U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB/A

(Amendment No.1)

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended June 30, 2003.

OR

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 000-29995

EDUCATION LENDING GROUP, INC.

(Exact name of small business issuer as specified in its charter)

Delaware	33-0851387
(State or other jurisdiction of incorporation or organization)	(IRS employer identification number)

12760 High Bluff Drive, Suite 210, San Diego, California 92130

(Address of principal executive offices)

(858) 617-6080

(Registrant’s telephone number, including area code)

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  x  NO  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date: Shares of Common Stock, $0.001 par value, outstanding on June 30, 2003: 11,481,584, including treasury shares.

Transitional Small Business Format:  YES  ¨  NO  x

EXPLANATION OF AMENDMENT

As announced in a press release dated February 26, 2004, as the result of a $468,000 computational error, Education Lending Group, Inc. is restating its consolidated results for the first, second and third quarters of 2003. Loan servicing set-up fees should have been written off against the “gain on sale” instead of continuing to be amortized when the related consolidation loans were sold. We are filing this Form 10-QSB/A to report the results for the quarter and six months ended June 30, 2003, as restated and as discussed in Note 3 to the Consolidated Financial Statements. Other than as set forth below, the restatement does not impact any of the financial or other information set forth in the original filing of our Form 10-QSB for the period ended June 30,2003. Effective as of December 31,2003, Education Lending Group, Inc. is no longer a small business issuer. In the future, we will report our quarterly results on Form 10-Q and our annual results on Form 10-K.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statement of Changes in Stockholders’ Deficit	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
	Report of Independent Accountants	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Controls and Procedures	12
PART II. OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8–K	13

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EDUCATION LENDING GROUP, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2003 (restated)			December 31, 2002
	(Unaudited)
ASSETS
Student loans, net of loan loss reserve	$	290,094,774		$	401,839,983
Student loans, net of loan loss reserve (securitized)		1,870,823,328			947,213,769
Restricted cash and investments		80,242,813			113,995,355
Cash and cash equivalents		2,963,416			2,042,527
Interest & other receivables		17,845,171			9,306,708
Property and equipment, net		1,685,278			1,313,182
Deferred financing costs		8,642,800			4,306,537
Other		654,104			813,209
Total Assets	$	2,272,951,684		$	1,480,831,270
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable	$	1,368,727		$	699,893
Government payables		4,545,208			4,976,425
Accrued expenses and other liabilities		7,288,706			7,746,605
Series 2002/2003 Notes		1,978,068,249			1,023,000,000
Warehouse loan facility		310,093,855			470,038,915
Total Liabilities		2,301,364,745			1,506,461,838
Preferred stock—$0.001 par value, 10,000,000 shares authorized
Common stock—$0.001 par value, 40,000,000 shares authorized, 11,481,584 and 11,189,084 shares issued and outstanding, respectively		11,481			11,189
Additional paid in capital		10,299,810			8,219,678
Accumulated deficit		(37,219,353	)		(33,861,435	)
Accumulated other comprehensive loss		(1,504,999	)		—
Total Stockholders’ Deficit		(28,413,061	)		(25,630,568	)
Total Liabilities and Stockholders’ Deficit	$	2,272,951,684		$	1,480,831,270

See accompanying Notes to consolidated financial statements

3

Education Lending Group, Inc.

