U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB/A

(Amendment No. 2)

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 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 (State or other jurisdiction of incorporation or organization) 33-0851387 (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 September 30, 2003: 12,975,055, 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 Form10-QSB/A to report the results for the quarter and nine months ended September 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 filing of our Form 10-QSB for the period ended September 30, 2003 as amended by the first amendment to such form filed on October 23, 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
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3. Controls and Procedures	11
PART II. OTHER INFORMATION	11
Item 6. Exhibits and Reports on Form 8–K	11

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EDUCATION LENDING GROUP, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2003 (restated)			December 31, 2002
	(Unaudited)
ASSETS
Student loans, net of loan loss reserve	$	908,994,229		$	401,839,983
Student loans, net of loan loss reserve (securitized)		1,832,490,178			947,213,769
Restricted cash and investments		127,881,369			113,995,355
Cash and cash equivalents		5,459,385			2,042,527
Interest & other receivables		24,433,822			9,306,708
Property and equipment, net		1,541,947			1,313,182
Deferred financing costs		8,542,983			4,306,537
Other		224,022			813,209
Total Assets	$	2,909,567,935		$	1,480,831,270
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable	$	2,742,753		$	699,893
Government payables Accrued expenses and other liabilities		7,043,751 7,933,430			4,976,425 7,746,605
Series 2002/2003 Notes		1,943,391,639			1,023,000,000
Warehouse loan facility		977,140,863			470,038,915
Total Liabilities		2,938,252,436			1,506,461,838
Commitments and Contingencies
Preferred stock—$0.001 par value, 10,000,000 shares authorized
Common stock—$0.001 par value, 40,000,000 shares authorized, 12,975,055 and 11,189,084 shares issued and outstanding, respectively		12,975			11,189
Additional paid in capital		12,555,289			8,219,678
Accumulated deficit		(40,033,266	)		(33,861,435	)
Accumulated other comprehensive loss		(1,219,499	)		—
Total Stockholders’ Deficit		(28,684,501	)		(25,630,568	)
Total Liabilities and Stockholders’ Deficit	$	2,909,567,935		$	1,480,831,270

See accompanying notes to consolidated financial statements

3

Education Lending Group, Inc.

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2003 and 2002

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003 (restated)			2002			2003 (restated)			2002
Interest Income:
Student loans, net	$	23,193,398		$	6,943,889		$	57,422,202		$	11,884,246
Investments		218,596			1,274,351			795,551			1,803,817
		23,411,994			8,218,240			58,217,753			13,688,063
Cost of Interest Income
Interest-related expenses		11,172,198			6,159,540			30,275,777			9,483,133
Valuation of interest rate swap		(869,559	)		—			(265,017	)		—
Loan servicing and other fees		1,145,423			503,432			2,908,411			1,099,532
Total Cost of Loan Financing		11,448,062			6,662,972			32,919,171			10,582,665
Net Interest Income		11,963,932			1,555,268			25,298,582			3,105,398
Less: Provision for losses		681,003			663,571			1,668,187			968,324
Interest income after provision		11,282,929			891,697			23,630,395			2,137,074
Other Income
Gain on sale of student loans		587,410			1,011,302			10,689,302			1,051,995
Other		33,672			7,640			51,042			13,032
Total Other Income		621,082			1,018,942			10,740,344			1,065,027
Operating Expenses:
General and administrative		3,057,671			2,451,996			7,925,804			5,662,511
Sales & marketing		11,657,053			9,663,979			32,576,310			16,649,290
Total Operating Expenses		14,714,724			12,115,975			40,502,114			22,311,801
Loss Before Income Tax Provision		(2,810,713	)		(10,205,336	)		(6,131,375	)		(19,109,700	)
Income tax provision		3,200			2,866			40,456			5,266
Net Loss	$	(2,813,913	)	$	(10,208,202	)	$	(6,171,831	)	$	(19,114,966	)
Net Loss Per Share:
Basic & diluted	$	(0.23	)	$	(0.99	)	$	(0.53	)	$	(1.92	)
Weighted average common shares outstanding:
Basic & diluted		12,085,134			10,306,509			11,604,215			9,962,192

See accompanying notes to consolidated financial statements

4

EDUCATION LENDING GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Nine Months Ended September 30, 2003

(Unaudited)

