Good day everyone and welcome to Nelnet’s fourth quarter 2007 conference call. Today’s call if being recorded and broadcast live over the internet. At this time, Mr. Phil Morgan of Nelnet’s Investor Relations Office will begin with opening remarks, please go ahead sir.

Thank you Lisa and thank you everyone for joining us today. Nelnet’s fourth quarter earning’s release and financial supplement have been posted to the Investor Relations website at www.nelnet.com. On today’s call we will have Jeff Noordhoek, President, and Terry Heimes, Chief Financial Officer providing the formal remarks and Mike Dunlap, Chief Executive Officer and Chairman joining for the question and answer session. Before we begin the formal remarks, I would like to read the Safe Harbor Statement. We would like to remind you that there will be forward looking statement made during today’s call. The forward looking statements may differ materially from actual results and are subject to certain risks and uncertainties that are detailed in our earnings release and with our filings with the SEC. The Company does not intend to update any forward-looking statements made during the call. During the course of this call, we will refer to a non-GAAP financial measure, which the Company defines as base net income. Please refer to our website for the reconciliation of GAAP net income to base net income. After Jeff and Terry have concluded their formal remarks, we will open up the call for further questions. I would like to now turn the call over to Jeff.

Thank you Phil and good morning everyone, thank you for joining us today. Today we will discuss our operating results for 2007 but more importantly let’s talk about the success of our strategy to diversify revenue and net income. I will take some time to talk about the impact of recent legislation and the global liquidity crisis has had on the student loan origination and acquisition components of our business. Finally, I will briefly touch upon the outstanding fundamentals and the macro economic dynamics that impact education services industries as a whole. First, let me remind you that Nelnet is a diversified education services Company serving the growing needs of the education seeking public. As you listen to our revue of 2007 and consider our opportunities for 2008, we want you to keep in mind that we have been highly successful in reducing our reliance on student loan at interest margin. In addition, the demand for our broad group of lower risk, fee-based services in education market is extremely encouraging. The results for 2007 include continued growth of our diversified revenue stream, increased bottom line contribution from fee for service operation, active management of operating expenses and strong bottom line performance when considering the impact of the 2007 legislation and the ongoing global credit crisis. Base net income excluding charges related to the new legislation and related structuring was $0.34 per share for the fourth quarter and 1.72 per share for the year. Fee based revenues reached $83 million for the quarter and $312 million for the year, which represented 65% of our total revenue for the fourth quarter and 56% for the year. Importantly and as a reflection of where more and more of our revenues will be coming from in the future, our fee based operations give it…

Thanks Jeff, today I want to talk to you about our operating results for 2007 and provide some color on our business strategy and performance of our various operating segments. Given the current market conditions, I will spend some time talking about our liquidity and funding capacity and finally talk about our strategy and performance objectives given the business environment for 2008 and moving forward. First, the more traditional measures of performance and results. Our GAAP net income from continuing operations was $19.2 million or $0.34 per share for the fourth quarter of 2007 and $35.4 million or $0.71 per share for the year. This compares to a loss of $5.9 million in the fourth quarter of last year and GAAP net income of $65.9 million or $1.23 per share for all of 2006. Base net income was $13.4 million or $0.27 per share for the fourth quarter of 2007 and $38.5 million or $0.78 per share for the year, which compares to $0.22 and $1.42 per share for the fourth quarter of 2006 and the 2006 fiscal year. Obviously, it’s a substantial amount of unusual activity occurred during all period and moving the discussion to review comparable operations can be complicated. Consider the fall line, the fourth quarter of 2007 included restructuring charges of $3.3 million after tax or $0.07 per share. The fourth quarter of 2006 includes impairment charges related to our settlement with the Department of Education totaling about 22% per share after tax. Thus excluding the legislative changes, impairment charges and other one-time items based net income is $0.34 per share for the fourth quarter of 2007 versus $0.44 per share for the fourth quarter of 2006. From a full year perspective, the year ended December 31, 2007, included approximately $46.8 million in after tax restructuring…