Consolidated Statements of Operations

For the Three and Six Months Ended June 30, 2003 and 2002

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2003 (restated)			2002			2003 (restated)			2002
Interest Income:
Student loans, net	$	19,516,152		$	3,690,098		$	34,228,804		$	4,940,357
Investments		386,050			505,458			576,955			529,466
		19,902,202			4,195,556			34,805,759			5,469,823
Cost of Interest Income
Interest related expenses		10,496,576			2,652,653			19,103,579			3,323,593
Valuation of interest rate swap		(308,160	)		—			604,542			—
Loan servicing and other fees		1,035,379			315,806			1,762,988			596,100
Total Cost of Loan Financing		11,223,795			2,968,459			21,471,109			3,919,693
Net Interest Income		8,678,407			1,227,097			13,334,650			1,550,130
Less: Provision for losses		432,554			141,858			987,184			304,753
Interest income after provision		8,245,853			1,085,239			12,347,466			1,245,377
Other Income
Gain on sale of student loans		2,360,474			36,617			10,101,892			40,693
Other		10,325			3,534			17,370			5,392
Total Other Income		2,370,799			40,151			10,119,262			46,085
Operating Expenses:
General and administrative		2,306,020			1,712,842			4,868,133			3,210,515
Sales & marketing		10,072,506			3,486,831			20,919,257			6,985,311
Total Operating Expenses		12,378,526			5,199,673			25,787,390			10,195,826
Loss Before Income Tax Provision		(1,761,874	)		(4,074,283	)		(3,320,662	)		(8,904,364	)
Income tax provision		1,200			1,600			37,256			2,400
Net Loss	$	(1,763,074	)	$	(4,075,883	)	$	(3,357,918	)	$	(8,906,764	)
Net Loss Per Share:
Basic & diluted	$	(0.15	)	$	(0.40	)		(0.30	)	$	(0.91	)
Weighted average common shares outstanding:
Basic & diluted		11,433,758			10,113,806			11,372,803			9,763,056

See accompanying Notes to consolidated financial statements

4

EDUCATION LENDING GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Six Months Ended June 30, 2003

(Unaudited)

	COMMON STOCK
	Number of Shares	Amount		Additional Paid in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total			Comprehensive Loss
Balance, December 31, 2002	11,189,084	$	11,189	$	8,219,678	$	(33,861,435	)		—		$	(25,630,568	)		—
Issuance of common stock	292,500		292		327,375		—			—			327,667			—
Performance based options	—		—		1,752,757		—			—			1,752,757			—
Other comprehensive loss	—		—		—		—		$	(1,504,999	)		(1,504,999	)	$	(1,504,999	)
Net loss, June 30, 2003 (restated)	—		—		—		(3,357,918	)		—			(3,357,918	)		(3,357,918	)
Balance at June 30, 2003 (restated)	11,481,584	$	11,481	$	10,299,810	$	(37,219,353	)	$	(1,504,999	)	$	(28,413,061	)	$	(4,862,917	)

See accompanying Notes to consolidated financial statements

5

EDUCATION LENDING GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2003 and 2002

(Unaudited)

	2003 (restated)			2002
Cash Flows From Operating Activities:
Net loss	$	(3,357,918	)	$	(8,906,764	)
Adjustments to reconcile net loss to net cash used in operations:
Non-cash charges (Depreciation, amortization and option expense)		2,541,532			169,158
Provision for loan losses		987,184			304,753
Valuation of interest rate swap		604,542			—
(Increase) decrease in assets:
Interest and other receivables		(8,538,463	)		(2,380,394	)
Other assets		159,105			(1,641,950	)
Increase (decrease) in liabilities:
Accounts payable		623,732			2,190,962
Government payable		(431,217	)		—
Accrued expenses		(2,536,092	)		2,050,517
Net cash used in operating activities		(9,947,595	)		(8,213,718	)
Cash flows from investing activities:
Origination/Purchase of student loans		(813,159,549	)		(256,217,268	)
Acquisition of property and equipment		(575,463	)		(708,240	)
Net cash used in investing activities		(813,735,012	)		(256,925,508	)
Cash flows from financing activities:
Net payments to credit facility		(89,927,948	)		(260,956,887	)
Net proceeds from Series 2002/2003 Notes		918,803,679			525,000,000
Payment of loan fees		(4,599,902	)		(1,726,500	)
Proceeds from issuance of stock		327,667			1,117,500
Net cash provided by financing activities		824,603,496			263,434,113
Net increase (decrease) in cash		920,889			(1,705,113	)
Cash and cash equivalents at beginning of period		2,042,527			1,705,113
Cash and cash equivalents at end of period	$	2,963,416		$	0

See accompanying Notes to consolidated financial statements

6

Education Lending Group, Inc.

(Formerly Direct III Marketing, Inc.)

Notes to Consolidated Financial Statements

June 30, 2003

(Unaudited)

Note 1—Statement of Accounting Principles

New Accounting Pronouncements

In April 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” (“SFAS 149”). SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments and for hedging activities under SFAS 133. In particular, SFAS 149 (1) clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative discussed in paragraph 6(b) of SFAS 133, (2) clarifies when a derivative contains a financing component, (3) amends the definition of an underlying to conform it to language used in FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” and (4) amends certain other existing pronouncements. Those changes will result in more consistent reporting of contracts as either derivatives or hybrid instruments. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The Company has determined that SFAS 149 will not have a significant impact on its consolidated financial statements.