	COMMON STOCK
	Number of Shares	Amount		Additional Paid in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total			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	1,785,971		1,786		2,506,711		—			—			2,508,497			—
Performance based options	—		—		1,828,900		—			—			1,828,900			—
Other comprehensive loss, net of taxes	—		—		—		—			(1,219,499	)		(1,219,499	)		(1,219,499	)
Net loss, September 30, 2003 (restated)	—		—		—		(6,171,831	)		—			(6,171,831	)		(6,171,831	)
Balance at September 30, 2003 (restated)	12,975,055	$	12,975	$	12,555,289	$	(40,033,266	)	$	(1,219,499	)	$	(28,684,501	)	$	(7,391,330	)

See accompanying notes to consolidated financial statements

5

EDUCATION LENDING GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2003 and 2002

(Unaudited)

	2003 (restated)			2002
Cash Flows From Operating Activities:
Net loss	$	(6,171,831	)	$	(19,114,966	)
Adjustments to reconcile net loss to net cash used in operations:
Non-cash charges (Depreciation, amortization and option expense)		3,108,297			311,007
Provision for loan losses Valuation of interest rate swap		1,668,187 (265,017	)		968,324 —
(Increase) decrease in assets:
Interest and other receivables		(15,127,113	)		(6,190,664	)
Other assets		589,187			(476,230	)
Increase (decrease) in liabilities:
Accounts payable Government payable		1,997,624 2,067,325			866,888 5,847,557
Accrued expenses		(766,433	)		7,439,921
Net cash used in operating activities		(12,899,774	)		(10,348,163	)
Cash flows from investing activities:
Origination/Purchase of student loans, net		(1,394,591,300	)		(812,515,336	)
Acquisition of property and equipment		(552,652	)		(828,027	)
Net cash used in investing activities		(1,395,143,952	)		(813,343,363	)
Cash flows from financing activities:
Net proceeds from warehouse loan facility		537,606,252			70,813,170
Net proceeds from Series 2002/2003 Notes		876,001,321			757,313,408
Payment of loan fees		(4,655,486	)		(3,991,042	)
Proceeds from issuance of stock		2,508,497			1,132,335
Net cash provided by financing activities		1,411,460,584			825,267,871
Net increase in cash		3,416,858			1,576,345
Cash and cash equivalents at beginning of period		2,042,527			1,705,113
Cash and cash equivalents at end of period	$	5,459,385		$	3,281,458

See accompanying notes to consolidated financial statements

6

Education Lending Group, Inc.

(Formerly Direct III Marketing, Inc.)

Notes to Consolidated Financial Statements

September 30, 2003

(Unaudited)

Note 1 – Statement of Accounting Principles

New Accounting Pronouncements

In April 2003, the Financial Accounting Standards Board (“FASB”) issued 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. We have determined that SFAS 149 will not have a significant impact on our 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. We are currently evaluating the impact adoption of SFAS 148 and, accordingly, SFAS 123, would have on our consolidated financial statements. We continue to account for our incentive based compensation using the intrinsic value method under APB 25. Had compensation cost for our 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, our net earnings and earnings per share would have been changed as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003 (restated)			2002			2003 (restated)			2002
Net loss, as reported	$	(2,813,913	)	$	(10,208,202	)	$	(6,171,831	)	$	(19,114,966	)
Deduct: total stock-based compensation expense determined under fair-value based method, net of tax effects		(200,174	)		(241,870	)		(652,077	)		(695,080	)
Pro forma net loss	$	(3,014,087	)	$	(10,450,072	)	$	(6,823,908	)	$	(19,810,046	)
Loss per share:
Basic & diluted, as reported	$	(0.23	)	$	(0.99	)	$	(0.53	)	$	(1.92	)
Basic & diluted, pro forma	$	(0.25	)	$	(1.01	)	$	(0.59	)	$	(1.99	)

As required by SFAS 123, we provide the following disclosure of hypothetical values for the net options issued during 2003. The net stock options granted during the quarter and nine months ended September 30, 2003 are valued at $8.95 and $5.36, respectively. These values were estimated using the Black-Scholes option-pricing model with the following assumptions: risk free interest rates of 3.93% and 3.88% were used for the quarter and nine months ended September 30, 2003, respectively; expected volatility of 92% and expected life of 9.33 years were used for both the quarter and nine months ended September 30, 2003.

