Karen King – Vice President Investor Relations Gary McCullough – President, Chief Executive Officer Mike Graham – Executive Vice President, Chief Financial Officer

Gary Bisbee – Lehman Brothers Kelly Flynn – Credit Suisse Amy Junker – Robert W. Baird Sara Gubins – Merrill Lynch Suzanne Stein – Morgan Stanley Jeff Silber – BMO Capital Markets Mark Marostica – Piper Jaffray Jerry Herman – Stifel Nicolaus Chris [Shetler] – William Blair & Co. Kevin Doherty – Banc of America Securities Trace Urdan – Signal Hill Group Corey Greendale – First Analysis Securities

Good day ladies and gentlemen and welcome to the first quarter 2008 Career Education earnings conference call. (Operator instructions) I would now like to turn the call over to Ms. Karen King, Vice President of Investor Relations. Please proceed ma’am.

Thank you. Good morning everyone and thank you for joining us on our first quarter 2008 earnings call today. I’m Karen King, Vice President Investor Relations and with me today are Gary McCullough, our President and Chief Executive Officer and Mike Graham, our Chief Financial Officer. Following a brief presentation by management the call will be opened for analyst and investor questions. This conference call is being webcast live on the investor relations section of our website at www.careered.com. The replay will also be available on our site. If we are unable to answer your questions during the call, please call our investor relations department at 847-585-3899. Before I turn the call over to Gary let me remind you that yesterday’s press release and the presentations made by our executives may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on information currently available to us and involve risks and uncertainties that could cause our actual results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include but are not limited to those factors identified in our first quarter earnings release and in our annual report on form 10-K for the year ended December 31, 2007 and from time to time in our other filings with the Securities & Exchange Commission. Except as expressly required by securities laws, we undertake no obligation to update such factors or to publically announce the results of any of these forward-looking statements to reflect future events, developments or changed circumstances or for any other reason. Now, let me turn the call over to Gary McCullough.

Thanks Karen. Good morning and thank you for joining us today for our first quarter 2008 earnings call. As Karen indicated, I’m joined on this call by Mike Graham, Executive Vice President and Chief Financial Officer. During today’s call, we’ll provide details of our operating results, we’ll discuss how we are addressing changes and uncertainty in the student lending environment and we’ll discuss progress we’ve made on a number of corporate initiatives. Our consolidated first quarter revenue of $460 million was in line with our expectations and was flat versus the first quarter of 2007. Excluding our transitional schools division, first quarter 2008 revenue was up 2.5% from first quarter 2007 revenue of $415.6 million. In addition, excluding the transitional schools division, population increased 6% and starts were up 10% year over year. On our last call I told you that we had restructured our organization into five strategic business units: university, art and design, culinary, health and international. In the first quarter we had strong starts in all of our SBUs with the exception of culinary. The university SBU showed improvements in the first quarter with starts up 8% year over year. As you may recall, last quarter we indicated we would synchronize AIUs ground and online calendars in order to provide seamless offerings to our students and we’ve done so. We are encouraged by the 10% year over year increase in starts at AIU. In the first quarter, AIU experienced the highest number of quarterly starts since the second quarter of 2006. During the investment analyst day we hosted in March, Len Mariani shared some of the work our teams are doing to become more effective in our admissions and marketing efforts. We have continued to improve our focus on the most productive internet vendors and we have…

Thanks Gary. I’d like to provide an update on our restructuring efforts and the transitional schools and add some financial clarity with respect to student lending before I end with some highlights of the first quarter. During the first quarter we announced a companywide restructuring as part of our long term growth strategy and we indicated that the estimated savings from workforce reduction during 2008 will be approximately $18-$20 million net of severance costs. In the first quarter, the net savings was negligible and we recorded all the severance expense associated with this reduction. We expect approximately $4-$6 million of savings per quarter for the remainder of the year. These reductions and related savings are exclusive of reductions made in the transitional schools division. We also restructured into five strategic business units as Gary discussed and the separate transitional schools division. 14 schools that we identified as teach outs moved into the transitional schools division. In the first quarter, we recognized $15.2 million of charges related to the onset of transitional activities. We recorded $8.6 million of severance and stay bonus expense associated with these schools. We also recorded a $4.6 million non-cash goodwill impairment charge in the first quarter of 2008 as the projected cash flows for the transitional division could not support the goodwill that was assigned to it. In addition, we recorded a $2 million non-cash asset impairment charge in the division related to the reduction in the asset carrying value for AIU ground campus in Los Angeles. As Gary mentioned, the transitional schools division is on track to wind down these schools as efficiently as possible. These charges were materially consistent with our estimates for the annual cost of winding down these operations that we provided to you in our investor and analyst day. However, the…