In December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of SFAS 123,” (“SFAS 148”). SFAS 148 addresses transition provisions for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123. The Company has determined that SFAS 148 will not have a significant impact on its consolidated financial statements. As discussed above, the Company continues to account for its incentive based compensation using the intrinsic value method under APB 25. Had compensation cost for the Company’s stock options been recognized based upon the estimated fair value on the grant date under the fair value methodology prescribed by SFAS 123 as amended by SFAS 148, the Company’s net earnings and earnings per share would have been changed as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2003 (restated)			2002			2003 (restated)			2002
Net loss, as reported	$	(1,763,074	)	$	(4,075,883	)	$	(3,357,918	)	$	(8,906,764	)
Deduct: total stock-based compensation expense determined under fair-value based method, net of tax effects		(238,827	)		(234,847	)		(446,575	)		(453,210	)
Pro forma net loss	$	(2,001,901	)	$	(4,310,730	)	$	(3,804,493	)	$	(9,359,974	)
Loss per share:
Basic & diluted, as reported	$	(0.15	)	$	(0.40	)	$	(0.30	)	$	(0.91	)
Basic & diluted, pro forma	$	(0.18	)	$	(0.43	)	$	(0.33	)	$	(0.96	)

As required by SFAS 123, the Company provides the following disclosure of hypothetical values for the net options issued during 2003. The net stock options granted during the quarter and six months ended June 30, 2003 are valued at $5.88 and $4.79, respectively. These values were estimated using the Black-Scholes option-pricing model with the following assumptions: risk free interest rates of 3.80% and 3.87% were used for the quarter and six months ended June 30, 2003, respectively; expected volatility of 92% and expected life of 9.33 years were used for both the quarter and six months ended June 30, 2003.

Note 2—Student Loans

The Company originates student loans on its own behalf and purchases student loans from originating lenders. The Company’s portfolio consists principally of loans originated under two federally sponsored programs: FFELP and the Health Education Assistance Loan Program (“HEAL”). The Company also purchases private education loans.

There are three principal categories of FFELP loans: Stafford loans, PLUS loans, and consolidation loans. The nature of the student loans held at June 30, 2003 are as follows:

7

Loans Held by Type

As of June 30, 2003

	Student Loans			Student Loans Securitized			Total
FFELP Loans:
Stafford	$	48,410,635		$	—		$	48,410,635
PLUS		2,073,475			—			2,073,475
Consolidation		227,330,535			1,860,107,241			2,087,437,776
FFELP Subtotal		277,814,645			1,860,107,241			2,137,921,886
Private Loans		9,825,401			—			9,825,401
Total Student Loans, gross		287,640,046			1,860,107,241			2,147,747,287
Capitalized costs, net of amortization		2,788,498			12,948,414			15,736,912
Loan loss reserve		(333,770	)		(2,232,327	)		(2,566,097	)
Total student loans, net	$	290,094,774		$	1,870,823,328		$	2,160,918,102

The activity in the student loan balances held during the period from December 31, 2002 through June 30, 2003 is as follows:

	Student Loans			Student Loans Securitized			Total
Balance at December 31, 2002	$	401,839,983		$	947,213,769		$	1,349,053,752
Additions
Originations and Purchases		1,190,099,096			1,564,918			1,191,664,014
Capitalized Interest		626,079			3,255,757			3,881,836
Additions to Capitalized Costs		6,480,619			7,199,362			13,679,981
Reductions in Loan Loss Reserve		1,541,357			69,497			1,610,854
Deductions
Borrower Payments		(30,728,016	)		(55,838,979	)		(86,566,995	)
Sales to Third Parties		(302,188,127	)		—			(302,188,127	)
Additions to Loan Loss Reserve		(1,412,653	)		(1,179,886	)		(2,592,539	)
Reductions in Capitalized Costs		(6,353,337	)		(765,358	)		(7,118,695	)
Other
Transfer to Securitizations		(969,972,482	)		969,472,975			(499,507	)
Other		162,255			(168,727	)		(6,472	)
Balance at 6/30/03	$	290,094,774		$	1,870,823,328		$	2,160,918,102

Note 3-Restatement of Quarterly Results

During our review of our 2003 year-end financial statements we discovered a computational error related to the sale of consolidation loans during the first and second quarters of 2003. Loan servicing set-up fees should have been written off against the “gain on sale” instead of continuing to be amortized when the related consolidation loans were sold. We have restated our consolidated financial statements to reflect the changes related to this adjustment. Following is a summary of the changes to our consolidated balance sheet at June 30, 2003, our consolidated statement of income for the three and six months ended June 30, 2003, and our consolidated statement of cash flows for the six months ended June 30, 2003.