Note 2 – Student Loans

We originate student loans on our own behalf and we purchase student loans from originating lenders. Our portfolio consists principally of loans originated under two federally sponsored programs: FFELP and the Health Education Assistance Loan Program, which is also known as HEAL. We also purchase alternative supplemental education loans. There are three principal categories of FFELP loans: consolidation loans, Stafford loans and PLUS loans. The nature of the student loans held at September 30, 2003 is as follows:

7

	Student Loans			Student Loans Securitized			Total
FFELP Loans:
Consolidation	$	796,032,456		$	1,820,776,973		$	2,616,809,429
Stafford		97,118,821			—			97,118,821
PLUS		713,166			—			713,166
FFELP Subtotal		893,864,443			1,820,776,973			2,714,641,416
Alternative Supplemental Loans		9,943,741			—			9,943,741
Total Student Loans, gross		903,808,184			1,820,776,973			2,724,585,157
Capitalized costs, net of amortization		6,217,673			13,898,420			20,116,093
Loan loss reserve		(1,031,628	)		(2,185,215	)		(3,216,843	)
Total student loans, net	$	908,994,229		$	1,832,490,178		$	2,741,484,407

The activity relating to the student loan balances held during the period from December 31, 2002 through September 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		1,900,480,632			4,375,512			1,904,856,144
Capitalized Interest		950,763			6,467,985			7,418,748
Additions to Capitalized Costs		10,016,543			8,386,067			18,402,610
Reductions in Loan Loss Reserve		1,609,012			124,436			1,733,448
Deductions
Borrower Payments		(46,383,596	)		(98,674,666	)		(145,058,262	)
Sales to Third Parties		(384,034,087	)		—			(384,034,087	)
Additions to Loan Loss Reserve		(2,178,414	)		(1,215,753	)		(3,394,167	)
Reductions in Capitalized Costs		(6,460,086	)		(1,002,059	)		(7,462,145	)
Other
Transfer to Securitizations		(967,005,485	)		967,005,485			—
Other		158,964			(190,598	)		(31,634	)
Balance at September 30, 2003	$	908,994,229		$	1,832,490,178		$	2,741,484,407

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 September 30, 2003, our consolidated statement of income for the three and nine months ended September 30, 2003, and our consolidated statement of cash flows for the nine months ended September 30, 2003.

Consolidated Balance Sheet as of September 30, 2003	As previously reported			As restated
Student loans, net of loan loss reserve (securitized)	$	1,832,958,659		$	1,832,490,178
Total assets		2,910,036,416			2,909,567,935
Accumulated deficit		(39,564,785	)		(40,033,266	)
Total stockholders’ deficit		(28,216,020	)		(28,684,501	)

Consolidated Statement of Operations	As previously reported Three months ended September 30, 2003			As restated Three months ended September 30, 2003			As previously reported Nine months ended September 30, 2003			As restated Nine months ended September 30, 2003
Loan servicing and other fees	$	1,152,099		$	1,145,423		$	2,926,772		$	2,908,411
Gain on sale of student loans		587,410			587,410			11,176,144			10,689,302
Net loss		(2,820,589	)		(2,813,913	)		(5,703,350	)		(6,171,831	)
Net loss per share		(0.23	)		(0.23	)		(0.49	)		(0.53	)
Weighted average common shares outstanding:
Basic and diluted		12,085,134			12,085,134			11,604,215			11,604,215

Consolidated Statement of Cash Flows for the nine months ended September 30, 2003	As previously reported			As restated
Net loss	$	(5,703,350	)	$	(6,171,831	)
Net cash used in operating activities		(12,431,293	)		(12,899,774	)
Origination/purchase of student loans		(1,395,059,781	)		(1,394,591,300	)
Net cash used in investing activities		(1,395,612,433	)		(1,395,143,952	)

8

Item  2. Management’s Discussion and Analysis of Finan cial 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 Form10-QSB/A to report the results for the quarter and nine months ended September 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 filing of our Form 10-QSB for the period ended September 30, 2003 as amended by the first amendment to such form filed on October 23, 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

