Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Loan Program Agreement (as defined below) or Trust Agreement, as applicable. For purposes of this Agreement, the following capitalized terms shall have the respective meanings set forth below:

“Loan Program Agreement” means that certain Loan Program Agreement executed April 20, 2010, by and among FMER, The First Marblehead Corporation, and SunTrust Bank.

“Trust Agreement” means that certain Trust Agreement dated as of July       , 2010 by and among The National Collegiate Funding II, LLC, [U.S. Bank National Association], as Trustee, [U.S. Bank Trust National Association], as Resident Trustee, and, with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii), 12.01 and 13.01 and Articles V and VI only, SunTrust Bank.

“Trust Loan” means (i) any Charged Off Loan and (ii) any Purchased Loan, in each case which has been assigned to the Trust from time to time pursuant to the Loan Program Agreement.

Section 2.               Appointment; Special Servicing Duties.

A.            Appointment.  The Trust hereby hires, designates and appoints the Special Servicer to perform the Special Services (as defined below), and the Special Servicer accepts such appointment and agrees to perform the Special Services with respect to the Trust Loans, in accordance with the terms of this Agreement and the Trust Agreement.

B.            Special Services.  The Special Servicer shall take such actions as it shall deem reasonably necessary or appropriate to administer and oversee the enforcement and collection of Trust Loans to maximize the collection of amounts payable on the Trust Loans (collectively, the “Special Services”), including without limitation:

(i)Retaining and entering into agreements with licensed collection agencies and other legally authorized persons (the “Subservicers”) engaged in providing

default collection services, in form and substance satisfactory to the Special Servicer, pursuant to which the Subservicers, for and on behalf of the Trust, will contact borrowers with respect to the Trust Loans, and seek enforcement and collection of such Trust Loans;

(ii)At the sole discretion of the Special Servicer, (a) performing periodic audits of Subservicers for compliance and performance reviews and (b) providing oversight of the activities of Subservicers with regard to account management, litigation assistance, and/or settlement strategies;

(iii)Replacing any Subservicer who, in the sole judgment of the Special Servicer, is deemed to be deficient or negligent in performing the duties outlined in its subservicing agreement with the Special Servicer;

(iv)Requiring, in the applicable subservicing agreement, the Subservicers to provide certain monthly reports to the Special Servicer with respect to Trust Loans serviced by such Subservicer, in each case, in form and substance satisfactory to the Special Servicer;

(v)Remitting and causing each Subservicer to remit weekly to the FMER Collection Account (as defined below), Recoveries collected on all Charged Off Loans serviced by such Subservicer for the Trust;

(vi)Establishing and maintaining an account or accounts (“FMER Collection Account”) for the deposit by each Subservicer of Recoveries on all Charged Off Loans serviced by each Subservicer and depositing on a [weekly] basis in the Participation Account all Recoveries so deposited in the FMER Collection Account;

(vii)Remitting and causing each Subservicer to remit weekly to the Purchased Loan Collection Account (as defined below), net collections collected on all Purchased Loans serviced by such Subservicer for the Trust;

(viii)Maintaining the [“Third Party” account currently at U.S. Bank] (“Purchased Loan Collection Account”) for the deposit by each Subservicer of net collections on all Purchased Loans serviced by each Subservicer and depositing on a [monthly] basis in the [NCF II Account] all net collections so deposited in the Purchased Loan Collection Account;

(ix)Reviewing default notification packages (which packages shall contain the information, reports and documents required in the Servicing Guidelines) prepared by the Servicer with respect to Trust Loans to confirm, on the basis of such review, that the Servicer has complied with the Servicing Guidelines in servicing the Trust Loans;

(x)Receiving reports from Subservicers related to payments with respect to Trust Loans and updating records with respect to Trust Loans as interest and other charges accrue and amounts are collected;

(xi)Transferring all collection activities to Subservicers, provided that the Special Servicer shall not be required to transfer such collection activities if the

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Administrator determines that it is likely that collections would not be maximized on such Trust Loans if the collection activities were transferred to Subservicers;

(xii)Retaining counsel on behalf of the Trust (whether directly or through collection agencies) to further pursue enforcement and collection of Trust Loans, including through litigation and bankruptcy or probate proceedings; and

(xiii)Negotiating any settlement or compromise of any claim with respect to a Trust Loan, which in the reasonable judgment of the Special Servicer or the applicable Subservicer is more likely to produce greater proceeds of collection than by virtue of a forbearance, payment arrangement or other accommodation with the Borrower.

Section 3.               Subservicers.    In carrying out its duties under this Agreement, the Special Servicer may retain and employ Subservicers to perform any of the Special Services, and to commence any actions or proceedings the Subservicers deem necessary or appropriate in connection with such enforcement or collection efforts on Trust Loans.

Section 4.               Servicing Fee.  As compensation for the performance of the Special Servicer’s obligations under this Agreement and as reimbursement for its expenses related thereto, the Special Servicer shall not receive any fee under this Agreement, but rather shall receive only the fee set forth in Section 6.4.1 of the Loan Program Agreement, paid to the Servicer and then remitted to FMER by the Servicer.

