Filed Pursuant to Rule 424(b)(5)
File No.: 333-133028-02
Prospectus Supplement to Prospectus dated September 8, 2006
$2,569,000,000
SLC Student Loan Trust 2006-2
Issuing Entity
SLC Student Loan Receivables I, Inc.
Depositor
The Student Loan Corporation
Sponsor, Seller, Servicer and Administrator
Student Loan Asset-Backed Notes
On or about September 19, 2006, the issuing entity will issue the following
classes of notes:
Original
Principal Initial Public Underwriting Proceeds to
Class Amount Interest Rate Maturity Offering Price Discount The Depositor
- --------- ------------- --------------------------- ------------------ -------------- ------------ -------------
A-1 Notes $ 130,000,000 3-month LIBOR minus 0.02% June 15, 2011 100% 0.1750% 99.8250%
A-2 Notes $ 525,000,000 3-month LIBOR June 15, 2016 100% 0.1800% 99.8200%
A-3 Notes $ 136,000,000 3-month LIBOR plus 0.02% September 15, 2017 100% 0.2000% 99.8000%
A-4 Notes $ 600,000,000 3-month LIBOR plus 0.08% June 15, 2022 100% 0.2150% 99.7850%
A-5 Notes $ 445,000,000 3-month LIBOR plus 0.10% September 15, 2026 100% 0.2350% 99.7650%
A-6 Notes $ 656,000,000 3-month LIBOR plus 0.16% September 15, 2039 100% 0.2500% 99.7500%
B Notes $ 77,000,000 3-month LIBOR plus 0.23% December 15, 2039 100% 0.3000% 99.7000%
The issuing entity will make payments quarterly, beginning December 15, 2006,
primarily from collections on a pool of student loans made under the Federal
Family Education Loan Program (FFELP) which are consolidation student loans.
Interest and principal will be paid to the applicable noteholders quarterly on
the 15th of each March, June, September and December, beginning on December 15,
2006. In general, the issuing entity will pay principal allocable to the class A
notes sequentially to the class A-1 through class A-6 notes, in numeric order,
until paid in full. The class B notes will not receive principal until the
stepdown date, which is scheduled to occur on the earlier of (i) the
distribution date in March 2013 or (ii) the first date on which no class A notes
are outstanding. The class B notes will then receive principal pro rata with the
class A notes, as long as a trigger event is not in effect for the related
distribution date. Interest on the class B notes will be subordinate to
interest, and if a class B interest subordination condition is in effect, to
principal, on the class A notes. Principal on the class B notes will be
subordinate to both principal and interest on the class A notes. Credit
enhancement for the notes consists of excess interest on the trust student
loans, subordination of the class B notes to the class A notes, the reserve
account and, until the distribution date in March 2008, the capitalized interest
account. The notes are LIBOR-based notes. A description of how LIBOR is
determined appears under "Certain Information Regarding the Notes--Determination
of Indices--LIBOR" in the base prospectus and "Description of the
Notes--Determination of LIBOR" in this prospectus supplement.
We are offering the notes through the underwriters at the prices shown above,
when and if issued. Application will be made to The Irish Stock Exchange Limited
for the class A notes to be admitted to the Official List and to begin trading
on its regulated market. There can be no assurance that such a listing will be
obtained. The issuance and settlement of the notes is not conditioned on the
listing of the class A notes on The Irish Stock Exchange Limited.
We are not offering the notes in any state or other jurisdiction where the
offer is prohibited.
We expect the proceeds to the depositor from the sale of the notes to be
$2,563,348,750, before deducting expenses payable by the depositor estimated to
be $1,400,000.
You should consider carefully the risk factors beginning on page S-21 of this
prospectus supplement and on page 17 of the base prospectus. The notes are
asset-backed securities and are obligations of the issuing entity, which is a
trust. They are not obligations of or interests in The Student Loan Corporation,
the depositor or any of their affiliates. The notes are not guaranteed or
insured by the United States or any governmental agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the notes or determined whether this
prospectus supplement or the base prospectus is accurate or complete. Any
contrary representation is a criminal offense.
Citigroup
Credit Suisse
Goldman, Sachs & Co.
Lehman Brothers
September 13, 2006
TABLE OF CONTENTS
SUMMARY OF TERMS.............................................................S-7
Principal Parties.........................................................S-7
The Notes.................................................................S-8
Dates.....................................................................S-8
Information About the Notes...............................................S-8
Indenture Trustee........................................................S-11
Eligible Lender Trustee..................................................S-11
Indenture Administrator and Paying Agent.................................S-11
Administrator and Sub-administrator......................................S-11
Servicer and Sub-servicer................................................S-11
Owner Trustee............................................................S-11
Irish Listing Agent and Paying Agent.....................................S-12
Information About the Issuing Entity.....................................S-12
Information About the Issuing Entity.....................................S-12
Capitalization of the Trust..............................................S-15
Administration of the Trust..............................................S-15
Transfer of the Assets to the Trust......................................S-17
Termination of the Trust.................................................S-18
Trust Certificateholder..................................................S-19
Certain U.S. Federal Income Tax Considerations...........................S-19
Certain ERISA Considerations.............................................S-19
Ratings of the Notes.....................................................S-20
Listing Information......................................................S-20
Risk Factors.............................................................S-20
Identification Numbers...................................................S-20
RISK FACTORS................................................................S-21
DEFINED TERMS...............................................................S-23
FORMATION OF THE TRUST......................................................S-23
The Trust................................................................S-23
Eligible Lender Trustee..................................................S-24
ADDITIONAL INFORMATION CONCERNING OTHER PRINCIPAL PARTIES...................S-26
Indenture Trustee........................................................S-26
Sub-servicer.............................................................S-27
USE OF PROCEEDS.............................................................S-27
THE TRUST STUDENT LOAN POOL.................................................S-28
General..................................................................S-28
Eligible Trust Student Loans.............................................S-28
Characteristics of the Trust Student Loans...............................S-28
Insurance of Trust Student Loans; Guarantors of Trust Student Loans......S-35
Cure Period for Trust Student Loans......................................S-38
Consolidation of Federal Benefit Billings and Receipts and Guarantor
Claims with Other Trusts..............................................S-38
DESCRIPTION OF THE NOTES....................................................S-40
General..................................................................S-40
The Notes................................................................S-40
Determination of LIBOR...................................................S-42
Notice of Interest Rates.................................................S-43
Additional Information Concerning Accounts and Eligible Investments......S-43
Consolidation Loan Add-On Period.........................................S-43
Servicing Compensation...................................................S-44
Additional Information Concerning Servicing Procedures...................S-44
Additional Information Concerning Payments on Student Loans..............S-44
Additional Information Concerning Servicer Covenants.....................S-44
Distributions............................................................S-44
Distributions Following an Event of Default and Acceleration of the
Maturity of the Notes.................................................S-46
Voting Rights and Remedies...............................................S-46
Credit Enhancement.......................................................S-46
Trust Fees and Expenses..................................................S-48
Determination of Indices.................................................S-48
Optional Purchase........................................................S-48
Auction of Trust Assets..................................................S-48
STATIC POOLS................................................................S-50
Prepayments, Extensions, Weighted Average Lives and Expected
Maturities of the Notes...............................................S-50
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS..............................S-51
EUROPEAN UNION DIRECTIVE ON THE TAXATION OF SAVINGS INCOME..................S-51
CERTAIN ERISA CONSIDERATIONS................................................S-52
REPORTS TO NOTEHOLDERS......................................................S-53
UNDERWRITING................................................................S-53
LISTING AND GENERAL INFORMATION.............................................S-55
LEGAL PROCEEDINGS...........................................................S-55
RATINGS OF THE NOTES........................................................S-55
LEGAL MATTERS...............................................................S-56
GLOSSARY FOR PROSPECTUS SUPPLEMENT..........................................S-57
PREPAYMENTS, EXTENSIONS, WEIGHTED AVERAGE LIVES AND EXPECTED
MATURITIES OF THE NOTES...............................................S-61
EXHIBIT I: PREPAYMENTS, EXTENSIONS, WEIGHTED AVERAGE LIVES AND EXPECTED
MATURITIES OF THE NOTES...................................................I-1
S-3
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING BASE PROSPECTUS
We provide information to you about the notes in two separate sections of
this document that provide progressively more detailed information. These two
sections are:
o the accompanying base prospectus, which begins after the end of this
prospectus supplement and which provides general information, some of
which may not apply to your particular class of notes; and
o this prospectus supplement, which describes the specific terms of the
notes being offered.
We have not authorized anyone to provide you with different information. You
should read both the base prospectus and this prospectus supplement to
understand the notes.
For your convenience, we include cross-references in this prospectus
supplement and in the base prospectus to captions in these materials where you
can find related information. The Tables of Contents on pages 2 and 3 of this
prospectus supplement and on pages 3-5 of the base prospectus provide the pages
on which you can find these captions.
Affiliates of the issuing entity expect to enter into market-making
transactions in the notes and may act as principal or agent in any of these
transactions. Any such purchases or sales will be made at prices related to
prevailing market prices at the time of sale.