(Operator instructions) Your first question comes from Gary Bisbee – Lehman Brothers. Gary Bisbee – Lehman Brothers: A question on the increased disclosure around student lending in your press release, it appears that the benefit you’re expecting on average for each of your students from the Stafford loan limit increase would only be on an annualized basis something like $400.00 or substantially less than the $2,000.00 increase. I guess I wondered if you could give some more color on that, is that just a mix issue? Some programs are cheap enough that the kids just won’t need that extra amount and only a smaller portion actually will? Why would the benefit not be more?

What we did to come up with that number and obviously the legislation is new, we went division by division, SBU by SBU and took as much data as we had on our serial students, continuing students, as well as new starts and the new start impact. And we looked at our relative gap, the relative amount of Pell and the relative amount of Stafford and then division by division we calculated out how that up to $2,000.00 limit would benefit moving money from our balance sheet, using our balance sheet to the Federal balance sheet. And so it is mostly driven by mix. Our health business unit has the least need for financing, our culinary has the most need for financing. And it’s been calculated out that way and again that is simply the Stafford of impact only on our use of balance sheet, it does not impact any improvement in our business from additional private loans or additional volume that may come from students who now have more affordable educations. Gary Bisbee – Lehman Brothers: I wondered if you could give us any color on the starts growth at CTU, it appears to slow down a bit verse the recent trend, is that more of a one quarter data point or was there some slowing there that we should expect going forward?

I don’t think there’s any slowing, if you look at the CTU starts fourth quarter to first quarter, the number of actual starts themselves are very consistent with over 5,000 starts at the university. As you remember back to the two plus two program and things we had last year, we were coming off a relatively easier comp basis and last year’s first quarter was a high start number. So I think it’s just more math of the percentage but the start number fourth quarter to first quarter was very consistent.

Your next question comes from Kelly Flynn – Credit Suisse. Kelly Flynn – Credit Suisse: I wanted you to revisit the schedule change at AIU and clarify, did that impact enrollments or just revenue per student and then can you talk about both revenue per student and margin there with and without the schedule change? I thought it would have improved by now but I’m trying to figure out if it was because of the schedule change or something else.

From an enrollment standpoint there’s not a material change necessarily across all of AIU from the schedule change. Again we’re moving, we changed the days so that the start of the online programs and the on-ground programs in January was the same allowing the student to go between the two programs on a blended basis seamlessly. What happened was basically you started the online program later in the quarter, moving $6 million of revenue and profit from this year’s first quarter to this year’s third quarter. At the same time we moved up the calendar slightly on the ground business so you’ve lost $2 million of revenue in this upcoming second quarter, right now that we’re in, and you gain $2 million. So you have a net $4 million shift in the calendar which is revenue and profit because there’s no cost changes to that calendar movement. I don’t have in front of me the relative RPSs, on the businesses. We can get that to you later. But again the RPSs on the business son the AIU business, which we’ve talked about before, you do have the impact of the calendar, you do have some shifts in the population between bachelors and associates which we’ve discussed in previous calls. And in this quarter we did see an increase in our starts slightly on students on a bit of a decelerated program, taking on class during an academic term then two, which also dropped our RPS slightly. Kelly Flynn – Credit Suisse: As we look forward through the remainder of the year, can you give some insights on what RPS should do given all the moving parts, just maybe for 08 on average versus 07, just for AIU.

During the quarter RPS on-ground went up about $700.00 per student and was slightly down, call it another $700.00 in the online business. Obviously we’ll work to address the RPS business issue on the online business as we go forward. I would expect that they’ll remain in the area they are, although we’re going to push for the online business. We don’t expect to take a price increase. One of the things we did do, if you recall in the first quarter is we began to address costs that had creeped into the AIU business as we took headcount reductions that were necessary in the organization. What we expect they’ll continue to be reflected in the business as we go forward. But we did that move in February along with the other reductions in force that we took.