Thank you, Terry. I am going to take a few minutes to describe what we feel could be in store of the entire student loan market and particularly students and their families as to what really matters in these large public call for aids. We believe the combined effect of the college cost reduction act, passed in September coupled with the global credit crisis is already starting to affect students and will only worsen through 2008 if something does not change. As all lenders are choosing where to invest their shrinking pool of available funds, the first to feel this effect will be the students attending higher default/low graduation rate schools. You have heard us and each of our public competitors’ state that we are pulling away from this market. As capital flowing into the broader student loan market continues to wither, our fear is that this could quickly roll into the for-profit education sector in the community cause market where smaller loan balances and higher delinquencies and default equate to higher servicing costs and lower margins and this would be a needles failure for our country. As thousands of people who have had the option to gain the most from education are served by these colleges. Ultimately, if something does not change, four-year College and graduate students will also start to feel the pinch as most banks and finance companies would be constrained in their ability to fund this growing amount of low margin assets on their balance sheets. There are some people publicly saying that the direct loan program will simply pick up the volume left by the FFELP Program lenders. We think this strategy is very risky and it’s our opinion the direct loan program does not have the infrastructure in place to more than double or…

Thank you, sir. The question and answer session will be conducted electronically. (Operator Instructions.) Our first question comes from Sameer Gokhale of CBW. Sameer Gokhale – CBW: Hi, good morning, I think you have mentioned that you were currently in discussions with the third constituency about perhaps thinking of ways of which to inject liquidity into the funding markets for student loans. Would you be willing to discuss any specific proposals you have submitted and perhaps who you might have spoken to or approached so far. I know Hank Paulsen, the Treasury Secretary has been approached, some lawmakers on this issue and I was wondering if you had pursued that line as well. Just would love to get your thoughts on this issue.

What I would say is that the industry as a whole, many participants and industry trade groups have approached multiple levels of government that would be local, state and federal levels and all different types of agencies have discussions about what is going on in the student loan market, what is going on in the capital markets and what it means for students and families in the United States. I’ll tell you that there have been multiple discussions at multiple levels across government on this issue. Sameer Gokhale – CBW: Is there anything more specific you can give us as far as proposals. Perhaps to have the government provide some sort of backstop liquidity support to the extent that ABS investors or kind of hesitating to invest in even government guaranteed ABS and maybe by providing back up liquidity you get more of these investors into the market. Is there along those lines or would you discuss specifically what kinds of ideas you’ve been thinking about?

Some of the discussion, this is Mike, has gone down the line of you look at some of the other market assessments like housing, you’ve got the federal home loan bank and the federal farm credit system for the agricultural area Fanny Mae, Freddie Mac in the mortgage sector. Student loan sector did have direct access when Sally Mae was a GSC to the federal financing bank. Some of the discussion that we’ve had is should the Federal Home Loan Bank of the Federal Financing Bank be allowed to provide liquidity directly into student loan assets or aftermath securities with a number of different players in government. That is some of the different ideas what we’ve talked about. Sameer Gokhale – CBW: That’s perfect, that is very helpful for color. The other thing I was wondering about is I think this warehouse facility that I think is due for renewal in May of this year, I think you mentioned that if it weren’t renewed it would become a term facility and you had mentioned a modest step up in cost. Would you be able to share with us what the incremental step up in cost on that facility would be if you were to just leave the assets in there and kind of term it out?

Ten bases points. Sameer Gokhale – CBW: Ten bases points as compared to what you are doing now, okay. The last thing I was curious about was on your fee-based income, I know there is some commentary given but in Q4 in your other fee-based income there is a big sequential increase and was that pretty much all due to seasonality or was there one business in particular that was performing better than the others?

It was primarily seasonality. We’ve seen really solid growth in terms of our tuition payment campus commerce segment as well as with the CU Net and Peterson’s, our enrollment services had a good quarter as well as our lead generation activity. Sameer Gokhale – CBW: Ok, great, thank you.

Your next call is from the line of Robert Kirkpatrick of Cardinal Capital. Robert Kirkpatrick – Cardinal Capital: Good morning, could you talk a little bit about where you are in your restructuring process with the one that was announced in January or are you all the way through that at this point and can you give us some guidance as to where your cost structure is relative to that which you reported in the fourth quarter, please.