NOTICE TO INVESTORS
-------------------
The notes may not be offered or sold to persons in the United Kingdom in a
transaction that results in an offer to the public within the meaning of the
securities laws of the United Kingdom.
Certain statements contained in or incorporated by reference in this
prospectus supplement and the accompanying base prospectus consist of
forward-looking statements relating to future economic performance or
projections and other financial items. These statements can be identified by the
use of forward-looking words such as "may," "will," "should," "expects,"
"believes," "anticipates," "estimates," or other comparable words.
Forward-looking statements are subject to a variety of risks and uncertainties
that could cause actual results to differ from the projected results. Those
risks and uncertainties include, among others, general economic and business
conditions, regulatory initiatives and compliance with governmental regulations,
customer preferences and various other matters, many of which are beyond our
control. Because we cannot predict the future, what actually happens may be very
different from what is contained in our forward-looking statements.
IRISH STOCK EXCHANGE INFORMATION
In connection with the proposed listing of the class A notes on the Official
List of The Irish Stock Exchange Limited, the depositor accepts responsibility
for the information contained in this prospectus supplement and the
accompanying prospectus. To the best of the depositor's knowledge and belief,
having taken all reasonable care to ensure that such is the case, the
information contained in this prospectus supplement and the accompanying
prospectus is in accordance with the facts and does not omit anything likely to
affect the import of such information.
Reference in this prospectus supplement and the accompanying prospectus to
any website addresses set forth in this prospectus supplement and the
accompanying prospectus will not be deemed to constitute a part of this
prospectus supplement and the accompanying prospectus filed with The Irish
Stock Exchange Limited in connection with the listing of the class A notes.
S-4
SUMMARY OF PARTIES TO THE TRANSACTION*
This chart provides only a simplified overview of the relations between the
principal parties to the transaction. Refer to this prospectus supplement for
a further description.
( )
( )
( Sale )
( of )
___________________( Trust )__________________
| ( Student ) |
| ( Loans ) |
| ( ) |
| ( ) |
| |
| |---------------------------|
| | |
| | SLC Student Loan |
| |------------------------| | Receivables I, Inc. |
| | | | (Depositor) |
| | CitiMortgage, Inc. | | |
| | (Sub-administrator) | |---------------------------|
| | | |
| |------------------------| |
| | |
| | |---------------------------|
| | | | |--------------------------|
| ) | Wilmington Trust Company | | |
| ( ) | (Owner Trustee) | /| Citibank, N.A. |
| ( ) | | / | (Eligible Lender Trustee |
| ( ) |---------------------------| / | and Indenture |
| ( Administration ) | / | Administrator) |
| of the | / | |
- ----------------------------| ( Issuing Entity )\ | / |--------------------------|
| | ( ) \ |-----------------------------| /
| |----------( ) \ | | /
| The Student | ( ) \| |/
| Loan Corporation | ) |SLC Student Loan Trust 2006-2|\
|(Sponsor, Seller, Servicer | /| (Issuing Entity) | \
| and Administrator) | ) / | | \
| | ( ) / | | \ |--------------------------|
| |----------( ) / |-----------------------------| \ | |
| | ( ) / | \ \ | U.S. Bank National |
|---------------------------| Servicing of / | \ \ | Association |
( Trust Student ) |---------------------------| \ \ | (Indenture Trustee) |
Loans | | \ \| |
( ) | Citigroup | \ |--------------------------|
( ) | Credit Suisse | \
( ) | Goldman, Sachs & Co. | \ (
) | Lehman Brothers | \ ( )
| | (Underwriters) | \ ( Trust )
| | | ( Certificate )
|------------------------| |---------------------------| ( )
| | | ( )
| Citibank USA, | | (
| National | |
| Association | ( ( ( ( ) ) ) )
| (Sub-servicer) | ( )
| | ( )
|------------------------| ( Class A-1 Notes )
( Class A-2 Notes )
( Class A-3 Notes )
( Class A-4 Notes )
( Class A-5 Notes )
( Class A-6 Notes )
( Class B Notes )
( )
( )
( ( ( ( ) ) ) )
* This chart provides only a simplified overview of the relations between the
key parties to the transaction. Refer to this prospectus supplement for a
further description.
Affiliations, Certain Relationships and Related Transactions
o The depositor is a wholly-owned, special-purpose subsidiary of the
sponsor;
o The sponsor, seller, servicer and administrator are the same entity and an
80% owned indirect subsidiary of Citigroup Inc., and are affiliates of the
eligible lender trustee, indenture administrator, sub-administrator and
sub-servicer;
o The sub-servicer is an indirect wholly owned subsidiary of Citigroup Inc.,
the parent of the sponsor;
o The sub-administrator is an affiliate of the sponsor and the depositor;
and
o The eligible lender trustee and the indenture administrator are the same
entity and own 80% of the outstanding common stock of the sponsor.
There are no business relationships, agreements, arrangements, transactions
or understandings entered into outside the ordinary course of business or on
terms other than those that would be obtained in an arm's length transaction
with an unrelated third party that are material to noteholders other than as
described in this prospectus supplement and the accompanying base prospectus
between or among the sponsor and the issuing entity and any other principal
party.
S-5
PAYMENT FLOWS AND DELIVERIES
|---------------------------| Loans for $ |------------------------------------|
| |<------------------------------------------------------------| |
| | $ for Loans | |
| |------------------------------------------------------------>| |
| | | |
| | Trust Certificate | |
| |------------------------------------------------------------>| |
| SLC Student Loan | | The Student Loan Corporation |
| Receivables I, Inc. | | |
| | Trust Certificate |-----------------------------| | |
| |<-----------------------| | | |
| | | | | |
| | $ for Loans | | | |
| |<-----------------------| | | |
| | | | |------------------------------------|
| |----------------------->|SLC Student Loan Trust 2006-2| |
|---------------------------| Loans for $ | | |
| | |
Notes for $ | | |
|---------------------------|<-----------------------| | |
| | | | | Legal
| |----------------------->| | | Title for
| | $ for Notes |-----------------------------| | Loans
| | | |
| Underwriters | | |
| | | |
| | | Quarterly |
| | | Distribution |
| | | of $ |
|---------------------------| | |
^ | | v
| | | |-----------------------------------|
$ for Notes | | Notes for $ | | |
| | | | |
| | | | |
| v v | |
|---------------------------| |-----------------------------| | |
| | Quarterly | | | Eligible Lender Trustee |
| | Distribution of $ | | | |
| | | | | |
| Investors |<-----------------------| Indenture Trustee | | |
| | | | | |
| | | | | |
| | | | | |
|---------------------------| |-----------------------------| |-----------------------------------|
S-6
SUMMARY OF TERMS
This summary highlights selected information about the notes. It does not
contain all of the information that you might find important in making your
investment decision. It provides only an overview to aid your understanding and
is qualified by the full description of the information contained in this
prospectus supplement and the attached base prospectus. You should read the full
description of this information appearing elsewhere in this prospectus
supplement and in the base prospectus to understand all of the terms of the
offering of the notes.
Principal Parties
Issuing Entity
SLC Student Loan Trust 2006-2
Depositor
SLC Student Loan Receivables I, Inc.
Sponsor, Seller, Servicer and Administrator
The Student Loan Corporation
Sub-servicer
Citibank USA, National Association
Sub-administrator
CitiMortgage, Inc.
Indenture Trustee
U.S. Bank National Association
Indenture Administrator
Citibank, N.A.
Eligible Lender Trustee
Citibank, N.A.
Owner Trustee
Wilmington Trust Company
S-7
The Notes
The issuing entity is offering the following classes of notes:
o Floating Rate Class A-1 Student Loan Asset-Backed Notes in the amount of
$130,000,000;
o Floating Rate Class A-2 Student Loan Asset-Backed Notes in the amount of
$525,000,000;
o Floating Rate Class A-3 Student Loan Asset-Backed Notes in the amount of
$136,000,000;
o Floating Rate Class A-4 Student Loan Asset-Backed Notes in the amount of
$600,000,000;
o Floating Rate Class A-5 Student Loan Asset-Backed Notes in the amount of
$445,000,000;
o Floating Rate Class A-6 Student Loan Asset-Backed Notes in the amount of
$656,000,000; and
o Floating Rate Class B Student Loan Asset-Backed Notes in the amount of
$77,000,000.
We sometimes refer to the class A-1, A-2, A-3, A-4, A-5 and A-6 notes,
collectively, as the class A notes, and to the class A notes and the class B
notes, collectively, as the notes.
Dates
The closing date for this offering is anticipated to be on or about September
19, 2006.
The information about the trust student loans in this prospectus supplement
is calculated and presented as of August 21, 2006. We refer to this date as the
statistical cutoff date.
The cutoff date for the pool of trust student loans will be the closing date,
after which time the issuing entity will be entitled to receive all collections
and proceeds on the trust student loans.
A distribution date for each class of notes is the 15th of each March, June,
September and December, beginning December 15, 2006. If any such date is not a
business day, the distribution date will be the next business day.
Interest and principal will be payable to holders of record as of the close
of business on the record date, which is the business day before the related
distribution date.