Your next question comes from Amy Junker – Robert W. Baird. Amy Junker – Robert W. Baird: First just a clarification question, do you still have starts in your transitional schools? And I guess I’m curious why that is and how long should we expect that to continue for those schools?

As you recall we announced our teach out within the first quarter, so we did have January starts because we had not concluded the sales process right at January 1. So you do have residual starts in the first quarter. You should have very little if any starts from the second quarter forward. Amy Junker – Robert W. Baird: Gary, you mentioned pricing a little bit, can you just talk about your plans to increase prices by segment? I know you allow your individual segment leaders to determine what’s appropriate, but what are your thoughts at this point and I’d be particularly interested in the culinary program.

As we said before and you reiterated, we don’t from the corporate center here determine price increases. We don’t have planned price increases in the business. We’re looking SBU by SBU to ensure that we’re competitive across the board on a by market basis. And so at this point we don’t have price increases planned into the business.

Your next question comes from Sara Gubins – Merrill Lynch. Sara Gubins – Merrill Lynch: Could you talk about your plans for advertising spend for the rest of the year.

As you noted we’re making progress in terms of cost per start. Len Mariani and that team along with the SBU heads have done a good job of beginning to take unnecessary costs out of our spend. We spent incrementally on AIU in particular in the first quarter and we think that was justified coming off of probation in December and I think when you see the positive starts that we experienced, we feel good about that and feel like the spend that we made was appropriate. We do not intend to spend at that level going forward, we’ll continue to look for opportunities to take spending out of our mix.

And we did talk about in the first quarter that some of the AIU spending made in the first quarter would be offset later in the year with some reductions of spending. So in general we anticipate that our advertising spending as a percentage of revenue would be consistent or below last year’s level. Sara Gubins – Merrill Lynch: Then the tax rate for the rest of the year, I saw that you guys had a benefit in this quarter, is 39% more of a reasonable run rate?

I wouldn’t think so, I think that we had a $2 million discrete item that comes out, I don’t think the tax rate will be that high. Our tax rate, our statutory tax rate is 35% and then our state tax rate is 2% so you’re at 37% and then the tax exempt securities drives that rate down. I don’t think our rate for each quarter going forward will be much different than the 35% maybe up to 36%, I think it’ll be pretty constant right around where it is. Sara Gubins – Merrill Lynch: For the Stonecliffe program, the associate degree program at CTU, I don’t know if it’s too early but any indications on those student’s interest in finishing up their bachelors degree with you?

Sure, we made certain assumptions around the sheer percentage that would move on to our bachelor’s degree programs and at this point we’re seeing the matriculation rate higher than we had anticipated. Sara Gubins – Merrill Lynch: Could you share the matriculation rate with us?

Sara I’d rather not because we’re still moving into that, we’re seeing the interest that is higher and we’ll know more probably mid to late summer.

Your next question comes from Suzanne Stein – Morgan Stanley. Suzanne Stein – Morgan Stanley: Can you just give us a little more color on what’s going on in the international division and just what we can expect as far as seasonality, the pattern for this year.

I’ll start by saying the international business is a bit different than our domestic business in that they enroll primarily in September for the academic year, so you would expect to see the larger or at least the starts increase in September unlike the balance of the business. Those businesses continue to perform well as I said in my opening comments. I actually spent time with them about two weeks ago to understand the business in each of the cities in which we operate. And so you could expect from a seasonality point of view the big start, September or in the fall as the traditional school year.

On a seasonal basis your first quarter and your fourth quarter, because you have full student attendance are your highest and the third quarter is a trough because you’ll have the schools basically dark for July and August. So you can anticipate that the third quarter will be half the normal volume of the business. The business enjoys great trends as Gary said in our call, starts around 40%, we disclosed in our 10-Q that we do benefit slightly from the Euro, but only $4 million of our top line increase in that business was driven by Euro favorability, so most of it was driven by starts and organic growth. Suzanne Stein – Morgan Stanley: Your share of affiliate earnings, going forward given the termination of the Dubai arraignment, what should we expect there, is that all that was in that line item?