Section 5.               Term of Agreement; Resignation and Removal of Special Servicer.

A.            This Agreement shall continue in force until the principal and interest balance of each Trust Loan has been fully paid or otherwise discharged, whether by settlement or other means, upon which event this Agreement shall automatically terminate.

B.            Subject to Section 5(C) of this Agreement, the Trustee shall remove the Special Servicer by delivering to the Special Servicer written notice of termination if any of the following events shall occur:

(i)The Special Servicer shall default in the performance of any of its duties under this Agreement and, after written notice of such default, shall not cure such default within 45 days (or such longer period as shall be reasonably satisfactory to the Trustee);

(ii)A court of competent jurisdiction shall enter a decree or order for relief, and such decree or order shall not have been vacated within 60 days, with respect to any involuntary case commenced against the Special Servicer under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or shall appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Special Servicer or any substantial part of its property or order the winding-up or liquidation of its affairs; or

(iii)The Special Servicer shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such

3

law, or shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for it or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of its creditors or shall fail generally to pay its debts as they become due.

The Special Servicer agrees that if any of the events specified in clauses (ii) or (iii) of this Section 5(B) shall occur, it shall give written notice thereof to the Trustee, within five (5) Business Days after the happening of such event.

C.            No removal of the Special Servicer pursuant to this Section 5 shall be effective until a Successor Special Servicer (as defined below) shall have agreed in writing to be bound by the terms of this Agreement or a substantially similar agreement providing for the collection of Trust Loans.

Section 6.               Action upon Termination or Removal.  Promptly upon the effective date of termination of this Agreement or removal of the Special Servicer pursuant to Section 5 of this Agreement, the Special Servicer shall forthwith upon such termination pursuant to Section 5 of this Agreement deliver to the Trust or its designee, all property and documents of or relating to the Trust Loans then in the custody of the Special Servicer pursuant to this Agreement.  In the event of the removal of the Special Servicer pursuant to Section 5 of this Agreement, the Special Servicer, for a period of not less than 120 days following notice of such removal, shall cooperate with the Trust and take all reasonable steps requested to assist the Trust in making an orderly transfer of the duties of the Special Servicer to the applicable Successor Special Servicer, including, without limitation, remitting or causing the Subservicers to remit net collections received on Trust Loans to the FMER Collection Account or the Purchased Loan Collection Account, as applicable.

Section 7.               Successor Special Servicer.

A.            In the event of the removal of the Special Servicer pursuant to Section 5 of this Agreement, SunTrust Bank shall have the right in its discretion to appoint a successor Special Servicer (“Charged Off Loans Successor Special Servicer”) to assume the rights, duties and obligations of the Special Servicer and/or the Subservicers solely related to the Charged Off Loans under this Agreement.

B.            In the event of the removal of the Special Servicer pursuant to Section 5 of this Agreement, the Trustee, at the direction of the Owners, shall have the right in its discretion to appoint a successor Special Servicer (“Purchased Loans Successor Special Servicer” and together with the Charged Off Loans Successor Special Servicer, the “Successor Special Servicer”) to assume the rights, duties and obligations of the Special Servicer and/or the Subservicers solely related to the Purchased Loans under this Agreement; provided that the Purchased Loans Successor Special Servicer and the Trust shall enter into a new agreement for the servicing of the Purchased Loans, which such agreement shall contain terms no less favorable to the Trust than those contained in this Agreement (the “Purchased Loans Servicing Agreement”).

C.            In order to facilitate the performance of the applicable Successor Special Servicer’s duties under this Agreement or the Purchased Loans Servicing Agreement, as the case may be, for a period of not less than 120 days following the removal of the Special Servicer pursuant to Section 5 of this Agreement the Special Servicer will provide to the applicable Successor Special Servicer reasonable access, during normal business hours and upon reasonable prior notice (and subject to standard confidentiality restrictions), to all files, systems and employees of the Special Servicer then used in the provision of the Special Services with respect to the Trust Loans.  Without limiting the generality of the foregoing, the Special Servicer agrees to cooperate with the applicable Successor Special Servicer (or its

4

designee) to facilitate the orderly transfer of its duties under this Agreement, including without limitation, notifying the Subservicers, collection agents and other appropriate parties of the transfer of the Special Servicer function and providing (or causing the Subservicers to provide) the applicable Successor Special Servicer with all documents and records in electronic or other form reasonably requested by the applicable Successor Special Servicer to enable the applicable Successor Special Servicer or its designee to assume the Special Servicer’s functions under this Agreement and shall, as applicable, (i) deposit into the Participation Account all Recoveries deposited into the FMER Collection Account during such period and (ii) deposit into the [NCF II Account] all net collections deposited into the Purchased Loan Collection Account during such period.