Consolidated Balance Sheet as of June 30, 2003	As previously reported			As restated
Student loans, net of loan loss reserve (securitized)	$	1,871,298,485		$	1,870,823,328
Total assets		2,273,426,841			2,272,951,684
Accumulated deficit		(36,744,196	)		(37,219,353	)
Total stockholders’ deficit		(27,937,904	)		(28,413,061	)

Consolidated Statement of Operations	As previously reported Three months ended June 30, 2003			As restated Three months ended June 30, 2003			As previously reported Six months ended June 30, 2003			As restated Six months ended June 30, 2003
Loan servicing and other fees	$	1,041,627		$	1,035,379		$	1,774,673		$	1,762,988
Gain on sale of student loans		2,446,546			2,360,474			10,588,734			10,101,892
Net loss		(1,683,250	)		(1,763,074	)		(2,882,761	)		(3,357,918	)
Net loss per share		(0.15	)		(0.15	)		(0.25	)		(0.30	)
Weighted average common shares outstanding:
Basic & diluted		11,433,758			11,433,758			11,372,803			11,372,803

Consolidated Statement of Cash Flows for the six months ended June 30, 2003	As previously reported			As restated
Net loss	$	(2,882,761	)	$	(3,357,918	)
Net cash used in operating activities		(9,472,438	)		(9,947,595	)
Origination/purchase of student loans		(813,634,706	)		(813,159,549	)
Net cash used in investing activities		(814,210,169	)		(813,735,012	)

8

Report of Independent Accountants

To the Board of Directors and Stockholders

of Education Lending Group, Inc.:

We have reviewed the accompanying consolidated balance sheet of Education Lending Group, Inc. and its subsidiaries (the “Company”) as of June 30, 2003 and the related consolidated statements of operations and changes in stockholders’ deficit for each of the three-month and six-month periods ended June 30, 2003 and June 30, 2002 and the consolidated statement of cash flows for the six-month periods ended June 30, 2003 and June 30, 2002. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, after the restatement described in Note 3, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2002, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the year then ended (not presented herein), and in our report dated February 27, 2003 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of June 30, 2003, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

PricewaterhouseCoopers LLP

Los Angeles, CA

August 11, 2003, except for Note 3, as to which the date is February 19, 2004

9

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

As announced in a press release dated February 26, 2004, as the result of a $468,000 computational error, Education Lending Group, Inc. is restating its consolidated results for the first, second and third quarters of 2003. Loan servicing set-up fees should have been written off against the “gain on sale” instead of continuing to be amortized when the related consolidation loans were sold. We are filing this Form 10-QSB/A to report the results for the quarter and six months ended June 30, 2003, as restated and as discussed in Note 3 to the Consolidated Financial Statements. Other than as set forth below, the restatement does not impact any of the financial or other information set forth in the original filing of our Form 10-QSB for the period ended June 30,2003. Effective as of December 31,2003, Education Lending Group, Inc. is no longer a small business issuer. In the future, we will report our quarterly results on Form 10-Q and our annual results on Form 10-K. Amounts referred to in Management’s Discussion and Analysis of Financial Condition and Results of Operations that were impacted by the restatement are restated below.