Yes, there’ll be zero in there going forward.

Your next question comes from Jeff Silber – BMO Capital Markets. Jeff Silber – BMO Capital Markets: In your prepared remarks you talked about the private lending environment or the lending environment getting a little bit tougher since the analyst meeting in March, can you just review with us who your preferred lenders are, both on the private and the Title IV side and if that’s changed in recent months?

As you know we’ve never given out the different names. We’ve gone through RFP processes and we’re talking to different people. We have had a reduction in both the Federal and the private side. We do have several lenders that are providing loans to our students on the private loan side and we have a list of lenders that are still active in the [self volume]. Jeff Silber – BMO Capital Markets: And continuing on lending, some of the other companies in this space expressed some concerns with while the potential addition in Stafford loan is positive, having to monitor a little more closely against breaking the 90-10 threshold, can you talk about what your company is doing along those lines?

Given our revenue per student and the relative Federal levels, 90-10 has not been a material issue for the company. Our lowest priced products are in the health business, and if you look across the reports that we’ve given out before on the OPIDs, we don’t have a lot of severe 90-10 issues. We tend to have in our health program somewhat higher degrees and higher programs and so we don’t butt up against those. Our plan would be first we would be hopeful that legislation does pass that would relieve any 90-10 issues from the industry, we’ll start there. Second, we’ll continue to manage the hire in programs and make sure that we look carefully at 90-10 levels. I know other people have potentially talked about different things like price increases. At the current time because it’s early and we have very few schools in our health division that are affected by 90-10, we haven’t contemplated price increases right now. We’ll see more when legislation comes out and gets finalized, whether we need to do that on a selective basis, but right now we feel good about 90-10. Jeff Silber – BMO Capital Markets: And if you could just give us a little bit of color on retention by the different business units that’ll be great.

When we looked at retention frankly we weren’t pleased with what we saw, we saw each of the units flat or slightly down from a retention point of view versus where they were year over year. And when I say that I mean a half a point or a point in each case and so that’s work we have to do that’s fundamental blocking and tackling which we’ll get after.

We did have sequentially from our fourth quarter last year to our first quarter this year, we saw retention rates improve by just under 100 basis points.

Your next question comes from Mark Marostica – Piper Jaffray. Mark Marostica – Piper Jaffray: I wanted to follow up on Gary’s comments regarding the idea of no price increases at any SBUs going forward at this point. Relative to the culinary division and given the relatively high cost of tuition in that division, I’m curious whether you’re considering or not considering price decreases or additional scholarships to combat the decline in start growth. How do you balance those two things?

Again, I’d never say never on either taking price up or down, but I think it’s one of those things that we just have to be aware of and make sure that we remain competitive on a market by market and program by program basis. And so that’s work that we can consistently do and we will do going forward. I guess with regard to scholarship and grants, obviously that is something we are contemplating across the company and by SBU. I would mention here that we do have a non-profit associate with the company that provides scholarships and we’re about to release $1.2 million in funds across the company for deserving students. And so we look forward to doing that for those deserving students where we can.

I think the other thing that we’re looking at is, as you know, we’ve spent a lot of time on the changes in the programs and the changes in programs won’t be effective until the beginning of 2009. The business again has the lowest cohort default rates in the company, is market priced with its competitive set and has very high placement rates. So we think that the price is not necessarily out of line with the value the student is getting and I think we’ll need more time to see how the length in program, the reduced footprint, reduced headcount and the staffing of the model works before we go quickly to a price decrease. Mark Marostica – Piper Jaffray: As a follow up to that point I’m curious how much of your decline in starts in the culinary business this quarter was attributable to your tightening of credit standards?

The culinary starts this quarter were minus 8%. Talking to our business units, it’s hard to quantify that but they thought that they would probably have been in the low single digits on starts versus the negative 8% that they had. Mark Marostica – Piper Jaffray: When do you think you’ll report a quarter without charges? Are we done with all the charges this quarter or should we expect more charges in the coming quarters?