Information About the Notes
The notes are debt obligations of the issuing entity only. The notes will
receive payments primarily from collections on the pool of trust student loans
acquired by the issuing entity on the closing date.
In addition, from the closing date through April 15, 2007, which we refer to
as the consolidation loan add-on period, certain trust student loans may be
supplemented by add-on consolidation loans. The Higher Education Act permits
borrowers to add additional student loans to a consolidation loan during the
180-day period following origination of the consolidation loan. Add-on
consolidation loans require additional disbursements by the issuing entity,
pursuant to which additional eligible education loans that were not originally
included in a borrower's consolidation loan are added to the existing trust
student loan, thereby increasing its principal balance. Only amounts on deposit
in the add-on consolidation loan account, as described below, may be used by the
issuing entity to fund those add-on consolidation loans.
Any amounts remaining on deposit in the add-on consolidation loan account at
the end of the consolidation loan add-on period will be transferred to the
collection account on the business day immediately following the end of that
period and will be included as part of available funds on the immediately
following distribution date.
The notes are LIBOR-based notes. Interest will accrue on the outstanding
principal balances of the notes during each accrual period and will be paid on
the related distribution date.
S-8
Each accrual period for the notes begins on a distribution date and ends on
the day before the next distribution date. The first accrual period for the
notes, however, will begin on the closing date and end on December 14, 2006, the
day before the first distribution date.
Interest Rates. Except for the first accrual period, each class of notes will
bear interest at a rate equal to three-month LIBOR plus or minus the applicable
spread listed in the table below:
Class Spread
---------------- ---------------
A-1 Notes....... minus 0.02%
A-2 Notes....... plus 0.00%
A-3 Notes....... plus 0.02%
A-4 Notes....... plus 0.08%
A-5 Notes....... plus 0.10%
A-6 Notes....... plus 0.16%
B Notes......... plus 0.23%
See "Description of the Notes--The Notes--The Class A Notes--Distributions of
Interest" in this prospectus supplement for a description of how LIBOR will be
determined for the first accrual period.
The administrator will determine LIBOR as specified under "Description of the
Notes--Determination of LIBOR" in this prospectus supplement and "Certain
Information Regarding the Notes--Determination of Indices--LIBOR" in the base
prospectus. The administrator will calculate interest on the notes based on the
actual number of days elapsed in each accrual period divided by 360.
Interest Payments. Interest accrued on the outstanding principal balance of
the notes during each accrual period will be payable on the related distribution
date.
Principal Payments. Principal will be payable on each distribution date in an
amount generally equal to:
o the principal distribution amount for that distribution date, plus
o any shortfall in the payment of principal as of the preceding distribution
date.
Priority of Principal Payments. Prior to an event of default, we will pay
principal on each distribution date:
o first, the class A noteholders' principal distribution amount,
sequentially to the class A-1 through class A-6 notes, in that order,
until their respective principal balances are reduced to zero; and
o second, the class B noteholders' principal distribution amount, to the
class B notes, until their principal balances are reduced to zero.
Until the stepdown date, the class B notes will not be entitled to any
payments of principal. On each distribution date on and after the stepdown date,
provided that no trigger event is in effect, the class B notes will be entitled
to their pro rata share of principal, subject to the existence of sufficient
available funds.
The class A noteholders' principal distribution amount is equal to the
principal distribution amount multiplied by the class A percentage, which is
equal to 100% minus the class B percentage. The class B noteholders' principal
distribution amount is equal to the principal distribution amount multiplied by
the class B percentage.
The class B percentage is zero prior to the stepdown date and on any other
distribution date if a trigger event is in effect. On each other distribution
date, it is the percentage obtained by dividing:
o the aggregate principal balance of the class B notes, by
o the aggregate principal balance of all outstanding notes less all amounts
on deposit, exclusive of any investment earnings, in any accumulation
account, in each case determined immediately prior to that distribution
date.
The stepdown date will be the earlier of:
o the distribution date in March 2013, or
S-9
o the first date on which no class A notes remain outstanding.
A trigger event will be in effect on any distribution date (i) while any of
the class A notes are outstanding, if the outstanding principal balance of the
notes, after giving effect to distributions to be made on that distribution
date, would exceed the pool balance for that distribution date plus the reserve
account balance as of the end of the related collection period or (ii) if there
has not been an optional purchase or sale of the trust student loans through an
auction after the pool balance falls below 10% of the initial pool balance.
See "Description of the Notes--Distributions" in this prospectus supplement
for a more detailed description of principal payments. See also "Description of
the Notes--Distributions Following an Event of Default and Acceleration of the
Maturity of the Notes" in this prospectus supplement for a description of the
cash flows on each distribution date following the occurrence of an event of
default and an acceleration of the maturity of the notes.
Maturity Dates. Each class of notes will mature no later than the date set
forth below for that class:
o The class A-1 notes will mature no later than June 15, 2011;
o the class A-2 notes will mature no later than June 15, 2016;
o the class A-3 notes will mature no later than September 15, 2017;
o the class A-4 notes will mature no later than June 15, 2022;
o the class A-5 notes will mature no later than September 15, 2026
o the class A-6 notes will mature no later than September 15, 2039; and
o the class B notes will mature no later than December 15, 2039.
The actual maturity of any class of notes could occur earlier if, for
example,
o there are prepayments on the trust student loans;
o the servicer exercises its option to purchase all remaining trust student
loans (which cannot occur until the first distribution date on which the
pool balance is 10% or less of the initial pool balance); or
o a third-party financial advisor, on behalf of the indenture administrator,
auctions all remaining trust student loans (which, absent an event of
default under the indenture, cannot occur until the first distribution
date on which the pool balance is 10% or less of the initial pool
balance).
The initial pool balance is equal to the pool balance as of the closing date.
The pool balance on the closing date will include all amounts deposited into the
add-on consolidation loan account on that date.
Prepayments, Extensions, Weighted Average Lives and Expected Maturities of
the Notes. The projected weighted average life, expected maturity date and
percentages of remaining principal balance of each class of notes under various
assumed prepayment scenarios may be found under "Prepayments, Extensions,
Weighted Average Lives and Expected Maturities of the Notes" included as Exhibit
I attached to this prospectus supplement.
Subordination of the Class B Notes. On any distribution date, distributions
of interest on the class B notes will be subordinated to the payment of
interest, and if a class B interest subordination condition is in effect, to the
payment of principal, on the class A notes. On any distribution date, principal
payments on the class B notes will be subordinated to the payment of both
interest and principal on the class A notes. See "Description of the Notes--The
Notes--The Class B Notes--Subordination of the Class B Notes" in this
prospectus supplement.
Losses and Shortfalls. If and to the extent that any losses in collections on
the trust student loan assets are not covered or offset by credit enhancement,
those losses may result in shortfalls of distributions to the noteholders and
other payees in the order of priority of distributions. See "Description of the
Notes--Distributions--Distributions from the Collection Account" in this
prospectus supplement.
Denominations. The notes will be available for purchase in minimum
denominations of $100,000 and additional increments of $1,000. The notes will be
available only in book-entry form through The Depository Trust
S-10
Company, Clearstream and Euroclear. You will not receive a certificate
representing your notes except in very limited circumstances.
Security for the Notes. The notes will be secured by the assets of the
issuing entity, primarily the trust student loans.
Indenture Trustee
The issuing entity will issue the notes under an indenture to be dated as of
the closing date. Under the indenture, U.S. Bank National Association will act
as indenture trustee.
Eligible Lender Trustee
Citibank, N.A. will be the eligible lender trustee under the eligible lender
trust agreements. It will hold legal title to the assets of the issuing entity
for the benefit of the issuing entity.
Indenture Administrator and Paying Agent
Citibank, N.A. will be the indenture administrator and the paying agent for
the notes.
Administrator and Sub-administrator
The Student Loan Corporation, also referred to herein as "SLC", will act as
the administrator of the issuing entity under an administration agreement. SLC
may transfer or subcontract some or all of its obligations as administrator and
has transferred or subcontracted many of its obligations to CitiMortgage, Inc.
See "Servicing and Administration--Administration Agreement" in the base
prospectus.
Servicer and Sub-servicer
Under the servicing agreement, SLC will service the trust student loans on
behalf of the issuing entity. Under the circumstances described in the base
prospectus, the servicer may transfer or subcontract its obligations to other
entities. See "Servicing and Administration" in the base prospectus.
Under the subservicing agreement, Citibank USA, National Association will
sub-service the trust student loans on behalf of the issuing entity. SLC has
outsourced a substantial portion of its operations, including the origination
and servicing of its student loan portfolio, to Citibank USA, National
Association. Citibank USA, National Association has a facility located in Sioux
Falls, South Dakota. Employees located at this facility assist with the
origination and servicing of student loans and also provide credit card services
to Citigroup customers. This arrangement with Citibank USA, National Association
allows SLC to utilize the substantial employee base that Citibank USA, National
Association has in place to service its credit card customers and creates
certain operational and personnel line-balancing efficiencies that would not
otherwise be afforded SLC if SLC's loan portfolio were originated and serviced
by its own employees. As of June 30, 2006, Citibank USA, National Association
and its affiliates had approximately 3,200 employees located at the Sioux Falls
facility. More than 840 employees located at the Sioux Falls facility or other
facilities service student loans on behalf of SLC. As of June 30, 2006, Citibank
USA, National Association serviced approximately $28 billion in student loans.