Sure Robert, this is Terry. We are largely through our restructuring process. We do have as we exit some associates they will be carry over severance and other costs that will flow into the second quarter but we are largely through that. In terms of our cost structure and run rate, we expect in as we announced previously with restructurings, we would expect a cost savings in the $25 to $50 million range from a standpoint of our 2007 run rate perspective. We would start to expect to see that in 2008 starting to take effect in the first quarter; however, with some of our carryover, we will see the main impact in the third quarter 2008. Robert Kirkpatrick – Cardinal Capital: First of all, what’s the 2007 run rate? Is that the rate at which you exited the year or is that the rates of the whole year?

That we exited. Robert Kirkpatrick – Cardinal Capital: What contributes to a variation of 25 to 50 million or nearly 100% swing in your assessment of the cost being safe?

It would somewhat depend upon the level of asset generation activities that we actually undertake in 2008. Robert Kirkpatrick – Cardinal Capital: Okay and could you go back to the point that you made during your prepared remarks about the loan portfolio having $1.2 billion of future value and explain that a little bit greater detail for us.

Sure, this is Terry. We’ve got of our $26 billion portfolio, we have $17.5 to 18 billion that is funded using the term market with fixed spread to three month LIBOR. When we run that out to the life of the portfolio, the cash flow and earnings generated on that portfolio over its life is in excess of $1.2 billion, which would include the excess spread, the servicing revenue that we would largely generate for ourselves because we are servicing it via administration releases from the trust estate. That assumes a historical level or spread between commercial paper and LIBOR as well as certain repayment rates et cetera. The point that we wanted to make though is that we have that portfolio financed to term with very attractive spreads and we’ve locked in the value on that portfolio. Since we don’t use gain on sale accounting, we are going to recognize that value over the life of that portfolio. Robert Kirkpatrick – Cardinal Capital: What is the term that you have locked in? What’s the average term of that 1.2 billion?

They vary by asset type or substantial portion of those are consolidation loans. They are going to have a very long life, probably in the neighborhood of ten to twenty years in terms of an average useful life. Robert Kirkpatrick – Cardinal Capital: Okay and your equity market value today is a little less than that?

Yes. Robert Kirkpatrick – Cardinal Capital: Great, thanks so much gentlemen, I appreciate your time.

(Operator Instructions) We have a call from Cyral Buckeeny with Credit Suisse. Cyral Buckeeny – Credit Suisse: Good morning, my question has to deal with your funding to a college, could you just maybe discuss what is coming due in 2008. I think you’ve talked about the 6.6 billion warehouse facility which you plan to term out and then I think there are 2.9 billion auction rate loans, how do you plan on refunding that given the current situation?

Sure, you are correct. We have about $6.9 or 7 billion warehouse line, which although it has a final maturity of May 2010, the liquidity is renewed annually and so with that renewing in May this year, we got that as coming due this year. In addition, the auction rate is reset annually, those we are experiencing dislocation in the rates; however, I think it is also important to note that some of those loans in those financing have lower floor character affixed to them so those are still economically viable trust estates. We are going to look to refinance those into an alternative source to reduce our funding costs there for our first priority is to refinance our short-term warehouse portfolio. Cyral Buckeeny – Credit Suisse: Are you referring to the 6.6 billion?

Yes. Cyral Buckeeny – Credit Suisse: This you can always term it out to 2010, right? If it can’t be refinanced.

We do have that option and yes, we are trying to make sure that we put ourselves in the best, most flexible position as we move into 2008 and beyond. Cyral Buckeeny – Credit Suisse: The 2.9 billion in auction rates funding and what’s plan B if you can’t refinance that?

As I said, those have the ability to…those are not coming due. They are just (inaudible) periodically and we have the ability to leave those in the auction rate or variable rate demand mode. It is just going to be more efficient to refinance those to the extent they can because they are currently earning at the max rate. They’ve gone to the max rate. We want to refinance those to gain efficiency. Cyral Buckeeny – Credit Suisse: Okay so when are they coming due?

They have varying maturities most of them are probably going to be anywhere from 12 to 30 years. Cyral Buckeeny – Credit Suisse: Okay, great, thank you.

We will take our next question from Shane Wilson with QBC Financial.

Hi, I was wondering when you speak about increasing revenue from third party servicing, you know that service basing general assessment of the state of our now or if you had very specific conversations with specific other initial participants?

There are all different kinds of opportunities that are popping up as people are looking at ways to become more efficient. They are looking at companies like ours that have the scale and efficiency to help them do things more efficiently. We always have had a sales pipeline in our servicing area that’s increased significantly in the last three to six months as term wells kind of rocked the market.