D.            In the event that a Successor Special Servicer begins performing the Special Services, it shall be authorized to accept and rely on all of the accounting, records (including computer records) and work of the Special Servicer or any Subservicer (collectively, the “Predecessor Work Product”) without any audit or other examination thereof, and it shall have no duty, responsibility, obligation or liability for the acts and omissions of the Special Servicer or of Subservicers.  If any error, inaccuracy, omission or incorrect or non-standard practice or procedure (collectively, “Errors”) exist in any Predecessor Work Product and such Errors make it materially more difficult to service or would cause or materially contribute to the Successor Special Servicer making or continuing any Errors (collectively, “Continued Errors”), the Successor Special Servicer shall have no duty, responsibility, obligation or liability for such Continued Errors, which shall be the responsibility of Special Servicer.  In performing the obligations of the Special Servicer under this Agreement, the Successor Special Servicer shall be entitled to rely conclusively on the reports and other information which it may receive from a Subservicer, including as to the accuracy and completeness thereof.

E.             Out of pocket costs and expenses (including the fees of its counsel and agents) incurred by the Successor Special Servicer in connection with the transition of services hereunder during the 120 day period following notice of the removal of FMER as Special Servicer shall be borne by FMER.  To the extent that such expenses are not paid by FMER (but without limiting or discharging its liability therefor), such expenses shall be paid by FMDS, as Administrator, who may seek reimbursement from the Trust.

Section 8.               Representations and Warranties.

A.            The Special Servicer hereby makes the following representations and warranties to the Trust:

(i)Organization and Good Standing.  The Special Servicer is an entity duly organized, validly existing, and in good standing under the laws of its state of incorporation or formation or the laws of the United States, and is in compliance with the laws of each state in which any of its property is located to the extent necessary to perform its obligations hereunder.

(ii)No Violation.  Neither the execution and delivery by the Special Servicer of this Agreement, nor the consummation by it of the transactions contemplated hereby, nor the performance of and compliance by the Special Servicer with the provisions hereof, will conflict with or result in a breach or violation of, or constitute a default (or an event which, with notice or the lapse of time, or both, would constitute a default) under, the organizational documents (its articles of incorporation or charter or by-laws) of the Special Servicer, any of the provisions of any judgment, decree, demand, or order of any federal, state, or local court binding on the Special Servicer, or any of the provisions of any indenture, mortgage, contract, instrument, or other document to which the Special Servicer

5

is a party or by which it is bound, or result in the creation or imposition of any lien, charge, or encumbrance upon any of its properties pursuant to the terms of any indenture, mortgage, contract, instrument, or other document. Neither the execution and delivery by the Special Servicer of this Agreement, nor the consummation by it of the transactions contemplated hereby, nor the performance of and compliance by the Special Servicer with the provisions hereof, will, to its knowledge, result in a breach of any law, rule or regulation of any federal, state or local governmental or regulatory authority binding on the Special Servicer.  The Special Servicer is not otherwise in violation of any law, rule, regulation, judgment, decree, demand, or order (of any federal, state or local governmental or regulatory authority or court), which violation, in the Special Servicer’s good faith and reasonable judgment, is likely to affect materially and adversely either its ability to perform its obligations hereunder, or the financial condition of the Special Servicer.

(iii)Authorization and Enforceability.  The execution and delivery by the Special Servicer of this Agreement, the consummation of the transactions contemplated hereby, and the performance and compliance by the Special Servicer with the terms hereof are within the powers of the Special Servicer, and have been duly authorized by all necessary action on the part of the Special Servicer. All organizational resolutions and consents necessary for the Special Servicer to enter into and consummate all transactions contemplated hereby have been obtained. This Agreement has been duly executed and delivered by the Special Servicer and constitutes the legal, valid and binding obligation of the Special Servicer, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors’ rights generally, and to general principles of equity, regardless of whether such enforcement is considered in a proceeding in equity or at law. The Special Servicer has not failed to obtain any consent, approval, authorization, or order of, or failed to cause any registration or qualification with, any court or regulatory authority or other governmental body having jurisdiction over the Special Servicer, which consent, approval, authorization, order, registration, or qualification is required for, and the absence of which would materially adversely affect, the legal and valid execution, delivery, and performance of this Agreement by the Special Servicer.

(iv)Approvals and Permits.  The Special Servicer possesses such certificates, authorizations, licenses, and permits issued by the appropriate state, federal, and foreign regulatory agencies or bodies necessary to conduct the business now operated by it, and it has not received any notice of proceedings relating to the revocation or modification of any such certificate, authorization, or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling, or finding, would materially and adversely affect the ability of the Special Servicer to perform its obligations hereunder.

(v)No Litigation.  No litigation is pending or, to the best of the Special Servicer’s knowledge, threatened against it, which, if determined adversely to the Special Servicer would prohibit the Special Servicer from entering into this Agreement or, in the good faith and reasonable judgment of the Special Servicer, is likely to materially and adversely affect either its ability to perform its obligations hereunder or the financial condition of the Special Servicer.

6

Section 9.               Indemnification.  The Special Servicer will indemnify the Trust, the Trustee, and their respective officers, directors, employees and agents for, and hold them harmless against, any losses, liability or expense, including reasonable attorneys’ fees and expenses, incurred in the absence of willful misconduct, negligence or bad faith on the part of the Trust, the Trustee and their respective agents, arising out of the willful misconduct, negligence or bad faith of the Special Servicer (or its agents) in the performance of the Special Servicer’s duties contemplated by this Agreement; provided that neither the Special Servicer nor any of its directors, officers, employees or agents shall be liable for any action taken or for refraining from the taking of any action pursuant to instructions or directions from the Administrator or the Trustee or in accordance with this Agreement.