Citibank USA, National Association is an indirect wholly-owned subsidiary of
Citigroup. Another affiliate of Citigroup, Citibank, N.A., owns 80% of the
outstanding common stock of SLC. A number of significant transactions are
carried out between SLC, Citigroup and Citigroup's affiliates, including cash
management, data processing, income tax payments, loan servicing, employee
benefits, payroll administration and facilities management.
S-11
Owner Trustee
Wilmington Trust Company will be the owner trustee under the trust agreement.
Wilmington Trust Company is a Delaware banking corporation with trust powers
incorporated in 1903. Wilmington Trust Company's principal place of business is
located at 1100 North Market Street, Wilmington, Delaware 19890. Wilmington
Trust Company has served as owner trustee in numerous asset-backed securities
transactions involving student loan
receivables. Wilmington Trust Company is subject to various legal proceedings
that arise from time to time in the ordinary course of business. Wilmington
Trust Company does not believe that the ultimate resolution of any of these
proceedings will have a materially adverse effect on its services as owner
trustee. Wilmington Trust Company has provided the above information for
purposes of complying with Regulation AB. Other than the above paragraph,
Wilmington Trust Company has not participated in the preparation of any other
information contained in this prospectus supplement.
Irish Listing Agent and Paying Agent
McCann FitzGerald Listing Services Limited will act as the Irish listing
agent and Custom House Administration and Corporate Services Limited will act as
the paying agent in Ireland for the class A notes. The depositor will at all
times maintain an Irish paying agent with a specific office in Dublin, Ireland.
The Irish paying agent will make no representations as to the validity or
sufficiency of the class A notes, the trust student loans, this prospectus
supplement, the accompanying prospectus or other related documents.
Information About the Issuing Entity
Formation of the Trust
The issuing entity is a Delaware statutory trust created under a trust
agreement dated as of August 16, 2006. We sometimes refer to the issuing entity
as a "trust" in this prospectus supplement.
The only activities of the trust are acquiring, owning and managing the trust
student loans and the other assets of the trust, issuing and making payments on
the notes and other related activities. See "Formation of the Trust--The Trust"
in this prospectus supplement. The trust is not required by Delaware state law
and does not intend to publish any financial statements. The indenture requires
the trust to deliver to the indenture trustee and each rating agency, within 90
days after the end of each fiscal year of the trust (commencing with the fiscal
year ending December 31, 2006), a certificate of the administrator on behalf of
the trust stating that (i) a review of the activities of the trust during that
year and of performance under the indenture has been made under the
administrator's supervision, and (ii) to the best of the administrator's
knowledge, based on that review, the trust has complied with all conditions and
covenants under the indenture throughout that year, or, if there has been a
default in the compliance of any condition or covenant, specifying each default
known to the administrator and the nature and status of that default.
The depositor is SLC Student Loan Receivables I, Inc., a Delaware corporation
and a bankruptcy remote, wholly-owned special purpose subsidiary of SLC. On the
closing date, the depositor will acquire the student loans from SLC and will
sell them to the trust. Citibank, N.A., as eligible lender trustee, will hold
legal title to the student loans for the benefit of the depositor pursuant to an
eligible lender trust agreement.
Its Assets
The assets of the trust will include:
o the trust student loans;
o collections and other payments on the trust student loans; and
o funds it will hold from time to time in its trust accounts, including the
collection account, the reserve account, the capitalized interest account
and the add-on consolidation loan account.
The rest of this section describes the trust student loans and trust accounts
more fully.
S-12
Trust Student Loans. The trust student loans (including any add-on
consolidation loans) are education loans to students and parents of students
made under the Federal Family Education Loan Program, known as FFELP. All of the
trust student loans are consolidation loans. See "Appendix A--Federal Family
Education Loan Program" to the base prospectus for a description of each type of
FFELP student loan.
Consolidation loans are used to combine a borrower's obligations under
various federally authorized student loan programs into a single loan.
The trust student loans had an aggregate principal balance of approximately
$2,272,925,293 as of the statistical cutoff date. The pool balance is expected
to be approximately $2,518,750,000 as of the closing date, which amount includes
the amount to be deposited into the add-on consolidation loan account on that
date.
As of the statistical cutoff date, the weighted average annual borrower
stated interest rate of the trust student loans was approximately 4.73% and
their weighted average remaining term to scheduled maturity was approximately
259 months.
SLC originated or acquired the trust student loans in the ordinary course of
its student loan financing business. The depositor will acquire the trust
student loans from SLC on or prior to the closing date.
The trust student loans have been selected from the consolidation student
loans owned by SLC based on the criteria established by the depositor, as
described in this prospectus supplement and the base prospectus.
Any special allowance payments on the trust student loans are based on the
three-month financial commercial paper rate.
The guarantee agencies described in this prospectus supplement guarantee or
will guarantee all of the trust student loans. See "The Trust Student Loan
Pool--Insurance of Trust Student Loans; Guarantors of Trust Student Loans" in
this prospectus supplement. The trust student loans are also reinsured by the
U.S. Department of Education.
Add-on Consolidation Loans. From time to time through April 15, 2007, the
trust may fund add-on consolidation loans to the extent that the trust has
sufficient funds on deposit in the add-on consolidation loan account.
Amounts withdrawn from the add-on consolidation loan account will be remitted
by the indenture administrator at the direction of the administrator to the
applicable lender in repayment of the related student loan. The principal
balance of the applicable add-on consolidation loan (including accrued and
unpaid interest, if any) will increase the principal balance and the accrued
interest balances of the related trust collateral by those amounts
Significant Guarantors. As of the statistical cutoff date, California Student
Aid Commission, guarantees 19.44% of the trust student loans, New York State
Higher Education Services Corporation, guarantees 41.17% of the trust student
loans and United Student Aid Funds, Inc., guarantees 23.99% of the trust
student loans. See "The Trust Student Loan Pool--Insurance of Trust Student
Loans; Guarantors of Trust Student Loans" in this prospectus supplement.
Collection Account. The indenture administrator will establish and maintain
the collection account as an asset of the trust in the name of the indenture
trustee. The indenture administrator will deposit collections on the trust
student loans, interest subsidy payments and special allowance payments, and
amounts received from SLC in respect of borrower benefits, into the collection
account, as described in this prospectus supplement and the base prospectus.
A collection period is the three-month period ending on the last day of
February, May, August or November, in each case for the distribution date in the
following month. However, the first collection period will be the period from
the closing date through November 30, 2006.
Excess Interest. Excess interest (as part of all interest collections) will
be collected and deposited into the collection account and will become part of
the available funds. There can be no assurance as to the rate, timing or amount,
if any, of excess interest. See "Description of the Notes --Credit
Enhancement--Excess Interest" in this prospectus supplement.
S-13
Add-on Consolidation Loan Account. The indenture administrator will establish
and maintain a pre-funding account in the form of an add-on consolidation loan
account as an asset of the trust in the name of the indenture trustee. The trust
will make an initial cash deposit from the net proceeds of the sale of the notes
into the add-on consolidation loan account on the closing date. The deposit will
equal $18,750,000, which amount will constitute an estimated 0.74% of the pool
balance as of the closing date and 0.73% of the outstanding principal balance of
the notes. The amount on deposit in the add-on consolidation loan account will
be reduced by the amount withdrawn from that account to fund add-on
consolidation loans from time to time during the consolidation loan add-on
period. Amounts on deposit in the add-on consolidation loan account will not be
replenished.
Any add-on consolidation loans will be added to the trust at a price equal to
100% of the outstanding principal balance of each add-on consolidation loan,
plus accrued and unpaid interest, if any.
Any amounts remaining on deposit in the add-on consolidation loan account at
the end of the consolidation loan add-on period will be transferred to the
collection account on the business day immediately following the end of that
period and will be included as part of available funds on the immediately
following distribution date.
Reserve Account. The indenture administrator will establish and maintain the
reserve account as an asset of the trust in the name of the indenture trustee.
The trust will make an initial cash deposit from the net proceeds of the sale of
the notes into the reserve account on the closing date. The initial deposit will
equal $6,296,875.
Funds in the reserve account may be replenished on each distribution date by
additional funds available after all prior required distributions have been
made. See "Description of the Notes--Distributions" in this prospectus
supplement.
Amounts remaining in the reserve account on any distribution date in excess
of the specified reserve account balance, after the payments described below,
will be deposited into the collection account for distribution on that
distribution date.
The specified reserve account balance is the amount required to be maintained
in the reserve account.
The specified reserve account balance for any distribution date will be equal
to the greater of:
o 0.25% of the pool balance as of the end of the related collection period;
and
o $3,778,125.
The specified reserve account balance will be subject to adjustment as
described in this prospectus supplement. In no event will it exceed the
outstanding balance of the notes.
The reserve account will be available on each distribution date to cover any
shortfalls in payments of the primary servicing fee, the class A noteholders'
interest distribution amount and, as long as a class B interest subordination
condition is not in effect, the class B noteholders' interest distribution
amount.