Three Months Ended September 30, 2003 Compared to September 30, 2002

Earnings Summary

For the three months ended September 30, 2003, our net loss was $2.8 million, or $0.23 per share, compared to a net loss of $10.2 million, or $0.99 per share for the three months ended September 30, 2002. The decreased loss for the three months ended September 30, 2003 as compared to September 30, 2002 is attributable to higher revenues generated by increased student loan assets in the September 30, 2003 quarter as compared to the September 30, 2002 quarter, partially offset by correspondingly higher interest-related expenses, loan servicing fees and operating expenses. Our student loan asset base at September 30, 2003 was $2.7 billion, compared to $2.2 billion at June 30, 2003 and $869 million at September 30, 2002. Included in our operating expenses for the quarter are the payments made to marketing partners who advertise, identify and attract potential borrowers for us. These marketing partners generally receive a one-time fee for each loan application they originate. Accordingly, as our new loan volume generated by marketing partners increases, our marketing partner fee expense increases. These fees are a significant portion of our expenses and during the quarter ended September 30, 2003, represented 59% of our total operating expenses. Since we only earn an interest spread on the loans we hold on our balance sheet, the marketing partner fee expense, along with other sales and marketing expenses, results in losses until such time as a significant scale of student loan assets is reached on our balance sheet.

Net Interest Income and Income after Provision for Loan Losses

Net interest income during the three months ended September 30, 2003 was $11,964,000. This was comprised of gross interest income of approximately $23,412,000 less costs of interest of approximately $11,448,000. This amount includes interest-related costs of $11,172,000, loan servicing and other fees of approximately $1,145,000 and a mark-to-market adjustment of $869,000 (credit) for the interest rate swap entered into during the fourth quarter of 2002. For the quarter ended September 30, 2003, net interest income after the provision for loan losses was approximately $11,283,000. Net interest income for the three months ended September 30, 2002 was $1,555,000. This was comprised of gross interest income of approximately $8,218,000 less costs of interest income of approximately $6,663,000. These costs for the quarter ended September 30, 2002 include interest-related costs of $6,160,000 and loan servicing and other fees of approximately $503,000. Net interest income after the provision for loan losses was approximately $892,000 for the quarter ended September 30, 2002. The increase in the net interest income we earned during the quarter is a direct result of the increase in the student loan assets we held over those held in the same quarter of the prior year. In addition, because the majority of the student loans we held are consolidation loans (approximately 97% and 96% of the loans on our balance sheets at December 31, 2002 and September 30, 2003, respectively) which carry a fixed interest rate, coupled with the fact our borrowing costs have decreased (a function of the low interest rate environment since September 30, 2002), our spread has increased. This is reflected in the increased net interest income.

9

Nine Months Ended September 30, 2003 Compared to September 30, 2002

Earnings Summary

For the nine months ended September 30, 2003, our net loss was $6.2 million, or $0.53 per share, compared to a net loss of $19.1 million, or $1.92 per share for the nine months ended September 30, 2002. The decreased loss for the nine months ended September 30, 2003 as compared to September 30, 2002 is primarily attributable to the sale of approximately $247 million of consolidation loans (we sold the consolidation loans during the period to raise cash for operations) which resulted in a gain on sale of approximately $8.5 million. Also contributing to the reduced loss in the nine months ended September 30, 2003 as compared to the nine months ended September 30, 2002 are the higher revenues generated by our increased student loan assets in the nine months ended September 30, 2003 compared to the nine months ended September 30, 2002, partially offset by correspondingly higher interest-related expenses, loan servicing fees and operating expenses. Our student loan asset base at September 30, 2003 was $2.7 billion, a $1.4 billion increase from the $1.3 billion student loan portfolio we held at December 31, 2002. At September 30, 2002, we held $0.9 million of student loans on our balance sheet. Included in our operating expenses are payments made to marketing partners who advertise, identify and attract potential borrowers for us. These marketing partners generally receive a one-time fee for each loan application they originate. Accordingly, as our new loan volume generated by marketing partners increases, our marketing partner fee expense increases. These marketing partner fees are a significant portion of our expenses and include the non-cash charge of approximately $1,458,000 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. During the nine months ended September 30, 2003, marketing partner fees represented 58% of our total operating expenses. Since we only earn an interest spread on the loans we carry on our balance sheet, the marketing partner fee expense along with other sales and marketing expenses results in losses until such time as a significant scale of student loan assets held on the balance sheet is reached.