Section 10.             Records; Inspection.  The Special Servicer shall maintain appropriate books of account and records relating to services performed hereunder, which books of account and records shall be accessible for inspection by the Trustee at any time during normal business hours.  The Special Servicer hereby grants the Trustee the right to perform ongoing due diligence review of the Special Servicer’s activities hereunder at the sole cost and expense of the Special Servicer; provided that such due diligence be conducted in a reasonable manner, convenient to the Special Servicer.

Section 11.             Reporting; Additional Information to be Furnished.  On the tenth (10th) Business Day after the end of each calendar month, the Special Servicer shall furnish the Administrator on behalf of the Trust, an electronically transferred data file containing a monthly collection report regarding the Trust Loans in a form satisfactory to the Administrator.  The Special Servicer shall furnish to the Administrator on behalf of the Trust from time to time such additional information regarding the Trust Loans as the Administrator on behalf of the Trust shall reasonably request.

Section 12.             Subservicing Agreements.  The Special Servicer will cause each subservicing agreement with a Subservicer to contain provisions consistent with this Agreement, including provisions requiring the applicable Subservicer to maintain adequate records and procedures with respect to a Trust Loan and its performance.  Each subservicing agreement shall be terminable by the Special Servicer (including for the avoidance of doubt, the Successor Special Servicer acting as successor Special Servicer) upon 30 days written notice, and shall provide that any Successor Special Servicer shall succeed to the Special Servicer thereunder.  The Special Servicer shall promptly provide the Trustee copies of all existing subservicing agreements with a Subservicer upon written request.

Section 13.             Amendments.  This Agreement may be amended from time to time by the parties hereto, provided that any amendment must be accompanied by the written consent of the Administrator.

Section 14.             Independence of the Special Servicer.  For all purposes of this Agreement, the Special Servicer shall be an independent contractor and shall not be subject to the supervision of the Trust with respect to the manner in which it accomplishes the performance of its obligations hereunder.  Unless expressly authorized by the Trust, the Special Servicer shall have no authority to act for or represent the Trust in any way other than as specified hereunder.

Section 15.             No Joint Venture.  Nothing contained in this Agreement (A) shall constitute the Special Servicer and the Trust as members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (B) shall be construed to impose any liability as such on any of them, or (C) shall be deemed to confer on any of them any express, implied or apparent authority to incur any obligation or liability on behalf of the other.

Section 16.             Other Activities of the Special Servicer.  Nothing herein shall prevent the Special Servicer or its Affiliates from engaging in other businesses or, in its or their sole discretion, from acting in

7

a similar capacity as servicer for any other person or entity even though such person or entity may engage in business activities similar to those of the Trust.

Section 17.             Notices.  Any notice, report or other communication given hereunder shall be in writing and addressed as follows:

If to the Special Servicer, to:

First Marblehead Education Resources, Inc.

The Prudential Tower

800 Boylston Street – 34th Floor

Boston, MA 02199-8157

Attention: Ms. Rosalyn Bonaventure

With a copy to:

The First Marblehead Corporation

The Prudential Tower

800 Boylston Street - 34th Floor

Boston, MA 02199-8157

Attention: Corporate Law Department

If to the Trust to:

MG Student Loan Trust 2010-1

[c/o U.S. Bank National Association, as Trustee

One Federal Street

Boston, MA 02110

Attention: Corporate Trust Administration]

With a copy to:

First Marblehead Data Services, Inc.
The Prudential Tower
800 Boylston Street - 34th Floor
Boston, MA 02199-8157
Attention:  Ms. Rosalyn Bonaventure

Or to such other address as any party shall have provided to the other parties in writing.  Any notice required to be in writing hereunder shall be deemed given if such notice is mailed by certified mail, postage prepaid, sent by overnight courier for next-day delivery or hand-delivered to the address of such party as provided above.

Section 18.             Miscellaneous.

A.            Successors and Assigns.  This Agreement may not be assigned by the Special Servicer unless such assignment is previously consented to in writing by the Trustee and SunTrust Bank; provided that, if the assignment of this Agreement relates solely to matters related to Purchased Loans, the consent of SunTrust Bank shall not be required.  An assignment with such consent, if accepted by the assignee, shall bind the assignee hereunder in the same manner as the Special Servicer is bound hereunder.  Notwithstanding the foregoing, this Agreement may be assigned by the Special Servicer, without the

8

consent of the Trustee or SunTrust Bank to a corporation or other organization that is a successor (by merger, consolidation or purchase of assets) to the Special Servicer; provided that such successor organization executes and delivers to the Trustee and the other parties hereto an agreement in which such corporation or other organization agrees to be bound hereunder in the same manner as the Special Servicer is bound hereunder.  Subject to the foregoing, this Agreement shall bind any such permitted successors or assigns of the parties hereto.

B.            Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to conflicts of laws provisions thereof.

C.            Headings.  The section headings hereof have been inserted for convenience of reference only and shall not be construed to affect the meaning, construction or effect of this Agreement.