In addition, the reserve account will be available:
o on the maturity date for each class of class A notes and upon termination
of the trust, to cover shortfalls in payments of the class A noteholders'
principal and accrued interest; and
o on the class B maturity date and upon termination of the trust, to pay the
class B noteholders the unpaid principal balance on the class B notes and
accrued interest and to pay the servicer any carryover servicing fee.
The reserve account enhances the likelihood of payment to noteholders. In
certain circumstances, however, the reserve account could be depleted. This
depletion could result in shortfalls in distributions to noteholders.
If the market value of securities and cash in the reserve account on any
distribution date are sufficient to pay the remaining principal balance of and
interest accrued on the notes and any carryover servicing fee, these assets will
be so applied on that distribution date. See "Description of the Notes--Credit
Enhancement--Reserve Account" in this prospectus supplement.
S-14
Capitalized Interest Account. The indenture administrator will establish and
maintain the capitalized interest account as an asset of the trust in the name
of the indenture trustee. The trust will make an initial cash deposit from the
net proceeds of the sale of the notes into the capitalized interest account on
the closing date. The deposit will equal $61,000,000.
On or prior to the March 2008 distribution date, funds in the capitalized
interest account will be available to cover shortfalls in payments of interest
due to the class A noteholders and, after that, if there is no class B interest
subordination condition, shortfalls in payments of interest to class B
noteholders after application of funds available in the collection account at
the end of the related collection period but before application of the reserve
account. Funds in the capitalized interest account will not be replenished. All
remaining funds on deposit in the capitalized interest account on the March 2008
distribution date will be transferred to the collection account and included in
available funds on that distribution date.
The capitalized interest account further enhances the likelihood of timely
interest payments to noteholders through the March 2008 distribution date.
Because it will not be replenished, in certain circumstances the capitalized
interest account could be depleted. This depletion could result in shortfalls in
interest distributions to noteholders.
CAPITALIZATION OF THE TRUST
As of the closing date, the capitalization of the trust after giving
effect to the issuance of the notes before deducting expenses of the offering
will be as follows:
Class Capitalization
--------- ---------------
A-1 Notes $ 130,000,000
A-2 Notes $ 525,000,000
A-3 Notes $ 136,000,000
A-4 Notes $ 600,000,000
A-5 Notes $ 445,000,000
A-6 Notes $ 656,000,000
B Notes $ 77,000,000
---------------
Total $ 2,569,000,000
===============
Administration of the Trust
Distributions
The administrator will instruct the indenture administrator to withdraw funds
on deposit in the collection account and, to the extent required, the reserve
account and the capitalized interest account. These funds will be applied
monthly to the payment of the primary servicing fee and on each applicable
distribution date, first to pay or reimburse the indenture trustee and the
indenture administrator for all amounts due to it under the indenture for the
related distribution date, next to pay or reimburse the owner trustee for all
amounts due to it under the trust agreement for the related distribution date,
next to pay or reimburse the eligible lender trustee for all amounts due to it
under the eligible lender trust agreements for the related distribution date
(these amounts payable to the indenture administrator, the indenture trustee,
the owner trustee and the eligible lender trustee not to exceed $30,000 per
annum in the aggregate), and then generally as shown in the chart below. See
"Description of Note--Distributions" in this prospectus supplement.
S-15
----------------------------------
COLLECTION ACCOUNT
----------------------------------
|
|
v
----------------------------------
SERVICER
1st (Primary Servicing Fee and
Administration Fee)
----------------------------------
|
|
v
----------------------------------
CLASS A NOTEHOLDERS
2nd (Class A Noteholders'
Interest Distribution Amount)
----------------------------------
|
|
v
----------------------------------
3rd CLASS B NOTEHOLDERS
(if the Class B Interest Subordination (Class B Noteholders'
Condition is not in effect) Interest Distribution Amount)
----------------------------------
|
|
|
4th v
(first to class A-1 until paid in full, ----------------------------------
then to class A-2 until paid in full, CLASS A NOTEHOLDERS
then to class A-3 until paid in full, (Class A Noteholders'
then to class A-4 until paid in full, Principal Distribution Amount)
then to class A-5 until paid in full, ----------------------------------
and then to class A-6 until paid in full) |
|
|
v
----------------------------------
5th CLASS B NOTEHOLDERS
(if the Class B Interest Subordination (Class B Noteholders'
Condition is in effect) Interest Distribution Amount)
----------------------------------
|
6th |
((i) on or after the Stepdown Date and |
(ii) provided that (x) if a Trigger Event v
has occurred and is continuing and (y) any ----------------------------------
class A notes are outstanding, then the CLASS B NOTEHOLDERS
remaining Available Funds will be (Class B Noteholders'
distributed sequentially to the class A-1, Principal Distribution Amount)
class A-2, class A-3, class A-4, ----------------------------------
class A-5 and class A-6 |
noteholders, in that order, until each such |
class is paid in full) |
v
----------------------------------
RESERVE ACCOUNT
(Amount, if any, necessary to
7th reinstate the Reserve Account
balance to the Specified Reserve
Account Balance)
----------------------------------
|
|
v
----------------------------------
8th SERVICER
(Carryover Servicing Fee, if any)
----------------------------------
|
|
v
----------------------------------
9th INDENTURE ADMINISTRATOR
(pro rata, for all amounts due to them and INDENTURE TRUSTEE
not previously paid for the related OWNER TRUSTEE
distribution date) ELIGIBLE LENDER TRUSTEE
----------------------------------
|
|
v
----------------------------------
10th HOLDER OF TRUST
CERTIFICATE
(any remaining amounts)
----------------------------------
S-16
Transfer of the Assets to the Trust
Under a sale agreement, the depositor will sell the trust student loans to
the trust. The eligible lender trustee will hold legal title to the trust
student loans on behalf of the trust.
If the depositor breaches a representation under the sale agreement regarding
an trust student loan, generally the depositor will have to cure the breach,
repurchase or replace that trust student loan or reimburse the trust for losses
resulting from the breach.
SLC will have similar obligations under the purchase agreement. See "Transfer
Agreements--Purchase of Student Loans by the Depositor; Representations and
Warranties of the Sellers" in the base prospectus.
Servicing of the Assets
Under a servicing agreement, The Student Loan Corporation, as servicer, will
be responsible for servicing, maintaining custody of and making collections on
the trust student loans. It will also bill and collect payments from the
guarantee agencies and the U.S. Department of Education. See "Servicing and
Administration--Servicing Procedures" and "Servicing and
Administration--Administration Agreement" in the base prospectus. Under some
circumstances, the servicer may transfer its obligations as servicer. See
"Servicing and Administration--Certain Matters Regarding the Servicer" in the
base prospectus.
If the servicer breaches a covenant under the servicing agreement regarding a
trust student loan, generally it will have to cure the breach, purchase that
trust student loan or reimburse the trust for losses resulting from the breach.
See "Servicing and Administration--Servicer Covenants" in the base prospectus.
Under a subservicing agreement, Citibank USA, National Association, as
sub-servicer, will agree to perform some or most of the servicer's obligations
under the servicing agreement on the trust student loans, and the servicer will
compensate Citibank USA, National Association, out of its own account.
In 2003, SLC was designated as an Exceptional Performer by the U.S.
Department of Education in recognition of its exceptional level of performance
in servicing FFELP student loans. As a result, instead of receiving the standard
rate of 97% for loans disbursed on or after July 1, 2006 (and 98% for loans
disbursed prior to July 1, 2006), SLC will receive 99% reimbursement on all
eligible FFELP default claims filed for reimbursement on loans that SLC services
including the trust student loans. The reimbursement rate could be reduced as a
result of a variety of factors, including further changes in FFELP or in SLC's
servicing performance. See "Risk Factors--Changes in Law May Affect Student
Loans and May Adversely Affect Your Notes" in this prospectus supplement.
Compensation of the Servicer
The servicer will receive two separate fees: a primary servicing fee and a
carryover servicing fee.
The primary servicing fee for any month is equal to 1/12th of 0.50% of the
outstanding principal amount of the trust student loans calculated based upon
the outstanding principal amount of the trust student loans as of the first day
of the preceding calendar month. The servicer will pay the administrator an
administration fee as compensation for the performance of the administrator's
obligations under the administration agreement and as reimbursement for its
related expenses. The administrator will be solely responsible for the payment
of fees due to the sub-administrator.
The primary servicing fee will be payable in arrears out of available funds
and amounts on deposit in the reserve account on the 15th of each month, or if
the 15th is not a business day, then on the next business day, beginning in
October, 2006. Fees will include amounts from any prior monthly servicing
payment dates that remain unpaid.
The carryover servicing fee will be payable to the servicer on each
distribution date out of available funds in the order and priority described
above.
The carryover servicing fee is the sum of:
o the amount of specified increases in the costs incurred by the servicer;
S-17
o the amount of specified conversion, transfer and removal fees;
o any amounts described in the first two bullets that remain unpaid from
prior distribution dates; and
o interest on any unpaid amounts.
See "Description of the Notes --Distributions" and "--Servicing Compensation"
in this prospectus supplement.