I would say a couple things, one we did outline for you in our investor meeting in Atlanta that we would have a lot of different charges from a real estate standpoint, from a restructuring standpoint, so we’ve been pretty clear there. And we did lay out for you a pattern of the charges over the years. Second is we do work heavily on our cost models and we have taken severance charges and other charges as we’ve reduced staff. As we look at our model going forward and we’ve talked about culinary that we reduced some staff in culinary, we will potentially have severance charges related to different staffing as we [treated] our employees with the right programs as we reduce our staff levels. It’s hard to say when we wouldn’t have charges but I will tell you that when we do have charges we’ll clearly lay them out for you, tell you if they’re cash or non-cash and be as descriptive as we can. Mark Marostica – Piper Jaffray: Is there anything specific you can comment on if there are any charges for Q2?

I think Gary did speak to that we did reduce headcount in the culinary division. As you know the change in lending happens April 1. So Sallie Mae no longer gives us recourse loans so a lot of the revenue decline that we had told you about in the first quarter that would hit begins to hit here April 1. And so we have adjusted and right sized our culinary organization to our anticipated levels of population and starts so there will be some kind of a cost for severance in the second quarter for culinary. Also as you know, we talked about the AIU ground earnings days moving. So those two days that are moving from the second quarter to the first quarter will impact our second quarter results here which is not a charge, but it is an unusual item, it’s a $2 million item that I disclosed to you earlier.

Your next question comes from Jerry Herman – Stifel Nicolaus. Jerry Herman – Stifel Nicolaus: I’m wondering if you guys would give us sort of where you are in the break out between bachelors and associates programs for both of the online programs, AIU and CTU and how close are we to normalizing there?

I can give you some rough numbers on the online programs, AIU mix is about 60% associate, 30% bachelors, 10% masters. The CTU program, the associate is slightly higher in associate, slightly lower on bachelors and about 10% on masters. CTU obviously we anticipate that that associate population will go up a little bit through September when we start matriculating the students in the two plus two and then we expect that to come down. So I think that we could look at 50-60% associate population over the near term for both these businesses. We have seen as most in the industry have seen an interest in our associate degree populations, we’ve seen a growth there. And we’ve also seen some growth in our part time or decelerated programs based on student needs. So I think right now 60-65% and it’ll stay there for a while. Jerry Herman – Stifel Nicolaus: So given that the RPS should stabilize or maybe even get a little bit better, correct?

I think the RPS will. It’s hard to say, you’ve got to take out the noise of AIU as we modeled that out. So you take that out and then the RPS in CTU, depending on the shift of the associates degree could increase late in the year into 2009 as those students move from associates to bachelors. Jerry Herman – Stifel Nicolaus: And another one regarding the operating profits in online and specifically AIU. Is a fair way to reconcile that operating profit by looking at the $4 million net revenue shift and then the $5.7 million incremental media spend if we affectively adjust for those, that might be a reasonable representation of what the operating margin would have been ex these timing issues? Speaking of online only.

I’m not sure that we have attributed all that advertising to the online business. It obviously affects the ground business as well. The majority of it may be going to the online business. There’s a split between those based on certain models we have internally. But I think you would halve it from there. Jerry Herman – Stifel Nicolaus: With regard to that media spend, the online starts were up 7% and that’s a bit lower than what it’s been the last couple of quarters, I know AIU was pretty strong, maybe you could just talk to the start growth and any influence that you’re seeing of the new media spend.

It’s always difficult to attribute results to media spend. I would tell you that a portion of the media spend was actually spent in markets where we have on ground campuses. And so it was good to see the on ground starts up over 30% which is the first time we’ve seen any number like that in some time. But we did outdoor and buses and things like that that weren’t typical of the spending. We did that primarily to remind people that the university existed in their locales. And so again I was pleased to see that we had start growth both at online and on ground. It was in line with what we expected but it’s hard to say it’s because of this, that or that that we saw things. We’ll continue to work at honing our message, we’ll continue to work at making sure that our media shows up where our students consume media, so to speak, which is largely on the internet and some television.