D.            Counterparts.  This Agreement may be executed in counterparts, each of which when so executed shall together constitute but one and the same agreement.

E.             Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

F.             Limitation of Liability of Trustee.  Notwithstanding anything contained herein to the contrary, this instrument has been executed by [U.S. Bank National Association], not in its individual capacity but solely in its capacity as Trustee of the Trust, and in no event shall [U.S. Bank National Association] in its individual capacity or any Owner of the Trust have any liability for the representations, warranties, covenants, agreements or other obligations of the Trust hereunder, as to all of which recourse shall be had solely to the assets of the Trust.  For all purposes of this Agreement, in the performance of any duties or obligations of the Trust hereunder, the Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles IX and X of the Trust Agreement.

G.            Third Party Beneficiary.  The parties hereto acknowledge that SunTrust Bank is a third party beneficiary hereof and is entitled to enforce their respective rights hereunder as if actually a party hereto.

H.            No Petition.  The parties hereto will not at any time institute against the Trust any bankruptcy proceeding under any United States federal or state bankruptcy or similar law in connection with any obligations of the Trust.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have caused this Special Servicing Agreement to be duly executed by their respective officers hereunto duly authorized, as of the day and year first above written.

FIRST MARBLEHEAD EDUCATION RESOURCES, INC., as the Special Servicer
By:
	Name:
	Title:
MG STUDENT LOAN TRUST 2010-1
By: [U.S. Bank National Association], not in its individual capacity but solely as Trustee
By:
	Name:
	Title:
FOR PURPOSES OF SECTIONS 2(B)(v), 2(B)(vi), 5, 7, 18(A) and 18(G):
SUNTRUST BANK
By:
	Name:
	Title:
ACKNOWLEDGED AND CONFIRMED:
FIRST MARBLEHEAD DATA SERVICES, INC., as Administrator
By:
	Name:
	Title:

EXHIBIT D1

TransUnion Addendum

TransUnion Addendum

AGENT ADDENDUM TO THE TRANSUNION MASTER SERVICES

AGREEMENT FOR CONSUMER REPORTING AND ANCILLARY SERVICES

This Agent Addendum (“Addendum”), effective the 15th day of July, 2010 (the “Effective Date”), by and between Trans Union LLC, with its principal place of business located at 555 West Adams, Chicago, Illinois 60661 (“TransUnion”), SunTrust Bank, with its principal place of business located at 303 Peachtree Street, Atlanta, GA 30308 (“SUBSCRIBER”), and First Marblehead Education Resources, Inc., with its principal place of business located at One Cabot Road, Medford, Massachusetts 02155 (“Agent”), is meant to modify the terms of the Master Agreement for Consumer Reporting and Ancillary Services entered between TransUnion and Subscriber on or about August 26, 2003 (the “MSA”).

RECITALS

WHEREAS, SUBSCRIBER has entered into an agreement with Agent for the purpose of conducing the project indicated on the attached Schedule A (the “Project”);

WHEREAS, the Project requires TransUnion to disclose Services and Services Information directly to Agent on behalf of SUBSCRIBER;

WHEREAS, SUBSCRIBER desires TransUnion disclose such Services and Services Information directly to Agent, and TransUnion has agreed to such disclosure, subject to the terms contained in both the MSA and this Addendum; and,

WHEREAS, SUBSCRIBER desires that TransUnion invoice Agent for the Services and Services Information disclosed to Agent as more fully explained herein.

NOW, THEREFORE, in exchange for the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.The forgoing Recitals are hereby incorporated by reference as a material part of this Agreement.

2.Capitalized terms not defined herein shall have the definition ascribed in the MSA.

3.SUBSCRIBER hereby appoints Agent its agent with all necessary authority to disclose to, and, request and receive from, TransUnion, Services or Services Information.  Moreover, SUBSCRIBER hereby authorizes TransUnion to disclose Services and Services information to Agent.

4.SUBSCRIBER hereby represents to TransUnion that it has entered into a written agreement with Agent containing obligations and restrictions consistent with its obligations and restrictions under the MSA.  SUBSCRIBER further agrees to enforce such obligations and restrictions against Agent to the satisfaction of TransUnion, and to immediately notify TransUnion upon the discovery of any violation of such obligations and restrictions by Agent.  In the event SUBSCRIBER fails to enforce said obligations and restrictions to TransUnion’s satisfaction, SUBSCRIBER hereby agrees to assign to TransUnion all such enforcement rights against Agent.

5.TransUnion, subject to the terms of the MSA and this Addendum, agrees to: 1) disclose Services and Services Information to Agent on behalf of SUBSCRIBER; and, 2) allow Agent to access Services and Services Information on behalf of Subscriber.

6.Agent certifies that it will request and use any information provided as part of the TransUnion services pursuant to this Addendum in compliance with the terms and conditions of the MSA and only on behalf of SUBSCRIBER one-time and only for the specific permissible purpose certified by SUBSCRIBER at the time of its request.  Agent further certifies that it will limit the disclosure of Services and Services Information to those individuals inside its organization with a “need to know”, and that it will not disclose such information to any third party other than the SUBSCRIBER.