Termination of the Trust
The trust will terminate upon:
o the maturity or other liquidation of the last trust student loan and the
disposition of any amount received upon its liquidation; and
o the payment of all amounts required to be paid to the noteholders.
See "The Student Loan Pools--Termination" in the base prospectus.
Optional Purchase
The servicer may purchase or arrange for the purchase of all remaining trust
student loans on any distribution date on or after the first distribution date
when the pool balance is 10% or less of the initial pool balance. The exercise
of this purchase option will result in the early retirement of the remaining
notes. The purchase price will equal the amount required to prepay in full,
including all accrued interest, the remaining trust student loans as of the end
of the preceding collection period, but not less than a prescribed minimum
purchase amount and not more than a prescribed maximum purchase amount.
This prescribed minimum purchase amount is the amount that would be
sufficient to:
o pay to noteholders the interest payable on the related distribution date;
and
o reduce the outstanding principal amount of each class of notes then
outstanding on the related distribution date to zero.
The prescribed maximum purchase amount is an amount equal to the fair market
value of the remaining trust student loans, including accrued but unpaid
interest, as of the end of the related collection period.
See "Description of the Notes--Optional Purchase" in this prospectus
supplement.
Auction of Trust Assets
If the servicer does not purchase or arrange for the purchase of all
remaining trust student loans on the first distribution date after the date on
which the pool balance is 10% or less of the initial pool balance, the indenture
administrator will engage a third-party financial advisor, which may be an
affiliate of SLC and which may include an underwriter of the securities or the
administrator, to try to auction any trust student loans remaining in the trust.
Only third parties unrelated to SLC may make bids to purchase these trust
student loans on the trust auction date.
The trust auction date will be the third business day before the related
distribution date. An auction will be consummated only if the servicer has first
waived its optional purchase right. The servicer will waive its option to
purchase the remaining trust student loans if it fails to notify the eligible
lender trustee, the indenture trustee and the indenture administrator, in
writing, that it intends to exercise its purchase option before the financial
advisor, on behalf of the indenture administrator, accepts a bid to purchase the
trust student loans.
If at least two bids are received, the financial advisor, on behalf of the
indenture administrator, will solicit and re-solicit new bids from all
participating bidders until only one bid remains or the remaining bidders
decline to resubmit bids. The financial advisor, on behalf of the indenture
administrator, will accept the highest of the remaining bids if it equals or
exceeds the higher of:
o the minimum purchase amount described under "--Optional Purchase" above
(plus any amounts owed to the servicer as carryover servicing fees); or
S-18
o the fair market value of the trust student loans, including accrued but
unpaid interest, as of the end of the related collection period.
If at least two bids are not received or the highest bid after the
re-solicitation process does not equal or exceed that amount, the financial
advisor will not complete the sale. The indenture administrator at the direction
of the depositor will be required to consult with a financial advisor, including
an underwriter of the securities or the administrator, to determine the fair
market value of the trust student loans. The indenture administrator and the
financial advisor will be entitled to the reimbursement of all of their and
their respective agents' fees, expenses and costs whether or not such auction
sale is consummated.
The net proceeds of any auction sale will be used to retire any outstanding
notes on the related distribution date.
If the sale is not completed, as described above, the financial advisor, on
behalf of the indenture administrator, will continue to solicit and re-solicit
bids for sale of the trust student loans upon the same terms described above,
including the servicer's waiver of its option to purchase the remaining trust
student loans, until the financial advisor has received at least one bid that
equals or exceeds the minimum purchase amount described under "Optional
Purchase" above.
The financial advisor may or may not succeed in soliciting acceptable bids
for the trust student loans either on the trust auction date or subsequently.
If the trust student loans are not sold as described above, on each
subsequent distribution date, if the amount on deposit in the reserve account
after giving effect to all withdrawals, except withdrawals payable to the
depositor, exceeds the specified reserve account balance, the administrator will
direct the indenture administrator to distribute the amount of the excess as
accelerated payments of note principal.
See "The Student Loan Pools--Termination" in the base prospectus.
Upon termination of the trust, any remaining assets of that trust, after
giving effect to final distributions to the noteholders, will be transferred to
the reserve account and paid as provided under "Description of the Notes--Credit
Enhancement--Reserve Account" in this prospectus supplement.
Trust Certificateholder
Under the sale agreement between the trust and the depositor, the trust will
issue a trust certificate to the depositor. This trust certificate will
represent the ownership of the residual interest in the trust. Under the
purchase agreement between the depositor and SLC, the depositor will transfer a
trust certificate to SLC as part of the consideration for the sale of the trust
student loans being sold to the depositor by SLC under the related purchase
agreement.
Certain U.S. Federal Income Tax Considerations
Cadwalader, Wickersham & Taft LLP will deliver an opinion that, for federal
income tax purposes, the class A notes will be and, although not free from
doubt, the class B notes will be treated as indebtedness, as described under
"Certain U.S. Federal Income Tax Considerations" in the base prospectus.
Certain ERISA Considerations
Although there can be no certainty in this regard, the notes should be
treated as debt for purposes of ERISA, and the notes are eligible for purchase
by or on behalf of employee benefit plans, individual retirement accounts, Keogh
Plans and similar retirement arrangements, subject to the considerations
discussed under "Certain ERISA Considerations" in the base prospectus, but only
if an exemption from the prohibited transaction rules applies. Each fiduciary of
a plan who purchases any note will be deemed to represent that such an exemption
exists and applies to the purchase and holding of the notes by or for the plan.
See "Certain ERISA Considerations" in this prospectus supplement and the
base prospectus for additional information concerning the application of ERISA.
S-19
Ratings of the Notes
The notes are required to be rated as follows:
Rating Agency
(Moody's / S&P /
Class Fitch)
----------- ----------------
A-1 Notes Aaa/AAA/AAA
A-2 Notes Aaa/AAA/AAA
A-3 Notes Aaa/AAA/AAA
A-4 Notes Aaa/AAA/AAA
A-5 Notes Aaa/AAA/AAA
A-6 Notes Aaa/AAA/AAA
B Notes Aa1/AA+/AA+
See "Ratings of the Notes" in this prospectus supplement.
Listing Information
Application will be made to The Irish Stock Exchange Limited for the class A
notes to be admitted to the Official List and to trading on its regulated
market. There can be no assurance that such a listing will be obtained. You may
consult with the Irish listing agent to determine their status. You can contact
the listing agent at 2 Habourmaster Place, International Financial Services
Centre, Dublin 1, Ireland.
We expect that the notes will be accepted for clearance and settlement by
Clearstream and Euroclear.
Risk Factors
Some of the factors you should consider before making an investment in the
notes are described in this prospectus supplement and in the base prospectus
under "Risk Factors."
IDENTIFICATION NUMBERS
The notes will have the following CUSIP Numbers and International Securities
Identification Numbers (ISIN):
Class CUSIP Numbers ISINs
--------------- ------------- ------------
Class A-1 notes 784428 AA 2 US784428AA27
Class A-2 notes 784428 AB 0 US784428AB00
Class A-3 notes 784428 AC 8 US784428AC82
Class A-4 notes 784428 AD 6 US784428AD65
Class A-5 notes 784428 AE 4 US784428AE49
Class A-6 notes 784428 AF 1 US784428AF14
Class B notes 784428 AG 9 US784428AG96
S-20
RISK FACTORS
You should carefully consider the following risk factors in order to
understand the structure and characteristics of the notes and the potential
merits and risks of an investment in the notes. Potential investors must review
and be familiar with the following risk factors in deciding whether to purchase
any note. The base prospectus describes additional risk factors that you should
also consider beginning on page 17 of the base prospectus. These risk factors
could affect your investment in or return on the notes.
Subordination of the Class B Notes and Sequential Payment of the Notes May
Result in a Greater Risk of Loss
Class B noteholders and, to lesser extent, holder of class A notes with
higher numerical designations, bear a greater risk of loss than holders of class
A notes with lower numerical designations because:
o On each distribution date, distributions of interest on the class B notes
will be subordinate to the payment of interest and, if class B interest
subordination condition is in effect, to the payment of principal on the
class A notes. Distributions of principal of the class B notes will be
subordinate to the payment of both interest and principal on the class A
notes;
o No principal will be paid to the class B noteholders until all principal
due to the class A noteholders on each distribution date has been paid in
full; and
o No principal will be paid to any holders of class A notes with higher
numerical designations until each class of the class A notes having lower
numerical designation has been paid in full.
Holders of later maturing class A notes bear a greater risk of loss than do
holders of earlier maturing class A notes because, prior to an event of default,
no principal will be paid to any class A noteholders until each class of the
class A notes having an earlier maturity has been paid in full.
Investors in the Class B Notes Bear Greater Risk of Loss Because the Priority
of Payment of Interest and the Timing of Principal Payments on the Class B
Notes May Change Due to the Variability of Cash Flows
Interest on the class B notes generally will be paid prior to payment of
principal on the class A notes. However, if after giving effect to all required
distributions of principal and interest on the notes on any distribution date,
the outstanding principal balance of the trust student loans, plus accrued but
unpaid interest thereon, amounts then on deposit in the capitalized interest
account (after any distributions of interest from that account), amounts then on
deposit in the add-on consolidation loan account and amounts then on deposit in
the reserve account in excess of the specified reserve account balance, would be
less than the outstanding principal balance of the class A notes, interest on
the class B notes will be subordinated to the payment of principal on the class
A notes on that distribution date.
