The Student Loan Corporation Announces Second Quarter Earnings

"The student loan industry is still contending with a challenging business environment. In the second quarter we strategically repositioned ourselves to benefit from the products, channels, and operational structure that best enable us to grow profitably while thoughtfully deploying capital. We remain committed to building a better future by providing unparalleled solutions that enable students and their families to finance the education of their choice," said Student Loan Corporation Chief Executive Officer Mike Reardon.

During the second quarter of 2008, the Company completed a $2.0 billion securitization. "During the quarter, we were able to take advantage of marginal improvements in the credit markets and realized better funding rates than were available through other channels. Our successful execution of an off-balance sheet securitization in the current environment clearly demonstrates our ability to successfully manage our business in these challenging markets," said Mr. Reardon

During the twelve-month period ended June 30, 2008, the Company's managed student loan portfolio grew by $4.0 billion (11%) to $39.3 billion reflecting the Company's continued strong origination performance. The managed portfolio includes $23.1 billion of Company-owned loan assets and $16.2 billion of loans serviced on behalf of securitization trusts or other lenders. Originations for the quarter included retail FFELP Stafford and PLUS originations of $0.7 billion, a 20% increase from the same quarter of 2007. The Company also made new CitiAssist loan commitments of $0.2 billion, up 1% compared to the same quarter of last year. Also during the quarter the Company's loan consolidation activities contributed $0.1 billion of loans, which were $0.2 billion lower than same quarter of 2007. This decrease was a direct result of the Company's decision to temporarily withdraw from the Federal Consolidation Loan market.

Net interest income of $119 million for the second quarter of 2008 was $17 million (16%) higher than the same quarter of 2007. This increase was driven by higher average loan balances as well as an increase in net interest margin. Net interest margin for the quarter was 1.89%. This 15 basis point improvement over the second quarter of 2007 was driven by management's repositioning of the portfolio towards higher rate loans, partially offset by a $20 million increase in funding costs due to higher credit premiums over LIBOR. The trend towards higher credit premiums is expected to continue as the Company refinances its maturing term debt under less favorable conditions. The enactment of the College Cost Reduction and Access Act also had a negative impact on the Company's net interest income, resulting in a $3 million reduction in the quarter.

The Company's other income of $41 million for the second quarter of 2008 was $19 million (32%) lower than the same quarter of 2007. This decrease was mainly attributable to lower gains realized on the securitization and lower loan sales. This decrease was partially offset by a net increase in the fair value of the Company's derivatives and retained interests from securitization.

Total operating expenses of $52 million for the second quarter of 2008 were $6 million (13%) higher than in the same quarter of 2007. Included in the second quarter 2008 operating expenses were $9 million of restructuring and related charges, primarily severance associated the Company's strategic repositioning efforts. Excluding these restructuring and related charges, operating expenses for the quarter totaled $43 million, $3 million lower than the comparable 2007 quarter. The Company's operating expense ratio, excluding restructuring and related charges (total operating expenses less restructuring and related charges as a percentage of average managed student loans) for the second quarter of 2008 was 0.44%, eight basis points lower than the same quarter of 2007 reflecting the Company's continued disciplined approach to expense management.

The Company's allowance for loan losses at June 30, 2008, was $82 million compared to $42 million at December 31, 2007. This increase of $40 million includes $38 million related to the higher risk uninsured CitiAssist portfolio. This increase is largely due to a $25 million increase in reserves associated with certain higher risk uninsured loans that have not yet entered repayment status. Continued seasoning of the Company's CitiAssist portfolio also added to the increase.

The Company's effective tax rate during the second quarter decreased to 33.1% from 38.0% in the same quarter of 2007. This decrease reflects a one-time credit to income taxes of $3 million to correct current and deferred income taxes payable. During the second quarter, the Company determined that the blended state statutory rate used to estimate taxes due from the Company under the tax sharing agreement in prior years was overstated. The correction was not deemed to be material to the current or prior year's financial statements. Excluding the impact of this correction, the Company's effective tax rate for the second quarter was 38.4%.

The Company's second quarter 2008 return on average equity decreased to 10.5 % from 17.9% in the same quarter of 2007, driven by lower earnings.

On July 16, 2008, the Company's Board of Directors declared a regular quarterly dividend on the Company's common stock of $1.43 per share. The dividend will be paid September 2, 2008 to shareholders of record on August 15, 2008.

The Student Loan Corporation is one of the nation's leading originators and holders of FFELP program and private education loans. Citibank, N.A., a subsidiary of Citigroup Inc., is the largest shareholder in the Company with an 80% interest.