As you know the online starts are eight times higher than the on ground starts so just on that small number, that percentage on that small number, we probably did benefit slightly form that calendar shift on the ground basis just from moving a little bit more of the curriculum in and starting it a bit earlier. Jerry Herman – Stifel Nicolaus: Were all the severance related payments actually paid during the course of the quarter, in other words does the cash balance reflect all payments?

No they do not. The severance payments for employees who left the company for the most part, those have been paid. The stay bonuses related to the transitional schools will be paid out at the end of the transitional period.

Your next question comes from Chris [Shetler] – William Blair & Co. Chris [Shetler] – William Blair & Co.: I wanted to touch on the trends in faculty turnover and enrollment rep turnover if you could give us a little bit of color on that for the voluntary employees as opposed to the ones that have been terminated.

From a rep standpoint, we have about 2,200 reps on hand in the company as of the end of the first quarter, that’s down about 26% from the year before. That is again driven by our peer qualifier model and the great work that Len and his team have done on changing the way we do the admissions process. From a faculty standpoint, our turnover is better year over year by about between 400-600 basis points of the company. But our turnover statistics across the company are better and our headcount of faculty is lower than the previous year at this time. Chris [Shetler] – William Blair & Co.: And sequentially you’re seeing some slight improvement as well?

Yes there was some sequential improvement from fourth quarter forward. Chris [Shetler] – William Blair & Co.: Also I wanted to touch on the art and design segment, obviously growth there was pretty strong this quarter and I know some of it was due to the startup campuses that you have and the online. But those would seem to have also positively impacted the previous couple of quarters. And this was really the first quarter where you saw some pretty significant growth and I’m just wondering if we could model that going forward or how we should think about that.

I’ll start by telling you that we began our online business August-September of last year and so we’ve seen it continue to grow in line with our expectations. With regard to the new campuses that have been started up, we carry those in a separate startup group until they have been up and running for a year. And so this reflects those moving in to the group.

And again, it’s hard to say on the online business how much of that is being cannibalized from the ground businesses, those schools, or how much is incremental. We did disclose in the 10-Q in the MD&A that our revenues for art and design exclusive of the startups and of online were down slightly for the quarter. Chris [Shetler] – William Blair & Co.: The detailed breakout that you provided this quarter on the university division, all the different operating metrics, will that be included in the press release going forward?

Yes.

Your next question comes from Kevin Doherty – Banc of America Securities. Kevin Doherty – Banc of America Securities: Just to follow up on the enrollment reps, I guess from the reduction do you think those reps are properly aligned with your lead flow right now and I guess would you expect any more changes going forward either way and maybe on the upside if some of your media efforts result in an increase in your lead flow.

At this point I would say that we do think that we’re properly aligned. We’re seeing better productivity out of our reps at this point in time. That said, as I said, we’ve been experimenting with our peer qualifier model. We think there are opportunities to continue to expand that in the balance of the business and so actually do that, we’ll continue to make the appropriate reductions and or add depending on what our needs are in each of the businesses. Kevin Doherty – Banc of America Securities: And you touched a bit on the on-ground population at AIU and CTU, how would you characterize the utilization there right now and I know it’s a much smaller population but how do you guys think about building back some of that population in order to drive leverage in that SBU.

We think obviously our goal would be to get back to where we had been historically and beyond that and so this is the first steps in us doing that. We will continue to drive start growth and population and work on the fundamentals of retention in each of those businesses as well. So we think there’s significant upside assuming we’re able to do that. But we’ve made reductions as necessary we we’ve talked about doing in the culinary business, we made the reductions that we think are necessary to support the student populations that we have and are prepared to continue to add back at the appropriate time when we have the population to warrant to.

Remember that as we made the decision to teach at AIU LA, that was half of the ground school loss of the AIU business. So we’ve addressed the capacity issue there. Second, we talked a lot about this calendar alignment but the important thing is that gets the ground campus and the online campus fully aligned so the student can go back and forth. So from the utilization of that campus, that makes that on-ground campus even more important so some of that cost and that loss may be benefitting or subsidizing the online business as part of the student experience. Kevin Doherty – Banc of America Securities: On the higher Stafford loan limits, I know we don’t have a lot of visibility right now but when do you expect some of those increases to start taking affect?

Depends on legislation and what the President signs and what goes into effect. Kevin Doherty – Banc of America Securities: But at least based on the range that you gave right now, I imagine it’s in the very near future?