Okay, thanks.

Our next question comes from Charles Kesstria with Cedar Hill.

Hey guys, I was wondering if you could just aluminates just a little better for me or us the derivatives you added in the quarter like you did have some activity there and what has hedged and what’s not hedged and what the exposures are?

Sure, this is Terry. Let me start with some of the exposures that we were trying to hedge. As you may recall, our assets are set off the average daily rate of the 90-day commercial paper so our assets set daily. The majority of our debt will reset every three months based off LIBOR. In a rising rate environment, we benefit from our assets resetting daily and our debt resetting discreetly every 90 days. When rates leveled out, we recognized that volatility and wanted to hedge against that in a declining rate environment and so we added a total of about $24 billion in terms of hedges that are outlined in our K that come on in varying points in time which hedge that average versus discreet difference in the reset provisions of our assets and our debts. That’s one of the risks that we’ve hedged and that we have benefitted from in terms of the recent substantial decrease in rates.

Those are bases hedges?

The other area that we have undertaken hedging activity is we have a portion of our loans that about $3.5 billion that have the ability to earn variable rate flooring income if rates drop substantially because they were reset last July. Rates have dropped substantially; we actually earn variable rate floor income to the extent that commercial paper would drop below about 4.9%. We have hedged or put on about $2 billion in hedges against that $3.5 billion portfolio, which lock in a rate of 4.18. We have effectively locked in or hedged about 72 bases points of variable rate floor income on $2 billion of our portfolio that could be eligible. We have an additional billion five to 2.4 billion that could be eligible for additional variable rate floor income because of T bill and T bill rates or commercial paper rates that we will earn a spread on as rates drop and we will earn variable rate flooring income between the difference of about 4.8 to 4.9% and the commercial paper rate, which currently is running probably around three. We have the ability to earn an additional 1.75 to 2.0% on that additional billion five of loans that are reset based on commercial paper. We also have about 800 million of loans that have the ability to earn variable rate floor income that are reset off the T bill; however, because we don’t have really any debt that is matched or based off the treasury bill while we earn variable rate flooring, we really don’t receive the economic benefit of that because of the wide tent spread. That’s the variable rate floor income component of it. Then on the fixed rate income, our fixed rate floors, we have about $2 billion that is earning at the fixed borrower rate of about 7.5% and we will have locked in because of hedges, we have locked in about 120 bases points of fixed rated floor income on that $2 billion portfolio. One billion of it was earning at fixed rates at year-end and a billion dollars was added after year end or an additional billion dollars converted to fixed rate after year end because of the continued decline in interest rates.

I got you that’s great, I appreciate it.

Your next call is from the line of Lance Eddis with Warner, Rock Capital Management. Lance Eddis – Warner, Rock Capital Management: I actually have a few questions. First, I know you said you are locked in part of your portfolio with 1.2 billion, I was wondering if you would comment on from what you are seeing out there, whether the part that’s is now locked in if it still sell those loans. I think you could still sell those loans at a slight premium to book value. In other words, you could sell them at 1.005 or 50 bases points above.

Obviously there is a substantial amount of destruction in the capital markets and the availability of capacity and liquidity has become challenging and I think it has become irrational in terms of the impact on the what assets would be sold for. We still believe that significant value and we are looking to retain that value by terming out some of them out of our warehouse but we will continue to look for ways we can capture that value including potential sale. Lance Eddis – Warner, Rock Capital Management: Okay and I just also comment one on your servicing business what’s been the growth there on the part that is not your assets and two; you mentioned diversification efforts before diversifying outside the payment arena. So, if you could comment on what kind of products we should expect coming in the pipeline.

This is Terry, let me first address this servicing. As we grew our portfolio historically, we have been able to grow our assets on balance sheet so through consolidation we actually saw a run off in our third party servicing portfolio. That has actually been declining over recent years because of the consolidation as well as our focus on growth of assets on our balance sheet. With the reduced consolidation impact and the reduced economics and people looking for efficiencies as Mike indicated, we see some opportunities to add some additional lenders and also grow for lenders to grow our third party servicing going forward. While that has historically seen a decline or run off, we see some opportunity to grow that going forward. Then, you other question on diversification, can you repeat that? Lance Eddis – Warner, Rock Capital Management: Just you commented before that you are looking to diversify sort of outside the core sort of payment products and your other fee businesses, would you just comment on that, be more specific on that if you could?

