IMN ABS East 2005

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IMN ABS East 2005 Investor Presentation
September 14-15, 2005
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Inspired by students . . .
Legal Statements

• We would like to remind you that there will be
  forward looking statements made during this
  presentation. The forward looking statements may
  differ materially from actual results and are
  subject to certain risks and uncertainties. The
  company does not intend to update any forward
  looking statements made during this presentation.

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Inspired by students . . .
Contents

• Tab Page
• Nelnet corporate overview and industry update 4
• Appendix A Federal Family Education Loan Program
  18
• Appendix B Prepayment behavior study 29

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Nelnet corporate overview and industry update
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Inspired by students . . .
Nelnet corporate highlights

• Leading originator, holder and servicer of FFELP
  student loans and largest servicer of Canadian
  student loan program
• Minimal credit risk and quality servicing
• Designated as exceptional performer by ED
  provides 100 guarantee on defaulted loans
• Investment grade company rated BBB by Standard
  and Poors and Baa2 by Moodys
• Solid company fundamentals
• Transparent high quality earnings
• Conservative business approach
• Diversified revenue streams
• Economies of scale
• Publicly traded company listed on the NYSE, NNI
• Current market capitalization approximately 2
  billion
• Strong asset growth 27 CAGR over the past 3
  years

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Inspired by students . . .
Nelnets industry position
A company that is recognized as a market leader
with economies of scale
Top FFELP loan servicers(2)
Canadian serviced portfolio 7 billion. Total
full serviced portfolio 29 billion
15.4 billion As of 6/30/2005

• Servicing efficiencies
• Financing efficiencies
• Marketing breadth

(1) Source Nelnet and DOE as of September 30,
2004 (2) Source SLSA Servicing Volume Survey,
December 31, 2004 (3) Source Nelnet and DOE as
of September 30, 2004 Includes Nelnet franchise
affiliated partners (4) Source DOE as of
September 30, 2004 (5) Source Nelnet based upon
industry estimates as of June 30, 2005
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Inspired by students . . .
Geographic breadth
Expanding national footprint
Loan servicing centers Denver, Colorado Claims /
appeals / recalls / cures Transfers /
acquisitions / repurchases Secondary customer
contact center Loan consolidation Data
center Jacksonville, Florida Remittance
processing Portfolio reconciliation / 799
reporting Secondary customer contact center Data
center Indianapolis, Indiana Primary customer
contact center College planning center Loan
consolidation Lincoln, Nebraska Corporate
headquarters Primary loan consolidation
center Processing Skip tracing Mississauga,
Ontario Canadian loan servicing operations
Corporate locations Loan servicing centers
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Inspired by students . . .
Nelnets Integrated Value Chain
Products and services
In-college
Post-college
Pre-college
Undergraduate, graduate/professional
Elementary and secondary
Loan repayment period

• 529 Plan Savings Plan Administration
• Nebraska 529 Plan
• Tuition Payment Plan Administration
• FACTS
• College Planning Center
• Nelnet Developed
• Direct Marketing and Student Recruiting
• SMG
• National Honor Roll

• Enrollment management
• Foresite Solutions
• E-commerce
• Infinet
• School channel
• Union Bank
• UFS
• Nebhelp, Inc.
• Melmac
• EFS
• RISLA
• Direct to consumer channel
• Nelnet developed
• Software Solutions
• IFA
• Charter
• 5280

• 3rd Party Loan Servicing
• Unipac
• InTuition, Inc.
• Private Loan Servicing
• Firstmark
• Canadian Loan Servicing
• Edulinx
• Guarantee Agency Servicing
• Guarantec
• Collection Agency Services
• Premiere Credit

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Inspired by students . . .
Our economic engine asset management
Revenue breakdown by source demonstrates
diversified revenue streams
64 of our revenue streams from the asset
management business while 36 is driven from our
fee based businesses
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As of June 30, 2005
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Inspired by students . . .
Growing diversified loan origination platform (
in billions)
Nelnet brands and consolidation
Branding forward flow partners
4.1
0.2
Spot acquisitions
3.1
2.9
0.03
1.8
0.3
2.1
1.4
1.7
0.5
1.4
0.3
1.1
2.1
1.4
1.0
1.1
0.5
0.1
2001
2002
2003
2004
2005 YTD
Note Direct channel excludes consolidation of
existing assets. Information presented for 2002
and prior has been adjusted for estimated
consolidations of our existing portfolio
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As of June 30, 2005
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Inspired by students . . .
Program with diverse sources of liquidity
Asset backed securities program