RESULTS OF OPERATIONS

For the three months ended June 30, 2003 and 2002

Earnings Summary

For the three months ended June 30, 2003, the Company’s net loss was $1.8 million, or $0.15 per share, compared to a net loss of $4.1 million, or $0.40 per share for the three months ended June 30, 2002. The decreased loss for the three months ended June 30, 2003 as compared to June 30, 2002 is attributable to higher revenues generated by higher loan balances in the June 30, 2003 quarter than in the June 30, 2002 quarter, partially offset by correspondingly higher interest related expenses, loan servicing fees and operating expenses. Additionally, the decreased loss for the three months ended June 30, 2003 as compared to June 30, 2002 is due to the sale of approximately $41.2 million of consolidation loans (the Company sold the consolidation loans during the period to raise cash for operations) which resulted in a gain on sale of roughly $1.7 million. Included in the Company’s operating expenses for the quarter are the payments made to marketing partners who advertise, identify and attract potential borrowers for the Company. As the loan volume for a particular period increases, marketing partner fees increase. These marketing partner fees are a significant portion of the Company’s expenses and include a non-cash charge related to vesting and mark-to-market adjustments of the performance based options awarded to certain marketing partners as discussed in Note 1 to the consolidated financial statements. These fees are a significant portion of the Company’s expenses and during the quarter ended June 30, 2003, represented 58% of the total operating expenses of the Company. Additionally, the Company increased its student loan asset base during the quarter by roughly $367 million to approximately $2.2 billion. Since the Company only earns an interest spread on the loans it holds on its balance sheet, the marketing partner fee expense along with other sales and marketing expenses results in significant losses until such time as a significant scale of student loan assets is reached on the balance sheet.

Net Interest Income and Income after Provision for Loan Losses

Net interest income is derived largely from the Company’s portfolio of student loans and is the spread between interest earned on student loans and the Company’s cost of generating that interest income. These costs include interest expense on the warehouse facility and permanent financings, fees paid to a third party servicer to service the loans, mark-to-market adjustments related to interest rate swaps that have not been designated as cash flow hedges, fees paid to the Department of Education, and amortization of premiums paid to acquire student loans. All servicing of the Company’s student loans is outsourced to third party servicers. Net interest income during the three months ended June 30, 2003 was $8,678,000. This was comprised of gross interest income of approximately $19,902,000 less costs of interest of approximately $11,224,000. This amount includes interest related costs of $10,497,000, loan servicing and other fees of approximately $1,035,000 and a mark-to-market adjustment of $308,000 (credit) for the interest rate swap entered into during the fourth quarter of 2002. For the quarter ended June 30, 2003, net interest income after the provision for loan losses was approximately $8,246,000. Net interest income for the three months ended June 30, 2002 was $1,227,000. This was comprised of gross interest income of approximately $4,196,000 less costs of interest income of approximately $2,969,000. These costs for the quarter ended June 30, 2002 include interest related costs of $2,653,000 and loan servicing and other fees of approximately $316,000. Net interest income after the provision for loan losses was approximately $1,085,000 for the quarter ended June 30, 2002. The increase in the net interest income earned by the Company during the quarter is a direct result of the increase in the student loan assets held by the Company over those held in the same quarter of the prior year. In addition, because the majority of the student loans held by the Company are consolidation loans (100% of the loans on its balance sheet at December 31, 2001 and approximately 97% of the loans on its balance sheet at December 31, 2002 and June 30, 2003) which carry a fixed interest rate, coupled with the fact the Company’s borrowing costs have decreased (a function of the declining interest rate environment of the economy since June 30, 2002), the Company’s spread has increased which is reflected in the increased net interest income. A majority of the student loans held by the Company have been financed with proceeds from both the warehouse loan facility (variable interest rate financing based upon the commercial paper rate of the financial institution providing the facility) and the Series 2002 Notes (part of these notes bear interest on a variable rate basis adjusted monthly and part of these notes are fixed for a period of as long as 13 months before they begin to adjust monthly). Assuming a continued low interest rate environment, the Company’s interest cost will continue to decrease when the portions of the Series 2002 Notes with longer terms and fixed interest rates begin to adjust to variable interest rates adjusted monthly. The Company expects this to result in improvement to the net interest spread.

10

Gain on Sale of Student Loans

In general, the Company currently sells the majority of the loans it originates in the traditional “lender-list” marketing channel, SLX, while retaining loans originated in the consolidation marketing channel. The SLX business is rather seasonal as the majority of the loans are originated in the August/September/October and January/February/March time frames, which correspond to the college disbursement calendar. For the three months ended June 30, 2003 the Company recorded approximately $631,000 as gain on the sale of student loans from SLX, compared with $37,000 during the three months ended June 30, 2002. This increase from the second quarter of 2002 to the second quarter of 2003 is attributable to having a full year of operations leading into the quarter whereas the second quarter of 2002 was the first full quarter of operations for SLX.