One of the4 areas that we’ve seen opportunity here has been in our software, technical services area and we’ve been able to develop products that really have appealed to constituencies outside of schools and students and we’ve been able to start to develop a market in that area. Right now, it’s really immaterial in terms of the overall contribution but we see opportunities to continue to diversify specifically in the software and technical areas outside. In addition, we also see opportunities to continue to diversify the product and service offered under our enrollment services area by example. Where traditionally that has been focused on planning and preparation as well as lead generation with lead generation taking the lion’s share of the activity there. We see opportunities to expand the product service offering to schools and students outside of that as we move forward. Lance Eddis – Warner, Rock Capital Management: Okay, thank you.

We have a follow up question from Sameer Gokhale with KBW. Sameer Gokhale – KBW: Just a couple of quick follow ups, on that warehouse facility and $6.6 billion of loans in there, assuming that facility isn’t renewed, as those loans paying down does that create additional capacity back up to the 6.6 billion or is that just basically fully amortizing at that point in time? I just wanted to kind of get some more detail on that.

If we were to term the facility with the providers, it would just amortize down. Sameer Gokhale – KBW: Okay and then, the other question I had was on that portfolio, where you talked about the future cash flows. I am assuming that doesn’t take into account any of the operating costs associated with servicing that portfolio. If one were to try to do an MPV on that piece of the portfolio, what would you envision your fallbacks would be if you were to just do a minimal amount of servicing on that and you cut out all the infrastructure related to the origination part of the business. How should we think about it from an MPV perspective if we were thinking of valuing that whole earning stream?

Well on that earning stream, the largest portion is going to be the net spread and the servicing is provided out of the cash flows that’s there. Our servicing is done, one of the developments or one of the things that we have been able to develop is a significant amount of scale or our cost is very efficient in that regard as it relates to…there is a lot of different factors that can come into the present value. Our focus was to make sure that we provided guidance on the amount that would flow off that portfolio to demonstrate the value that’s there. Sameer Gokhale – KBW: Let me try again and ask the question another way. If I was just trying to value within run off so you don’t leverage off of the scale of new loans that you might add on there and service those if you were just going to run the portfolio off. Your OFFEX ratio right now for the current quarter just if that business if it was 80 bases points or so I don’t know if that sounds reasonable but if your were just doing a minimal amount of servicing on that portfolio cut out all the origination costs, et cetera. Perhaps that could be 40 bases points of expense you are left with in a burned down scenario where you just are running the portfolio off. Is that the way I should be thinking about it and not take into account, not assuming growth in the business, just assuming a burned down run off analysis from an MPV perspective does those numbers makes sense?

You are still high in terms of the true cost associated with a run off scenario. Again, substantial portion of those are high balanced consolidation loans, so our servicing costs true marginal incremental servicing cost is going to be very low substantially less than the 40 bases points that you referenced. Sameer Gokhale – KBW: How about the all in costs of that portfolio, would it be lower than 40 bases points? Not looking at marginal again just assuming a run off the portfolio so servicing that existing portfolio with the cost, I assume, would that be 40 bases points or all including your fixed costs infrastructure, et cetera?

No, it will be less than that. The key is our ability to manage our fixed cost infrastructure is how we continue to grow our fee based businesses, the opportunities that are provided to continue to focus on the growth of our servicing business, the ability to expand our enrollment services areas, the ability to continue to grow our tuition payment campus commerce, so all of those play into our ability to manage our fixed cost infrastructure. Sameer Gokhale – KBW: Okay, thank Terry.

There are no further questions at this time. I would like to turn the conference back over to our speakers for any additional or closing remarks.

We have diversified our revenues and reduced our reliance on that interest margin and government fund program. We have established valid entry points in school and lender customers. We have developed significant accomplish scale on our loan servicing and our tuition payment plan operations and are developing similar consensus scale in our enrollment services areas. We have accessed the necessary capital to expand our business in profitable areas. We have the management experience and expertise to take advantage of business opportunities. We have demonstrated the ability to execute our business plan and challenging times. We want to thank you for participating in our call. Have a great day.

That concludes today’s teleconference. Thank you for your participation. Have a good day.