• 2 US issuer of Student Loan Asset Backed
  Securities
• Diversified investor base
• LIBOR floating rate securities
• Auction rate debt
• Fixed rate debt
• Tax-exempt debt
• Student loan interest margin securities
• Reset rate notes
• Comprehensive investor disclosure _at_ www.nelnet.net

Funding strategy

• Maintain one-year capacity for warehouse funding
  and two-year capacity on registered shelf for
  structured securitization transactions
• Utilize diverse mix of debt and providers,
  including unsecured debt and lines of credit, to
  ensure access to liquidity
• Access long-term securitization market on
  programmatic quarterly issuance schedule to
  ensure broad investor base and good secondary
  trading levels to achieve lowest cost of funding

Secured financing program

• 4.4 billion of capacity as of June 30, 2005
• Diversified providers (Bank of America, JPMorgan
  Chase, Deutsche Bank, Mellon Bank, Royal Bank of
  Canada, Société Générale Fifth Third Bank)

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Inspired by students . . .
High quality earnings
Conservative business approach transparent
accounting

• No gain on sale
• Premium amortization policies
• No dilutive stock options
• Limited intangibles

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Selected financial highlights( in millions,
except share data)
Inspired by students . . .
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Inspired by students . . .
Growing industry
Education costs are projected to increase at
double the rate of inflation
Annual cost of education(1) (000)
Higher education enrollment (millions)
College education expenditures
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FFELP Loans(2) - 45 billion
FDLP and Perkins Loans(2) - 13 billion
Scholarships, Grants, Other - 74 billion
Parents/Student Contributions - 80 billion
Total 212 billion
Source ED, The College Board, National Center
for Education Statistics, Octameron
Associates (1) Annual average tuition at private,
four-year institutions using constant 2002
dollars (2) Excludes consolidation loans
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Inspired by students . . .
Default rates are declining
FFELP and FDLP cohort default rates at lowest
level in program history
Max 20
Min 4.5
The cohort default rate for schools measures the
percentage of all Stafford and SLS loans (by
school attended) scheduled to enter repayment in
a given year that defaulted in that year or the
following year
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Source U.S. Department of Education
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Legislative update HEA Reauthorization
Inspired by students . . .
Momentum is building as both the House Education
and Workforce Committee and the Senate HELP
Committee have passed bills that would
reauthorize the HEA

• Final action expected late 2005 or early 2006
  reauthorizing the HEA through September 30, 2012
• Major provisions proposed by both the House and
  Senate bills with differences
• Borrower interest rates House provides for
  variable borrower rate and Senate provides for
  fixed borrower rate
• Consolidation loan interest rate House provides
  fixed or variable rate option, Senate provides
  for only a fixed rate
• Risk Share House would increase risk share to
  4 (2 for loans services by exceptional
  performers). Senate would increase risk share to
  3 and eliminate the EP designation.
• 9.5 Loans Both the House and Senate make
  permanent the Taxpayer Teacher Protection Act of
  2004. Additionally, the House also eliminates
  providing a 9.5 yield to recycled loans in
  pre-10/1/1993 tax-exempt bonds.
• Special Allowance Senate would reduce PLUS SAP
  60 basis points during in-school period. No
  changes to special allowance in the house.
• PLUS Loans Senate would allow graduate
  borrowers to qualify for PLUS loans
• Major similar provisions proposed by both the
  House and Senate bills
• Increase loan limits for 1st and 2nd year
  students and graduate students
• No increase in aggregate borrowing limits
• Repeal of single holder rule for consolidation
  loans
• Rebate of floor income for new loans made on or
  after 7/01/2006
• Fixes PLUS SAP Gap
• Origination fee for consolidation loans increases
  50 basis points to 1.0