From time to time the Company may elect also to sell some portion of its consolidation loans. Accordingly, in addition to the sale of loans generated in the SLX business during the quarter ended June 30, 2003, the Company chose to sell approximately $41,200,000 of consolidation loans. This resulted in additional gain on sale of approximately $1,730,000 for the three months ended June 30, 2003 compared to no sales from this source in the quarter ended June 30, 2002. As a result, the Company had total gain on sale during the quarter ended June 30, 2003 of approximately $2,360,000 compared to $37,000 during the same period in 2002.

For the six months ended June 30, 2003 and 2002

Earnings Summary

For the six months ended June 30, 2003, the Company’s net loss was $3.4 million, or $0.30 per share, compared to a net loss of $8.9 million, or $0.91 per share for the six months ended June 30, 2002. The decreased loss for the six months ended June 30, 2003 as compared to June 30, 2002 is primarily attributable to the sale of approximately $247 million of consolidation loans (the Company sold the consolidation loans during the period to raise cash for operations) which resulted in a gain on sale of roughly $8.5 million. Also contributing to the reduced loss in the six months ended June 30, 2003 as compared to the six months ended June 30, 2002 are the higher revenues generated by higher loan balances in the six months ended June 30, 2003 than in the six months ended June 30, 2002, partially offset by correspondingly higher interest related expenses, loan servicing fees and operating expenses. Included in the Company’s operating expenses are payments made to marketing partners who advertise, identify and attract potential borrowers for the Company. As the loan volume for a particular period increases, marketing partner fees also increase. These marketing partner fees are a significant portion of the Company’s expenses and include the non-cash charge of approximately $1,463,000 related to vesting and mark-to-market adjustments of the performance based options awarded to certain marketing partners discussed in Note 1 to the consolidated financial statements. During the six months ended June 30, 2003, marketing partner fees represented 58% of the total operating expenses of the Company. Since the Company only earns an interest spread on the loans carried on its balance sheet, the marketing partner fee expense along with other sales and marketing expenses results in significant losses until such time as a significant scale of student loan assets is reached on the balance sheet. Additionally, during the six months ended June 30, 2003 the Company increased its student loan asset base from the balance at December 31, 2002 by roughly $812 million to approximately $2.2 billion.

Net Interest Income and Interest Income after Provision for Loan Losses

Net interest income is derived largely from the Company’s portfolio of student loans that remain on the balance sheet and is the spread between interest earned on student loans and the Company’s cost of generating that interest income. These costs include interest expense on the warehouse facility and permanent financings, fees paid to a third party servicer to service the loans, mark-to-market adjustments related to interest rate swaps that have not been designated as cash flow hedges, fees paid to the Department of Education and amortization of premiums paid to acquire student loans. All servicing of the Company’s student loans is outsourced to third party servicers. Net interest income for the six months ended June 30, 2003 was $13,335,000. This was comprised of gross interest income of approximately $34,806,000 less interest costs of approximately $21,471,000. Interest costs include interest related expenses of $19,103,000, a mark-to-market adjustment of $605,000 related to the interest rate swap entered into during the fourth quarter of 2002 and loan servicing and other fees of $1,763,000. For the six months ended June 30, 2003, net interest income after the provision for loan losses was approximately $12,347,000. Net interest income for the six months ended June 30, 2002 was $1,550,000. This was comprised of gross interest income of approximately $5,470,000 less costs of interest income of approximately $3,920,000. Costs of interest income include interest related expenses of $3,324,000 and loan servicing and other fees of $596,000 for the six months ended June 30, 2002. Net interest income after the provision for loan losses was approximately $1,245,000 for the six

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months ended June 30, 2002. The increase in the net interest income earned by the Company during the six months ended June 30, 2003 compared to the six months ended June 30, 2002 is a direct result of the increase in the student loan assets held by the Company at June 30, 2003. In addition, because the majority of the student loans held by the Company are consolidation loans (100% of the loans on its balance sheet at December 31, 2001 and approximately 97% of the loans on its balance sheet at December 31, 2002 and June 30, 2003) which carry a fixed interest rate, coupled with the fact the Company’s borrowing costs have decreased (a function of the declining interest rate environment of the economy since June 30, 2002), the Company’s spread has increased which is reflected in the increased net interest income. A majority of the student loans held by the Company have been financed with proceeds from both the warehouse loan facility (variable interest rate financing based upon the commercial paper rate of the financial institution providing the facility) and the Series 2002 Notes (part of these notes bear interest on a variable rate basis adjusted monthly and part of these notes are fixed for a period of as long as 13 months before they begin to adjust monthly). Assuming a continued low interest rate environment, the Company’s interest cost will continue to decrease when the portions of the Series 2002 Notes with longer terms and fixed interest rates begin to adjust to variable interest rates adjusted monthly. This will result in improvement to the net interest spread.