Net Interest Income and Interest Income after Provision for Loan Losses

Net interest income for the nine months ended September 30, 2003 was $25,299,000. This was comprised of gross interest income of approximately $58,218,000 less interest costs of approximately $32,919,000. Interest costs include interest-related expenses of $30,276,000, a mark-to-market adjustment of $265,000 (credit) related to the interest rate swap entered into during the fourth quarter of 2002 and loan servicing and other fees of $2,908,000. For the nine months ended September 30, 2003, net interest income after the provision for loan losses was approximately $23,630,000. Net interest income for the nine months ended September 30, 2002 was $3,105,000. This was comprised of gross interest income of approximately $13,688,000 less costs of interest income of approximately $10,583,000. Costs of interest income include interest-related expenses of $9,483,000 and loan servicing and other fees of $1,100,000 for the nine months ended September 30, 2002. Net interest income after the provision for loan losses was approximately $2,137,000 for the nine months ended September 30, 2002. The increase in the net interest income we earned during the nine months ended September 30, 2003 compared to the nine months ended September 30, 2002 is a direct result of the increase in the student loan assets we held at September 30, 2003. In addition, because the majority of the student loans we hold are consolidation loans (approximately 97% and 96% of the loans on our balance sheets at December 31, 2002 and September 30, 2003, respectively) which carry a fixed interest rate, coupled with the fact our borrowing costs have decreased (a function of the low interest rate environment since September 30, 2002), our spread has increased. This is reflected in the increased net interest income.

Gain on Sale of Student Loans

For the nine months ended September 30, 2003 approximately $10,689,000 was booked as gain on the sale of student loans from this entity compared with $1,052,000 during the nine months ended September 30, 2002. The increase from the nine months ended September 30, 2002 to the nine months ended September 30, 2003 is attributable to having a full year of operations leading into the period, whereas we had only commenced operations through the school preferred lender-list channel in the first quarter of 2002 and therefore had neither a full nine months of activity, nor an established pipeline from which to draw. Due to changes in our arrangement with the purchaser of a portion of these loans, beginning with the third quarter of 2003, we will hold loans on our balance sheet for 120 days after final disbursement. The change will push a portion of these sales into 2004, resulting in reduced gain on sale when compared to prior periods. At September 30, 2003, our total student loans on the balance sheet included approximately $39,527,000 of loans held for sale.

10

From time to time we may also elect to sell some portion of our consolidation loans. Accordingly, in addition to the sale of loans generated in the school preferred lender-list channel during the nine months ended September 30, 2003, we chose to sell approximately $247,000,000 of consolidation loans. This resulted in additional gain on sale of approximately $8,532,000 for the nine months ended September 30, 2003 compared to no sales from this source in the first nine months of 2002. As a result, we had total gain on sale during the nine months ended September 30, 2003 of approximately $10,689,000 compared to $1,052,000 during the same period in 2002.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2003, we had operating cash and cash equivalents of approximately $5,459,000 (excluding restricted cash and investments). Since inception, we have financed our operations from debt and equity financings. During the three and nine months ended September 30, 2003, we used cash of approximately $3,426,000 and $12,900,000, respectively, to fund our operations. During the nine months ended September 30, 2003, we acquired property and equipment of approximately $553,000. At September 30, 2003, we had advances of approximately $977,141,000 outstanding against our warehouse loan facilities. We hold $959,500,000 and $983,892,000 from our LIBOR/Auction Rate Education Loan Backed Notes issued in 2002 and 2003 (“Series 2002 Notes” and “Series 2003 Notes”), respectively at September 30, 2003. During the nine months ended September 30, 2003, our net recorded loans increased $1,392,431,000 to $2,741,484,000. During the three and nine months ended September 30, 2003, we received proceeds of approximately $2,181,000 and $2,508,000, respectively, net of issuance costs, for the issuance of 1,493,471 and 1,785,971 shares of common stock in connection with the exercise of warrants and employee stock options.

Item 3. Controls and Pro cedures

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.

PART II. OTHER INFORMA TION

Item 6. Exhibits and Reports o n Form 8-K

(a) Exhibits.

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

Exhibit Number	Description
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 quarter ended September 30, 2003, we filed two Reports on Form 8-K. They were dated July 24, 2003 and August 11, 2003.

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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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