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Inspired by students . . .
Questions?
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Appendix A Federal Family Education Loan
Program 101
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Inspired by students . . .
Federal Family Education Loan Program (FFELP)
Student loans 101
Government guaranteed collateral

• Loans are originated under the FFELP
• Properly serviced FFELP student loans are
  entitled to at least a 98 guarantee from the US
  Department of Education (ED)while a student loan
  servicer is designated as an Exceptional
  Performer, loans are guaranteed at 100 of
  principal plus interest
• Guaranty agencies act as clearinghouses to pay
  claims for ED, however the ultimate credit risk
  lies with the U.S. Government

Government subsidized

• Generally, Stafford and PLUS borrowers pay a
  floating rate of interest consolidation
  borrowers pay a fixed rate
• Through Special Allowance Payments (SAP) by
  the U.S. Government, the holder of the loan (i.e.
  Nelnet) earns the greater of the borrower
  interest rate or the borrower interest rate plus
  the SAP margin
• SAP ensures holders of FFELP student loans
  receive a market rate of return even as interest
  rates fluctuate

Repayment features

• Multiple Stafford and PLUS loans can be
  consolidated into one loan with a longer term
  (10-30 year repayment), with a fixed interest
  rate to the borrower. Consolidation loans are
  eligible for SAP which creates a variable rate
  return to the holder in rising rate environments
• If returning to school or suffering financial
  hardship, borrowers have the option to defer
  payments while interest continues to accrue

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Inspired by students . . .
Exceptional performance designation
100 reimbursement for Nelnet default claims
filed on/after June 1, 2004

• Overview The U.S. Department of Education
  awards the Exceptional Performance designation to
  reward and recognize qualified student loan
  lenders and servicers who demonstrate an
  exceptional level of performance in servicing
  FFELP loans
• A lender or lender servicer designated for
  Exceptional Performance may receive 100
  reimbursement on all claims submitted for
  insurance during the 12-month period following
  the date the lender or lender servicer receives
  notification of the designation
• A lender or lender servicer may reapply for the
  Exceptional Performance status every year
• Nelnet Performance Nelnet's initial and
  quarterly audits by the public accounting firm of
  KPMG have demonstrated a compliance rating in
  excess of 99 in the required review areas,
  including performing proper due diligence
  requirements applicable to each loan, converting
  FFELP loans to repayment in a timely and accurate
  manner and filing on-time claims with guaranty
  agencies
• A score of 97 is required to receive Exceptional
  Performance status
• Impact Exceptional Performance status provides
  Nelnet and the 243 lender accounts for which it
  provides student loan servicing with a 100
  federal reimbursement on all student loan claims
  submitted for the 12 month period following
  notification of the designation
• The expanded reimbursement eliminates the
  standard two percent risk-sharing fees normally
  assumed by education lenders

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Inspired by students . . .
Nelnet historical claims reject rates
Initial and expected net claim reject rates due
to Nelnet servicing error
Historically, approximately 80 of initially
rejected claims are collected within 3 years
Assumes 10 default rate
Source Nelnet
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Inspired by students . . .
FFELP student loans 101
Mechanics
U.S. Department of Education
Reinsurance claim
Reinsurance
SAP / ISP
Payment of principal interest
Claim package
Lender / Servicer
Guarantor
Borrower
Dispense funds to school then to borrower
98 or 100 guarantee
Financial aid loan application
Lender requests guarantee
Certified loan application
School Financial Aid Office
Guarantee issued

• FFELP Loans remain eligible for ED guarantee so
  long as servicers follow specified due diligence
  guidelines such as initiating certain collection
  procedures and maintaining accurate loan records
• Nelnet is one of the best performing servicers in
  the industry and was recently awarded Exceptional
  Performance status by ED. Historical net losses
  due to ED guarantee ineligibility have ranged
  from 1/2 to 5 bps annually
• SAP and interest subsidy payments (ISP) from the
  ED ensure that FFELP loan holders receive a
  market rate of return while borrowers may pay
  either fixed or floating rates of interest, the
  holder receives the greater of the borrower
  interest rate, or 90-day CP or 91-day T-bill plus
  a margin of 1.74 to 3.50 based on the type of
  loan (Stafford, PLUS, SLS, Consolidation), status
  of the loan (in-school, grace, repayment) and
  date of disbursement