Gain on Sale of Student Loans

In general, the Company currently sells the majority of loans it originates in the traditional “lender-list” marketing channel, SLX, while retaining loans originated in the consolidation marketing channel. The SLX business is rather seasonal as the majority of the loans are originated in the August/September/October and January/February/March time frames which correspond to the college disbursement calendar. For the six months ended June 30, 2003 approximately $1,570,000 was booked as gain on the sale of student loans from this entity compared with $41,000 during the six months ended June 30, 2002. The increase from the six months ended June 30, 2002 to the six months ended June 30, 2003 is attributable to having a full year of operations leading into the period, whereas SLX had only commenced operations in the first quarter of 2002 and therefore had neither a full six months of activity, nor an established pipeline from which to draw.

From time to time the Company may elect also to sell some portion of its consolidation loans. Accordingly, in addition to the sale of loans generated in the SLX business during the six months ended

June 30, 2003, the Company chose to sell approximately $247,000,000 of consolidation loans. This resulted in additional gain on sale of approximately $8,532,000 for the six months ended June 30, 2003 compared to no sales from this source in the first six months of 2002. As a result, the Company had total gain on sale during the six months ended June 30, 2003 of roughly $10,102,000 compared to $41,000 during the same period in 2002.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2003, the Company had operating cash and cash equivalents of approximately $2,963,000 (excluding restricted cash and investments). Since inception, the Company has financed its operations from debt and equity financings. During the three and six months ended June 30, 2003, the Company used cash of approximately $9,256,000 and $9,948,000, respectively, to fund its operations. During the three and six months ended June 30, 2003, the Company acquired property and equipment of approximately $399,000 and $575,000, respectively. At June 30, 2003, the Company had advances of roughly $310,094,000 outstanding against its warehouse loan facilities, reflecting $89,928,000 in net payments to the warehouse line during the six months then ended. The Company holds $984,500,000 and $993,568,000 from its Auction Rate Education Loan Backed Notes (“Series 2002 Notes” and “Series 2003 Notes,” respectively) at June 30, 2003. During the six months ended June 30, 2003, the Company’s net recorded loans increased $811,864,000 to $2,160,918,000. During the three and six months ended June 30, 2003, the Company received proceeds of approximately $154,000 and $328,000, respectively, net of issuance costs, for the purchase of 130,334 and 292,500 shares of common stock in connection with the exercise of warrants and stock options.

Item 3. Controls and Procedures

Based on their most recent evaluation, which was completed within 90 days of the filing of this Form 10-QSB/A, our principal executive officer and principal financial officer believe our disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) require specific modifications to insure that all financial reporting and disclosures are accurate. We are in the process of developing improved internal control processes and expect to implement them during the first quarter of 2004. We believe these changes will enhance the accuracy of all future financial reports.

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Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits.

The exhibits listed below are filed as part of this document.

Exhibit Number	Description
10.1*	Amendment No. 3 to Indenture dated October 18, 2002, among Education Funding Resources, LLC, Corporate Receivables Corporation, Corporate Asset Funding Company, Inc., certain financial institutions from time to time party thereto, Citicorp North America, Inc., Fifth Third Bank and Education Lending Services, Inc., dated July 1, 2003.
31.1	CEO Certification under Sarbanes-Oxley Act (Section 302)
31.2	CFO Certification under Sarbanes-Oxley Act (Section 302)
32.1	CEO Certification under Sarbanes-Oxley Act (Section 906)
32.2	CFO Certification under Sarbanes-Oxley Act (Section 906)

(b) Form 8-K.

During the last quarter, the Company filed one Report on Form 8-K dated May 14, 2003.

* Previously filed

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 27, 2004	EDUCATION LENDING GROUP, INC.
	By:	/s/    JAMES G. CLARK
	Name:	James G. Clark
	Title:	Chief Financial Officer (Principal Financial and Accounting Officer)

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