For information or inquiries regarding student loan accounts, please call 1-800-967-2400. Hearing impaired customers with Telecommunication Devices for the Deaf (TDD) may call 1-800-846-1298. Information is also available on the Company's Web site at http://www.studentloan.com.

FORWARD-LOOKING STATEMENTS

Certain statements in this document are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in the Company's filings with the Securities and Exchange Commission.

THE STUDENT LOAN CORPORATION CONSOLIDATED BALANCE SHEET (Dollars in thousands, except per share amounts) June 30, December 31, June 30, 2008 2007 2007 ------------------------- ------------ (Unaudited) (Unaudited) ASSETS Federally insured student loans $14,719,407 $16,244,273 $16,355,000 Private education loans 5,819,978 4,696,337 3,021,424 Deferred origination and premium costs 660,296 668,082 607,695 Allowance for loan losses (81,817) (42,115) (15,411) ------------ ------------ ------------ Student loans, net 21,117,864 21,566,577 19,968,708 Other loans and lines of credit 18,157 87,437 18,809 Loans held for sale 1,926,538 337,790 2,160,804 Cash 656 25 363 Residual interests in securitized loans 701,598 633,074 593,552 Other assets 1,333,562 1,154,956 967,135 ------------ ------------ ------------ Total Assets $25,098,375 $23,779,859 $23,709,371 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Short-term borrowings, payable to principal stockholder $11,801,600 $13,373,000 $ 9,543,300 Long-term borrowings, payable to principal stockholder 9,150,000 8,100,000 11,900,000 Long-term secured borrowings 1,830,988 - 271,429 Deferred income taxes 264,089 287,462 381,382 Other liabilities 427,403 395,174 ------------ ------------ ------------ Total Liabilities 23,474,080 22,155,636 22,096,111 ------------ ------------ ------------ Common stock, $0.01 par value; authorized 50,000,000 shares; 20,000,000 shares issued and outstanding 200 200 200 Additional paid-in capital 141,377 141,355 141,343 Retained earnings 1,482,718 1,482,668 1,471,717 ------------ ------------ ------------ Total Stockholders' Equity 1,624,295 1,624,223 1,613,260 ------------ ------------ ------------ Total Liabilities and Stockholders' Equity $25,098,375 $23,779,859 $23,709,371 ============ ============ ============

THE STUDENT LOAN CORPORATION CONSOLIDATED STATEMENT OF INCOME (Dollars in thousands, except per share amounts) Three months ended Six months ended June 30, June 30, ------------------- ------------------- 2008 2007 2008 2007 --------- --------- --------- --------- Unaudited Unaudited ------------------- ------------------- NET INTEREST INCOME Interest income $318,769 $400,674 $648,516 $779,321 Interest expense 199,379 297,797 447,679 582,687 --------- --------- --------- --------- Net interest income 119,390 102,877 200,837 196,634 Provision for loan losses (45,827) (3,895) (71,139) (14,423) --------- --------- --------- --------- Net interest income after provision for loan losses 73,563 98,982 129,698 182,211 --------- --------- --------- --------- OTHER INCOME Gains on loans securitized 1,262 48,548 1,262 48,548 Gains on loans sold 859 2,492 2,314 20,266 Fee and other income 39,012 9,420 50,471 24,283 --------- --------- --------- --------- Total other income 41,133 60,460 54,047 93,097 --------- --------- --------- --------- OPERATING EXPENSES Salaries and employee benefits 13,593 16,120 29,062 30,570 Restructuring and related charges 8,735 - 8,735 735 Other expenses 29,521 29,631 58,187 58,644 --------- --------- --------- --------- Total operating expenses 51,849 45,751 95,984 89,949 --------- --------- --------- --------- Income before income taxes 62,847 113,691 87,761 185,359 Income taxes 20,831 43,174 30,511 70,819 --------- --------- --------- --------- NET INCOME $ 42,016 $ 70,517 $ 57,250 $114,540 ========= ========= ========= ========= DIVIDENDS DECLARED AND PAID $ 28,600 $ 28,600 $ 57,200 $ 54,600 ========= ========= ========= ========= BASIC AND DILUTED EARNINGS PER COMMON SHARE (based on 20 million average shares outstanding) $ 2.10 $ 3.53 $ 2.86 $ 5.73 ========= ========= ========= ========= DIVIDENDS DECLARED AND PAID PER COMMON SHARE $ 1.43 $ 1.43 $ 2.86 $ 2.73 ========= ========= ========= =========

Certain prior period balances have been reclassified to conform to the current period's presentation.

SOURCE: The Student Loan Corporation

for The Student Loan Corporation Press Mark Rodgers, 212-559-1719 or Investor Relations Bradley Svalberg, 203-975-6320