7.SUBSCRIBER and Agent shall at all times be responsible for compliance with, and any violation of, the terms, certifications, obligations and restrictions as set forth in the MSA with respect to Services and/or Services Information disclosed to Agent, including, but not limited to, those terms related to compliance with laws and security.  Moreover, and without regard to any cap on liability set forth in the MSA, SUBSCRIBER and Agent shall jointly and severally defend, indemnify and hold TransUnion harmless from and against any and all claims, expenses, costs, damages, settlements, judgments or awards, including attorney’s fees, directly or indirectly resulting from, or alleged to have directly or indirectly resulted from, disclosure hereunder.

8.SUBSCRIBER authorizes, and TransUnion agrees, that for any Services and/or Services Information accessed by its Agent, TransUnion will invoice SUBSCRIBER care-of Agent, at a rate previously agreed upon by TransUnion and Agent, at the following address One Cabot Road , Medford, Massachusetts 02155, which may be changed upon written notice to TransUnion in accordance with Paragraph 11.  Agent shall remit to TransUnion payment to TransUnion Invoice within thirty (30) days of the invoice date, regardless whether or not it has collected such payment from SUBSCRIBER.  Without limiting any of TransUnion’s remedies for non payment or late payment of invoices, invoices which are not paid by Agent within sixty (60) days of the invoice date shall be subject to a late charge of one and one-half percent (1.5%) per month (18% per year) or the maximum allowed by law, whichever is less.  If collection efforts are required, Agent shall pay all costs of collection, including reasonable attorneys’ fees.

9.Notwithstanding the forgoing, SUBSCRIBER, in accordance with the terms of the MSA, shall remain responsible for payment of any unpaid or untimely paid invoices, as well as any fees associated therewith, submitted to SUBSCRIBER care-of Agent.

10.Agent recognizes the confidential nature of the information contained in the TransUnion invoice(s).  Agent shall keep all information in any way related to the TransUnion invoice(s), whether received from either TransUnion or SUBSCRIBER, in confidence and shall not use such information except for purposes of this Addendum, nor disclose such information to any person or persons outside of its organization.  Moreover, Agent shall limit the disclosure of such information inside its organization to employees having a need to know who are subject to written obligations of confidentiality substantially similar to those contained herein.  Furthermore, no information related to the TransUnion invoice(s), whether received from TransUnion or SUBSCRIBER, shall be copied or duplicated in any form or manner except as necessary to carry out the purpose of this Addendum.

11.All notices and correspondence required under the Addendum shall be sent to the Parties at the following addresses.  Either party may change such name and address by notice to the other in accordance herewith.  Any such change shall take effect immediately upon receipt of such notice.

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If to TransUnion: TransUnion LLC 555 West Adams Chicago, IL 60661 Attn: General Counsel
If to SunTrust: SunTrust Bank 1001 Semmes Avenue Mail Code CS-RVW-7900 Richmond, VA 23224 Attn:  Mark Smith, Executive Vice President	With a copy to: SunTrust Bank Legal Department 303 Peachtree St., NE – 36th Floor Atlanta, GA 30308
If to FMER: First Marblehead Education Resources, Inc. One Cabot Road Medford, MA 02155 Attn:  Managing Director	With a copy to: The First Marblehead Corporation Legal Department 800 Boylston Street, 34th Floor Boston, MA 02199-8157

12.All terms of the MSA are incorporated into this Addendum and are expressly applicable to all orders and payments hereunder.  In the event of a conflict between any of the terms of this Addendum and those of the MSA, the terms of this Addendum shall govern.  The remaining terms of the MSA shall at all times remain in full force and effect.

13.This Addendum shall be coterminous with the MSA unless earlier terminated by SUBSCRIBER in accordance with the termination provisions contained in the MSA or by TransUnion upon written notice to SUBSCRIBER.

[Signatures appear on next page]

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IN WITNESS WHEREOF, the parties, intending to be legally bound, have caused this Addendum to be executed by their duly authorized representatives as of the Effective Date.

TransUnion LLC		SunTrust Bank
By:	/s/ Steve Sassaman	By:	/s/ Joe McDonald
	Steve Sassaman, Executive Vice President		Joe McDonald, First Vice-President
	Name and Title of Signer		Name and Title of Signer
	As of 7/15/10		July 15, 2010
	Date Signed		Date Signed

First Marblehead Education Resources, Inc.
By:	/s/ Michael Plunkett
	Michael Plunkett, Managing Director
	Name and Title of Signer
	28 July 2010
	Date Signed

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Schedule A

Project Description: Custom Choice Loansm Student Loan Origination

All SUBSCRIBER orders placed hereunder shall be made under the following TransUnion Subscriber Code: [**].