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Inspired by students . . .
FFELP student loans 101

• Special allowance payment (SAP)
• Subsidized and Unsubsidized Stafford Loans
• Date of loan Annualized SAP rate
• On or after 10/01/1981 T-Bill Rate less
  Applicable Interest Rate 3.50
• On or after 11/16/1986 T-Bill Rate less
  Applicable Interest Rate 3.25
• On or after 10/01/1992 T-Bill Rate less
  Applicable Interest Rate 3.10
• On or after 07/01/1995 T-Bill Rate less
  Applicable Interest Rate 3.10 (1)
• On or after 07/01/1998 T-Bill Rate less
  Applicable Interest Rate 2.80 (2)
• On or after 01/01/2000 3 Month
  Commercial Paper Rate less Applicable (3)
• Interest Rate 2.34
• (1) Substitute 2.5 in the formula while loans
  are in-school, grace or deferment status
• (2) Substitute 2.2 in the formula while loans
  are in-school, grace or deferment status
• Substitute 1.74 in the formula while loans are
  in-school, grace or deferment status
• PLUS, SLS and Consolidation Loans
• Date of loan Annualized SAP rate
• On or after 10/01/1992 T-Bill Rate less
  Applicable Interest Rate 3.10
• On or after 01/01/2000 3 Month Commercial Paper
  Rate less Applicable
• Interest Rate 2.64

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Inspired by students . . .
FFELP student loans 101

• Description of 9.5 loans
• The Higher Education Act (the Act) spells out
  the 9.5 Floor SAP provisions
• Loans are called 9.5 Floor Loans because the
  Act effectively establishes a minimum 9.5 rate
  of return on these loans
• FFELP loans currently or previously financed with
  tax-exempt bonds originally issued prior to
  October 1, 1993 are eligible to receive 9.5
  Floor SAP
• The performance of these 9.5 Floor Loans varies
  by interest rate environment
• High interest rates 9.5 Floor Loans earn only
  half SAP
• Low interest rates Potential for large excess
  spread between 9.5 Floor and prevailing interest
  rates
• Timeline of recent 9.5 floor loan legislation

Reauthorization
September 2004
May 2004
October 2004
General Accounting Office published report
describing, among other things, provisions of the
Act that permitted growth of 9.5 Floor Loans
among many student loan industry participants.
Report recommends Act be changed to eliminate
payment of 9.5 Floor
Bill introduced in Congress to, among other
things, remove the 9.5 Floor provisions in the
future
Public Law 108-409 (H.R. 5186) eliminated payment
of the 9.5 floor SAP for new loans previously
financed with pre-October 1, 1993 tax-exempt
bonds effective October 1, 2004 to January 1, 2006
Industry expects the temporary bill passed in
October 2004 to become permanent as part of the
reauthorization legislation
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Inspired by students . . .
FFELP student loans 101
Loan Limits
Stafford Loans - Subsidized and
Unsubsidized 2,625 1st academic year
undergraduate 3,500 2nd academic year
undergraduate 5,500 per academic year
remaining undergraduate 8,500 per graduate
academic year Graduate and independent
undergraduate students are also eligible for
additional Unsubsidized Stafford Loan
Funds. 4,000 1st and 2nd academic year
undergraduates 5,000 additional academic years
of undergraduate 10,000 graduate
students 46,000 Maximum subsidized and
unsubsidized aggregate undergraduate
borrowing 138,500 Maximum subsidized and
unsubsidized aggregate undergraduate and graduate
borrowing PLUS Loans PLUS Loans made on or after
07/01/1993 are limited only by the students
unmet need
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Inspired by students . . .
FFELP student loans 101
Borrower Interest Rates
Stafford Subsidized and Unsubsidized
Loans Borrower interest rate for loans
originated on or after 07/01/1998 and before
07/01/2006 Calculation Adjusted annually, based
upon last auction in May of the bond equivalent
rate of 91-day U.S. Treasury bills plus 1.7 per
annum for in-school, grace and deferment or plus
2.3 per annum during repayment, not to exceed
8.25. Currently 4.70 and 5.30
PLUS Loans Borrower interest rate for loans
originated on or after 07/01/1998 and before
07/01/2006 Calculation Adjusted annually, based
upon last auction in May of the bond equivalent
rate of 91-day U.S. Treasury bills plus 3.1 per
annum, not to exceed 9, Currently 6.10
Consolidation Loans Borrower interest rate for
loans originated on or after 10/01/1998 and
before 07/01/2006 Calculation Will be equal to
the lesser of 8.25 or the weighted average of
the interest rates on the loans being
consolidated, rounded up to the nearest 1/8th of
1
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Inspired by students . . .
FFELP student loans 101
Overview of the payment and guarantee process