Yeah we were basically expecting something and the range we gave we were basically expecting it would be in place by July 1. We would anticipate given the academic years at traditional schools it will be in place well in advance of that. So as we’ve made a very broad estimate for you, we took a July 1 start date.

Your next question comes from Trace Urdan – Signal Hill Group. Trace Urdan – Signal Hill Group: I was hoping to get a sense of, obviously a lot of moving parts around private lending in the quarter and I’m wondering if you could help us understand what the, how that relates to the starts that you experienced in the quarter, what was the experience of the students as you went through time with respect to the lenders dropping out, with respect to you guys stepping up. And I was interested specifically around the comments where you’re asking for co-borrowers, when did that kick in, was it only for new students or is it for existing students as well? If you could relate the experience of the student to the comments around lending that would be helpful I think.

We talked to various admissions reps and we have not seen a material change in the students’ behavior. Obviously the students read the paper, they see what’s going on, they understand it. Remember what’s happened in the quarter we’re speaking of, it was pretty dynamic. Sallie Mae did not go away until the April 1. And so from a student experience, during that quarter, we still had a long list of FFELP volume, you still had several if not more private lenders available and you still had the Sallie Mae recourse program. We were not packaging up students with our balance sheet to any great extent. We had curtailed most of our use of our extended payment plan by then and so most of it to the student through March 31, end of the quarter, was transparent and didn’t have a big impact on them. We worked hard obviously with knowing Sallie Mae was terminated as of March 31 to make sure every student had as much access as possible to the Sallie Mae product and helped every student get in that could get in. Trace Urdan – Signal Hill Group: So all these students that we see enrolled here are all packaged?

That’s correct. Trace Urdan – Signal Hill Group: And effectively you haven’t really started this process of asking the students for co-borrowed funds at this point?

We rolled out our program April 1, correct. Trace Urdan – Signal Hill Group: But you’re not anticipating that’s going to be a problem in terms of getting them to commit to programs if you’re sort of throwing that up as you go?

We’re not just throwing it out as we go, we actually had planned for this and we put the process in place where we’ve asked our admissions representatives to require an attempted co-borrower and we’re in fact seeing a more than 10 point increase in co-borrowers. Again I think as Mike said if you look at what’s happening from a macro point of view, the students and in some cases parents were in affect or other people who were sponsoring them understand that the situation has changed. And so they are working with us to take part in our programs. We’re not asking or requiring them to do things that are different than I think most of the other folks who are out there. Trace Urdan – Signal Hill Group: So you were asking for co-borrowers in the first quarter?

We put the training into place and the expectations into place in anticipation of recourse funding going away and us starting a new program on April 1.

Remember, as we communicated our revenue decline of $75-$90 million in our previous communications, we had built into that a loss of volume from lending capabilities, the use of our balance sheet, requiring more stringent co-borrower requirements, adding an in school payment component for every student to make sure that in school they’re making payments to get financially responsible. So all that was factored into our revenue loss estimate that we gave you which basically began on April 1 with the change of the programs. The data we’ve told you about co-borrowers was since April 1 our call it five weeks of experience where we are now stepping up the requirement for co-borrowers where we may have in the past asked for a waiver of co-borrowers, now we’re asking for more, but denial of a co-borrower. So we’re making sure the co-borrower process is much more rigorously enforced. Trace Urdan – Signal Hill Group: So basically your experience in April so far has been positive with respect to looking for co-borrowers?

Yes. Trace Urdan – Signal Hill Group: And then have you also been asking students to put up more cash as they enroll?

No we have not, we are asking them to make in school payments so we can monitor them as we go along. So that in fact is happening in each of the programs where we’re lending money. Trace Urdan – Signal Hill Group: I just want to understand the experience of the numbers that we’re seeing in the first quarter, were you asking students to make in school payments in the first quarter to a greater degree than you had in the prior year?