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EXHIBIT D2

TransUnion FICO Addendum

AGENT ADDENDUM

AGENT SERVICE ADDENDUM TO THE FICO SCORE SERVICES AGREEMENT

This Agent Service Addendum (the “Addendum”), effective the 15th day of July, 2010 (the “Effective Date”), by and between Trans Union LLC, with its principal place of business located at 555 West Adams, Chicago, Illinois 60661 (“TransUnion”), Fair Isaac Corporation, with its principal place of business located at 901 Marquette Avenue Suite 3200 Minneapolis, MN 55402 (“FICO”), SunTrust Bank, with a place of business located at 1001 Semmes Avenue, Richmond, Virginia 23224 (“SUBSCRIBER”), and First Marblehead Education Resources, Inc. with its principal place of business located at One Cabot Road, Medford, Massachusetts 02155 (“Agent”), and is intended to modify the terms of the Agreement for Fair Isaac Score Services entered between TransUnion, FICO and SUBSCRIBER on or about July 15th, 2010 (the “FICO Agreement”) as more fully explained herein.

RECITALS

WHEREAS, SUBSCRIBER has entered into an agreement with Agent for the purpose of conducing the project indicated on the attached Schedule A (the “Project”);

WHEREAS, the Project requires TransUnion to disclose FICO Score Services directly to Agent on behalf of SUBSCRIBER;

WHEREAS, SUBSCRIBER desires TransUnion disclose such FICO Score Services directly to Agent, and TransUnion and FICO have agreed to such disclosure, subject to the terms contained in both the FICO Agreement and this Addendum; and,

WHEREAS, SUBSCRIBER desires that TransUnion invoice Agent for the FICO Score Services disclosed to Agent as more fully explained herein.

NOW, THEREFORE, in exchange for the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.The forgoing Recitals are hereby incorporated by reference as a material part of this Agreement.

2.Capitalized terms not defined herein shall have the definition ascribed in the FICO AGREEMENT.

3.SUBSCRIBER hereby appoints Agent its agent with all necessary authority to request and receive from TransUnion, FICO Score Services. Moreover, SUBSCRIBER hereby authorizes TransUnion to disclose FICO Score Services to Agent.

4.SUBSCRIBER shall at all times be responsible and ensure Agent’s compliance with the terms and conditions of the FICO AGREEMENT. Additionally SUBSCRIBER hereby represents to TransUnion and FICO that it has entered into a written agreement with Agent containing obligations and restrictions consistent with its obligations and restrictions under the FICO AGREEMENT. SUBSCRIBER further agrees to enforce such obligations and restrictions against Agent to the satisfaction of TransUnion and FICO, and to immediately notify TransUnion and FICO upon the discovery of any

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violation of such obligations and restrictions by Agent. In the event SUBSCRIBER fails to enforce said obligations and restrictions to TransUnion’s and/or FICO’s satisfaction, SUBSCRIBER hereby agrees to assign to TransUnion and/or FICO, as the case may be, all such enforcement rights against Agent.

5.TransUnion and FICO, subject to the terms of the FICO AGREEMENT and this Addendum, agrees to: 1) disclose FICO Score Services to Agent on behalf of SUBSCRIBER.

6.Agent certifies that it will request and use any information provided as part of the FICO Score Services in compliance with the terms and conditions of the FICO AGREEMENT and only on behalf of SUBSCRIBER. Agent further certifies that it will limit the disclosure of FICO Score Services to those individuals inside its organization with a “need to know”, and that it will not disclose such information to any third party other than the SUBSCRIBER.

7.SUBSCRIBER and Agent shall at all times be responsible for compliance with, and any violation of, the terms, certifications, obligations and restrictions as set forth in the FICO AGREEMENT with respect to the FICO Score Services disclosed to Agent, including, but not limited to, those terms related to compliance with laws and security. Moreover, and without regard to any cap on liability set forth in the FICO Agreement, SUBSCRIBER and Agent shall jointly and severally defend, indemnify and hold TransUnion and FICO harmless from and against any and all claims, expenses, costs, damages, settlements, judgments or awards, including attorney’s fees, directly or indirectly resulting from, or alleged to have directly or indirectly resulted from, disclosure hereunder.

8.SUBSCRIBER authorizes, and TransUnion agrees, that for any Services and/or Services Information accessed by its Agent, TransUnion will invoice SUBSCRIBER care-of Agent, at a rate previously agreed upon by TransUnion and Agent, at the following address First Marblehead Education Resources, Inc., Loan Origination, One Cabot Road, Medford, MA 02155, which may be changed by SUBSCRIBER or Agent upon written notice to TransUnion in accordance with paragraph 11. Notwithstanding the forgoing, SUBSCRIBER, in accordance with the terms of the FICO Agreement, shall remain responsible for payment of any unpaid or untimely paid invoices, as well as any fees associated therewith, submitted to SUBSCRIBER care-of Agent.

9.Notwithstanding the forgoing, SUBSCRIBER, in accordance with the terms of the FICO AGREEMENT, shall remain responsible for payment of any unpaid or untimely paid invoices, as well as any fees associated therewith, submitted to SUBSCRIBER care-of Agent.

10.Agent recognizes the confidential nature of the information contained in the TransUnion invoice(s). Agent shall keep all information in any way related to the TransUnion invoice(s), whether received from either TransUnion or SUBSCRIBER, in confidence and shall not use such information except for purposes of this Addendum, nor disclose such information to any person or persons outside of its organization. Moreover, Agent shall limit the disclosure of such information inside its organization to employees having a need to know who are subject to written obligations of confidentiality substantially similar to those contained herein. Furthermore, no information related to the TransUnion invoice(s), whether received from TransUnion or SUBSCRIBER, shall be copied or

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duplicated in any form or manner except as necessary to carry out the purpose of this Addendum.