• US student loans are ultimately 98 to 100
  guaranteed by the U.S. Government
• Guaranty agencies will reimburse the lender 98
  or 100 if the borrower defaults as long as the
  servicing has been done properly
• If the guaranty agency becomes insolvent, the
  federal government is required to pay lender
  claims directly or reassign the guarantee
  obligation to another agency
• As per section 432(o) of the Higher Education
  Act, 20 U.S.C. 1082(o) CONSEQUENCES OF GUARANTY
  AGENCY INSOLVENCY. In the event that the
  Secretary has determined that a guaranty agency
  is unable to meet its insurance obligations under
  this part, the holder of loans insured by the
  guaranty agency may submit insurance claims
  directly to the Secretary and the Secretary shall
  pay to the holder the full insurance obligation
  of the guaranty agency, in accordance with
  insurance requirements no more stringent than
  those of the guaranty agency. Such arrangements
  shall continue until the Secretary is satisfied
  that the insurance obligations have been
  transferred to another guarantor who can meet
  those obligations or a successor will assume the
  outstanding insurance obligations

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Inspired by students . . .
FFELP student loans 101
Flow chart of loss protection for investors in
structured debt transactions
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Appendix B Prepayment behavior study
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Inspired by students . . .
Trust lifetime CPR history
Note Consolidation loan refers to pool
characteristics at issuance.
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Inspired by students . . .
Trust quarterly CPR history
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Note Consolidation loan refers to pool
characteristics at issuance.
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Inspired by students . . .
Prepayment behavior study

• Background of study
• Various loan types studied on a static pool basis
  
• Stafford, PLUS, and Consolidation loans
• Historical information utilized dating back to
  1992
• Original FFELP principal balance approximately
  12.4 billion
• Analyzed 4 sources of prepayment
• Loan consolidation
• Default reimbursement
• Periodic borrower cash prepayments
  (non-consolidation)
• Lump sum borrower cash prepayments
  (non-consolidation)
• Prepayment sources were dollar-weighted averaged
  over lives of pool using the Single Monthly
  Mortality (SMM) approach (common to mortgages),
  generating a single cumulative weighted average
  Constant Prepayment Rate (CPR)
• Unique CPR curves over life of each cohort and
  for each loan type
• Also reviewed propensity to consolidate based on
• Borrower indebtedness
• Interest rate levels

• Summary of results
• Stafford, PLUS, and Consolidation loans prepay
  differently from standard industry 7 CPR
• Average cumulative CPRs differ by loan types
• Sources of prepay activity vary significantly
• Lifetime prepayment curves diverge
• Stafford loans
• Highest CPRs of all loan types, with new pools
  reaching 75 prepayment range YTD 2005
• Oldest pools average high teens, low 20s
• Concave curve
• PLUS loans
• Next highest CPR, with new pools reaching 55
  prepayment range YTD 2005
• Middle vintages average low to mid teens
• Convex curve
• Consolidation loans
• Upward sloping ramp consistent across vintages
• Increase from 1-2 in year 1 of repayment to 12
  after 10 years
• Results in a cumulative average CPR of
  approximately 6
• Consolidation activity driven by low interest
  rates plus level of borrower indebtedness, quest
  for lower monthly payments, and aggressive
  marketing consolidation campaigns

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CPR Case Study Nelnet 2002-1 Trust Estate
Inspired by students . . .
Transaction had a 6 month pre-funding period.
Therefore, prepayment analysis begins after the
acquisition period.
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Inspired by students . . .
Stafford
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Inspired by students . . .
PLUS
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Inspired by students . . .
Consolidation
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