Principal on the class B notes will not begin to be paid until the stepdown
date. However, if a trigger event is in effect on any distribution date, the
class B notes will not receive any payments of principal on any distribution
date occurring on or after the stepdown date unless the class A notes have been
paid in full.
Thus, investors in the class B notes will bear a greater risk of loss than
the holders of class A notes. Investors in the class B notes will also bear the
risk of any adverse changes in the anticipated yield and weighted average life
of their notes resulting from any variability in payments of principal and/or
interest on the class B notes.
Certain Credit Enhancement Features Are Limited and if They Are Depleted,
There May Be Shortfalls in Distributions to Noteholders
Certain credit enhancement features, including the reserve account, consist
of a limited amount of funds. In certain circumstances, for example, if there is
a shortfall in available funds, such amounts may be depleted. This depletion
could result in shortfalls in distributions to noteholders.
The Characteristics of the Trust Student Loans May Change
The statistical information in this prospectus supplement reflects only the
characteristics of the trust student loans as of the statistical cutoff date. We
expect additional student loans will be added to the trust student loans
S-21
during the period from the statistical cutoff date to the closing date. The
trust student loans actually sold to the trust on the closing date will have
characteristics that differ somewhat from the characteristics of the trust
student loans as of the statistical cutoff date due to payments received, other
changes in these loans that occur during the period from the statistical cutoff
date to the closing date, and the addition of student loans after the
statistical cutoff date. We do not expect the characteristics of the trust
student loans actually sold to the trust on the closing date to differ
materially from the characteristics of the trust student loans as of the
statistical cutoff date. However, in making your investment decision, you should
assume that the actual characteristics of the trust student loans will vary
somewhat from the characteristics of the trust student loans presented in this
prospectus supplement as of the statistical cutoff date.
Further, certain characteristics of the final pool of trust student loans may
vary from the characteristics of the initial pool of trust student loans
described in this prospectus supplement due to the addition of loans after the
statistical cut-off date and the addition of add-on consolidation loans during
the consolidation loan add-on period.
You May Incur Losses or Delays in Payments on Your Notes if Borrowers Default
on the Student Loans
SLC, which was designated as an Exceptional Performer by the U.S. Department
of Education in recognition of its exceptional level of performance in servicing
FFELP student loans, will receive 99% reimbursement, on all eligible FFELP
default claims filed for reimbursement on loans that SLC services. This rate
could be further reduced as a result of a variety of factors, including further
changes to FFELP or in SLC's servicing performance. If a borrower defaults on a
student loan, the trust will experience a loss equal to the unguaranteed
percentage of the outstanding principal and interest with respect to the
defaulted student loan. Non-exceptional performers will be reimbursed at a
percentage rate level of 98% for loans made prior to July 1, 2006 and at the 97%
level for loans made on or after July 1, 2006. If defaults occur on the trust
student loans and the credit enhancement described in this prospectus supplement
is insufficient, you may suffer a delay in payment or losses on your notes.
Your Notes May Have a Degree of Basis Risk, Which Could Compromise the
Trust's Ability to Pay Principal and Interest on Your Notes
There is a degree of basis risk associated with the notes. Basis risk is the
risk that shortfalls might occur because, among other things, the effective
interest rates of the trust student loans adjust on the basis of specified
indices and those of the notes adjust on the basis of a different indices or do
not adjust at all. If a shortfall were to occur, the trust's ability to pay your
principal and/or interest on the notes could be compromised.
Changes in Law May Affect Student Loans and May Adversely Affect Your Notes
The Higher Education Act or other relevant federal or state laws, rules and
regulations may be amended or modified in the future in a manner that could
adversely affect the federal student loan programs as well as the student loans
made under these programs and the financial condition of the guarantors.
The provisions of the Higher Education Act expire if they are not
periodically reauthorized by Congress. The Higher Education Reconciliation Act
of 2005, part of the Deficit Reduction Act of 2005, extended the current
provisions of FFELP through September 30, 2012. Under this Act, a number of
changes to the Higher Education Act, including changing loan limits, changing
interest rate provisions and decreasing origination fees, were made.
In 2006, lawsuits were filed requesting that the Deficit Reduction Act of
2005 be declared unconstitutional. The lawsuits allege that the Deficit
Reduction Act of 2005 is unconstitutional because the House of Representatives
and the Senate failed to approve identical versions. The House passed a version
of the bill providing for 36 months of durable medical equipment funding, while
the Senate bill provides for 13 months.
If the Deficit Reduction Act of 2005 is declared unconstitutional, the
amendments to the Higher Education Act made by the Higher Education
Reconciliation Act of 2005 would not become effective. We cannot predict the
outcome of this litigation or the effect such litigation may have on the issuing
entity's student loan program.
In the past, when the Higher Education Act has been subject to
reauthorization, amendments to its provisions have been common. Amendments or
modifications to the Higher Education Act or other laws that affect student
loans could result in adjustments from time to time to the level of guarantee
payments. Future changes could affect the ability of the SLC, the depositor or
the servicer to satisfy their obligations to purchase or substitute student
loans. Future changes could also have a material adverse effect on the revenues
received by the guarantors that are available to pay claims on defaulted student
loans in a timely manner. We cannot predict whether any changes will
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be adopted when the Higher Education Act becomes subject to reauthorization or
at any other time or, if adopted, what impact those changes would have on the
trust or the securities that it issues.
DEFINED TERMS
In later sections, we use a few terms that we define in the Glossary at the
end of this prospectus supplement. These terms appear in bold face on their
first use and in initial capital letters in all cases.
FORMATION OF THE TRUST
The Trust
The SLC Student Loan Trust 2006-2 is a statutory trust newly formed under
Delaware law and under a short-form trust agreement dated as of August 16, 2006,
between the depositor and the owner trustee. The short-form trust agreement will
be amended on the closing date pursuant to an amended and restated trust
agreement dated as of the closing date among the depositor and the owner
trustee.
After its formation, the trust will not engage in any activity other than:
o acquiring, holding and managing the trust student loans and the other
assets of the trust and related proceeds;
o issuing the notes;
o making payments on the notes; and
o engaging in other activities that are necessary, suitable or convenient to
accomplish, or are incidental to, the foregoing.
The net proceeds from the sale of the notes will be used by the trust to make
the initial deposits into the capitalized interest account, the add-on
consolidation loan account and the reserve account, and to purchase, on behalf
of the trust, the trust student loans. The trust will purchase the trust student
loans from the depositor under a sale agreement to be dated as of the closing
date, among the depositor, the trust and the eligible lender trustee. On the
closing date, the depositor will use the net proceeds it receives from the sale
of the trust student loans to the trust to pay to SLC the purchase price for the
trust student loans acquired from it under the purchase agreement between the
depositor and SLC.
With respect to add-on consolidation loans, the indenture administrator at
the direction of the administrator will transfer from the add-on consolidation
loan account (but only to the extent of available amounts on deposit therein) an
amount equal to the principal balance of each add-on consolidation loan plus
accrued and unpaid interest, if any, thereon to the applicable lender in
repayment of the related trust student loan, and the principal balance of the
related trust student loan will be increased by the same amount.
The property of the trust will consist of:
o the pool of trust student loans, legal title to which is held by the
eligible lender trustee on behalf of the trust;
o all funds collected on trust student loans, including any special
allowance payments and interest subsidy payments, on or after the cutoff
date;
o all moneys and investments from time to time on deposit in the trust
accounts;
o its rights under the transfer agreements and the servicing agreements,
including the right to require SLC, the depositor or the servicer to
repurchase trust student loans from it or to substitute student loans
under certain conditions; and
o its rights under the guarantee agreements with guarantors.
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The Sections "Transfer Agreements", "Servicing and Administration" and
"Description of the Notes" in the base prospectus contain descriptions of the
material provisions of the transaction documents.
The notes will be secured by the property of the trust. The collection
account, the add-on consolidation loan account, the reserve account and the
capitalized interest account will be maintained by the indenture administrator
in the name of the indenture trustee for the benefit of the noteholders. To
facilitate servicing and to minimize administrative burden and expense, the
servicer will act as custodian of the promissory notes representing the trust
student loans and other related documents.
The trust's principal offices are at 1100 North Market Street, Wilmington,
Delaware 19890, in care of Wilmington Trust Company, as owner trustee.
Other than issuing the notes, the trust will not be permitted to borrow money
or make loans to other persons. The permitted activities of the trust may be
amended only with the consent of a majority of all of the noteholders; however,
the trust agreement may be modified without noteholder consent if an opinion of
counsel is provided to the effect that those proposed revisions would not
adversely affect in any material respect the interests of any noteholder.
The trust and its assets (other than the trust student loans) will be
administered by the administrator pursuant to the administration agreement. The
servicer will be responsible for the servicing and collection of the trust
student loans pursuant to the servicing agreement. See "Servicing and
Administration" in the base prospectus.