11.All notices and correspondence required under the Addendum shall be sent to the Parties at the following addresses. Either party may change such name and address by notice to the other in accordance herewith. Any such change shall take effect immediately upon receipt of such notice.

TransUnion LLC	SunTrust Bank (Subscriber)
555 West Adams	1001 Semmes Avenue
Chicago, IL 60661	Richmond, Virginia 23224
Attn: General Counsel	Attn: W. Mark Smith
	Executive Vice President
FMER Loan Originations (Agent)
One Cabot Road
Medford, Massachusetts 02155
Attn: Managing Director

12.All terms of the FICO AGREEMENT are incorporated into this Addendum and are expressly applicable to all orders and payments hereunder. In the event of a conflict between any of the terms of this Addendum and those of the FICO AGREEMENT, the terms of this Addendum shall govern. The remaining terms of the FICO AGREEMENT shall at all times remain in full force and effect.

13.This Addendum shall be coterminous with the FICO AGREEMENT unless earlier terminated by SUBSCRIBER in accordance with the termination provisions contained in the FICO AGREEMENT or by TransUnion or FICO upon written notice to SUBSCRIBER.

[Signatures appear on next page.]

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IN WITNESS WHEREOF, the parties, intending to be legally bound, have caused this Addendum to be executed by their duly authorized representatives as of the Effective Date.

Trans Union LLC		SunTrust Bank
for itself and Fair Isaac Corporation
By:	/s/ Steve Sassaman	By:	/s/ Joe McDonald
	Steve Sassaman, EVP		Joe McDonald, First Vice-President
	Name and Title of Signer		Name and Title of Signer
	As of 7/15/10		July 15, 2010
	Date Signed		Date Signed
First Marblehead Education Resources, Inc.
By:	/s/ Michael Plunkett
	Michael Plunkett, Managing Director
	Name and Title of Signer
	28 July 2010
	Date Signed

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Schedule A

Project Name: Custom Choice LoanSM Student Loan Origination

Project Description:

All SUBSCRIBER orders placed hereunder shall be made under the following TransUnion Subscriber Code(s): [**].

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EXHIBIT E

Amended FMC Variable Rate Compensation

[**]

EX-21.1

Exhibit 21.1

The following is a list of the direct and indirect subsidiaries of The First Marblehead Corporation:

Name of Subsidiary	Jurisdiction of Incorporation or Organization
First Marblehead Data Services, Inc.	Massachusetts
First Marblehead Education Resources, Inc.	Delaware
First Marblehead Securities Corporation II	Massachusetts
The National Collegiate Funding II, LLC	Delaware
Union Federal Savings Bank	United States
UFSB Private Loan SPV, LLC	Delaware
FM Loan Origination Services, LLC	Delaware

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

The First Marblehead Corporation:

We consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-153245, 333-129674, 333-110523 and 333-163141) of The First  Marblehead Corporation of our reports dated September 2, 2010, with respect to the consolidated balance sheets of The First Marblehead Corporation and subsidiaries as of June 30, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended June 30, 2010, and the effectiveness of internal control over financial reporting as of June 30, 2010, which reports appear in the June 30, 2010 annual report on Form 10-K of The First Marblehead Corporation.

/s/ KPMG LLP

Boston, Massachusetts

September 2, 2010

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Daniel Meyers, certify that:

1.I have reviewed this Annual Report on Form 10-K of The First Marblehead 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 officer 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 officer 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 the 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.

Dated: September 2, 2010

/s/ Daniel Meyers

Daniel Meyers

Chairman, Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Kenneth Klipper, certify that:

1.I have reviewed this Annual Report on Form 10-K of The First Marblehead 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 officer 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 officer 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 the 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.

Dated: September 2, 2010

/s/ Kenneth Klipper

Kenneth Klipper

Managing Director, Chief Financial Officer, Treasurer and Chief Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of The First Marblehead Corporation (the “Company”) for the fiscal year ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel Meyers, Chairman, Chief Executive Officer and President of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(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 results of operations of the Company.

Dated: September 2, 2010	/s/ Daniel Meyers
	Daniel Meyers
	Chairman, Chief Executive Officer and President

A signed original of this written statement required by Section 906 has been provided to The First Marblehead Corporation and will be retained by The First Marblehead Corporation and furnished to the SEC or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of The First Marblehead Corporation (the “Company”) for the fiscal year ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kenneth Klipper, Managing Director, Chief Financial Officer, Treasurer and Chief Accounting Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(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 results of operations of the Company.

Dated: September 2, 2010	/s/ Kenneth Klipper
	Kenneth Klipper
	Managing Director, Chief Financial Officer, Treasurer and Chief Accounting Officer

A signed original of this written statement required by Section 906 has been provided to The First Marblehead Corporation and will be retained by The First Marblehead Corporation and furnished to the SEC or its staff upon request.