Remember what we had in place in the first quarter. In the first quarter all we had was our extended payments program which was given to students below that recourse level of Sallie Mae. So that was a totally different program than we have starting April 1. And we weren’t using our balance sheet to subsidize or take over the asset of any lenders because they hadn’t disappeared in the first quarter. Trace Urdan – Signal Hill Group: I’m just trying to get a sense of whether you’ve seen, had experience with any of this new activity so far. So just basically starting April 1 you’ve been asking for some cash or in school payments?

No, we have in the past asked for in school payments, we had the extended payments plan as we talked about. We’ve also always had in school payment plans where people make certain contributions to their education while they’re in school. We’ve had that, we’ve collected that, we’ve processed that. As we’ve talked about before, the amount of volume we were generating under the existing EPP program, the amount of balance sheet we’ve been using before theses new lenders was the same volume. So systems wise, people wise, process wise, consistent with what we’ve done. But we haven’t materially changed in the first quarter any needs for payments in school or co-borrowers that would give you evidence of what the second quarter looks like. Trace Urdan – Signal Hill Group: So no change in the first quarter but you do anticipate asking for more in school payments starting in the second quarter?

As we’ve communicated, our new program, we require in school payments. So if you are in our new payment program we’re requiring you to make some kind of in school payment. Trace Urdan – Signal Hill Group: Alright and just as you gave us some feedback around the co-borrower experience in the first part of April, have you had any experience with that piece where you’re asking or requiring in school payments? Has there been any kind of a problem so far in the second quarter is what I’m asking.

After five weeks it’s too early at this point Trace. But we’ll stay abreast of it. Our experience suggest though that when students make their in school payments faithfully, they are much more committed to their education and they tend to pay over time.

The other thing, just remember how the paperwork process may work. If you’re starting early in April, you were probably packaged in March or before. So you could have been packaged under Sallie Mae or one of those existing lenders. Most lenders that have left the market have said that if you’re in the system and you’re approved that they’ll honor those commitments. So you’re not going to get on April 1 this total void for the starts that people are already planning on coming in that quickly.

Your final question comes from Corey Greendale – First Analyst Securities. Corey Greendale – First Analysis Securities: Following up on Trace’s questions, as you ramp up this co-borrower requirement, is there an opportunity to access the Plus loan program more and would any benefit of that be factored into that table you provided at the back of the press release?

Yes. Again, it’s really early to tell but when we did our analysis we looked at the different Stafford levels and the Plus levels and how the Stafford loan limits work with the Plus loan limits. Corey Greendale – First Analysis Securities: And looking at that $45-$65 million number at the bottom of that table, I just want to make sure I’m understanding, so there was no impact of that in Q1 so that $45-$65 million in Q2 through Q4 combined is that correct?

No that is the amount of receivables we will have on our balance sheet as of 12/31/08 for originations of loans. Corey Greendale – First Analysis Securities: And it’s fair to assume that it’s going to be a lesser impact on Q2 and then grow with each quarter as the bigger portion of the student population gets new loans?

Every time we underwrite a new loan that balance will grow and it will grow to $45-$65 by the end of the year on the balance sheet. Corey Greendale – First Analysis Securities: Is it also fair to assume that the share repurchases will probably slow given that you’re having to use your balance sheet more for liquidity right now?

I’m not sure about the pace of the share repurchases. We still have the authorization, we still as we talked about want to return our cash to shareholders as we can but let’s be prudent right now based on the lending environment. We did purchase 1 million shares in the first quarter based on our free cash flow and where we knew the lending markets were at.

At this time I would now like to turn the call back over to Mr. Gary McCullough for the final remarks.

Thank you. Career Education is no stranger to adversity as you’ve seen. Over the past four years, as I shared with you when we were at our investor analyst day, our company has faced significant challenges and we’ve resolved many of those challenges. We’ve successfully addresses significant legal, regulatory compliance and accreditation challenges from almost every angle and we’re making positive progress to put checks and balances in place to make sure that we won’t face those issues again. Today I believe we’re better positioned to withstand the current changes in the market and will emerge from these challenges as an organization positioned for sustainable long term growth. I appreciate your participation on the call this morning. Because the environment that we’re operating in is constantly changing I want you to know that we’ll keep you, as Mike said, we’ll make every effort to keep you informed and to be as transparent as possible if any changes happen that you ought to be made aware of. And with that, thanks again for your support and for your interest in Career Education.