The trust will not own any other assets. The fiscal year of the trust will be
a calendar year.
The trust certificate will represent the ownership of the residual interest
in the trust. Under the related purchase agreement between the depositor and
SLC, the depositor will transfer the trust certificate to SLC as part of the
consideration for the sale of the trust student loans being sold to the
depositor by SLC under the related purchase agreement.
Non-Petition. Each transaction agreement will contain "non-petition"
covenants to prevent the commencement of any bankruptcy or insolvency
proceedings against the depositor and/or the trust, as applicable, by any of the
transaction parties or by the noteholders.
Security Interest. We have structured the transactions described in this
prospectus supplement to assure that each transfer of trust student loans to the
depositor and to the issuing entity constitutes a "true sale" of those trust
student loans. If the transfer constitutes a "true sale", the trust student
loans and related proceeds would not be property of the applicable seller should
that seller become subject to any insolvency law. Although SLC and the depositor
will express its intent to treat the conveyance of the trust student loans as a
sale, each of them will also grant to the eligible lender trustee on behalf of
the trust, a security interest in the trust student loans. This security
interest is intended to protect the interests of the noteholders if a bankruptcy
court were to characterize SLC's or the depositor's transfer of the trust
student loans as a borrowing secured by a pledge of the trust student loans. In
the event that a bankruptcy court did characterize the transaction as a
borrowing by SLC or the depositor, that borrowing would be secured by the trust
student loans in which SLC or the depositor granted a security interest to the
eligible lender trustee. SLC and the depositor have agreed to take any actions
that are necessary to maintain the security interest granted to the eligible
lender trustee as a first priority, perfected security interest in the trust
student loans, including the filing of Uniform Commercial Code financing
statements, as necessary. This security interest will be assigned to the
indenture trustee for the benefit of the noteholders.
Eligible Lender Trustee
The Eligible Lender Trustee is Citibank, N.A., a national banking association
and wholly owned subsidiary of Citigroup Inc., a Delaware corporation. Citibank,
N.A. performs as trustee through the Agency and Trust line of business, which is
part of the Global Transaction Services division. Citibank, N.A. has primary
corporate trust offices located in both New York, New York and London, England.
Citibank, N.A. is a leading provider of corporate trust services offering a full
range of agency, fiduciary, tender and exchange, depositary and escrow services.
As of the end of the second quarter of 2006, Citibank's Agency & Trust group
manages in excess of $3.5 trillion in fixed income and equity investments on
behalf of approximately 2,500 corporations worldwide. Since 1987, Citibank
Agency & Trust has provided trustee services for asset-backed securities
containing pool assets consisting of airplane leases, auto loans and leases,
boat loans, commercial loans, commodities, credit cards, durable goods,
equipment leases, foreign securities, funding agreement backed note programs,
truck loans, utilities, student
S-24
loans and commercial and residential mortgages. As of the end of the second
quarter of 2006, Citibank, N.A. acts as eligible lender trustee and/or paying
agent for approximately 6 student loan asset-backed note transactions.
Citibank, N.A. is the eligible lender trustee for the trust under the trust
agreement. The eligible lender trustee will acquire on behalf of the trust legal
title to all the trust student loans acquired under the sale agreement on the
closing date. The eligible lender trustee on behalf of the trust has entered
into a separate guarantee agreement with each of the guarantee agencies
described in this prospectus supplement with respect to the trust student loans.
The eligible lender trustee qualifies as an eligible lender and the holder of
the trust student loans for all purposes under the Higher Education Act and the
guarantee agreements. Failure of the trust student loans to be owned by an
eligible lender would result in the loss of guarantor and U.S. Department of
Education payments on the trust student loans. See "Appendix A--Federal Family
Education Loan Program--Eligible Lenders, Students and Educational Institutions"
in the base prospectus.
The eligible lender trustee's liability in connection with the issuance and
sale of the notes is limited solely to the express obligations of the eligible
lender trustee in the trust agreement and the sale agreement. The eligible
lender trustee will be entitled to be indemnified by the trust for any loss,
liability or expense (including reasonable attorneys' fees) incurred by it in
connection with the performance of its duties under the eligible lender trust
agreement except for any loss, liability or expenses caused by the eligible
lender trustee's bad faith or negligence. See "Description of the Notes" in this
prospectus supplement and "Transfer Agreements" in the base prospectus.
There is a $30,000 per annum aggregate limit on the amounts, including fees
and expenses, payable to the eligible lender trustee, the indenture
administrator, the indenture trustee and the owner trustee from the cash flow on
the trust student loans prior to the amounts distributed to the noteholders.
Remaining amounts, if any, payable to the eligible lender trustee, indenture
administrator, indenture trustee and owner trustee will be subordinate to
amounts payable to the noteholders. See "Description of the
Notes--Distributions--Distributions from the Collection Account" in this
prospectus supplement.
Affiliates of the depositor maintain customary banking relations on
arm's-length terms with the eligible lender trustee.
The eligible lender trustee may resign at any time. The administrator may
also remove the eligible lender trustee if it becomes insolvent or ceases to be
eligible to continue as eligible lender trustee. In the event of such a
resignation or removal, the administrator will appoint a successor. The
resignation or removal of the eligible lender trustee and the appointment of a
successor will become effective only when a successor accepts its appointment.
The depositor will be responsible for the payment of expenses incurred in
connection with the replacement of the eligible lender trustee.
The depositor's obligations after issuance of the notes include (i)
repurchasing trust student loans in the event of certain breaches of
representations or warranties made by the depositor, (ii) providing tax-related
information to the eligible lender trustee, and (iii) maintaining the eligible
lender trustee's first priority perfected security interest in the assets of the
trust.
S-25
ADDITIONAL INFORMATION CONCERNING OTHER PRINCIPAL PARTIES
Indenture Trustee
The trust will issue the notes under an indenture to be dated as of the
closing date. Under the indenture, U.S. Bank National Association will act as
indenture trustee.
U.S. Bank National Association is a national banking association and a
wholly-owned subsidiary of U.S. Bancorp, which is currently ranked as the sixth
largest bank holding company in the United States with total assets exceeding
$213 billion as of June 30, 2006. As of June 30, 2006, U.S. Bancorp served
approximately 13.5 million customers, operated 2,434 branch offices in 24 states
and had over 51,000 employees. A network of specialized U.S. Bancorp offices
across the nation, inside and outside its 24-state footprint, provides a
comprehensive line of banking, brokerage, insurance, investment, mortgage, trust
and payment services products to consumers, businesses, governments and
institutions.
U.S. Bank National Association has one of the largest corporate trust
businesses in the country with offices in 31 U.S. cities. The indenture will be
administered from U.S. Bank National Association's corporate trust office
located at 100 Wall Street, 16th Floor, New York, New York 10005. The telephone
number of the indenture trustee is (212) 361-4401.
U.S. Bank National Association has provided corporate trust services since
1924. As of June 30, 2006, U.S. Bank National Association was acting as trustee
with respect to approximately 57,621 issuances of securities with an aggregate
outstanding principal balance of over $1.7 trillion. This portfolio includes
corporate and municipal bonds, mortgage-backed and asset-backed securities and
collateralized debt obligations.
On December 30, 2005, U.S. Bank National Association purchased the corporate
trust and structured finance trust services businesses of Wachovia Corporation.
Following the closing of the acquisition, the Wachovia affiliate named as
fiduciary or agent, as applicable, under each client agreement will continue in
that role until U.S. Bank National Association succeeds to that role in
accordance with the terms of the governing instrument or agreement and
applicable law.
On July 24, 2006, U.S. Bank National Association entered into a definitive
agreement to purchase the municipal and corporate bond trustee business of
SunTrust Banks, Inc. The transaction is subject to certain regulatory approvals
and is expected to close by the end of the third quarter 2006 with conversion
occurring during the first quarter 2007. Following the closing of the
acquisition, the SunTrust affiliate named as fiduciary or agent, as applicable,
under each client agreement will continue in that role until U.S. Bank National
Association succeeds to that role in accordance with the terms of the governing
instrument or agreement and applicable law.
As of June 30, 2006, U.S. Bank National Association (and its affiliate U.S.
Bank Trust National Association) was acting as trustee on 121 issuances of
student loan-backed securities with an outstanding aggregate principal balance
of approximately $20,423,900,000.
Affiliates of the depositor maintain customary banking relations on
arm's-length terms with the indenture trustee.
The indenture trustee will act on behalf of the noteholders and represent
their interests in the exercise of their rights under the indenture.
The depositor will be responsible for the payment of expenses incurred in
connection with the replacement of the indenture trustee.
The indenture trustee will not be personally liable for any actions or
omissions that were not the result of its own bad faith, fraud, willful
misconduct or negligence. The indenture trustee will be entitled to be
indemnified by the administrator for any loss, liability or expense (including
reasonable attorneys' fees) incurred by it in connection with the performance of
its duties under the indenture and the other transaction documents. Upon the
occurrence of an event of default, and in the event the administrator fails to
reimburse the indenture trustee, the indenture trustee will be entitled to
receive all such amounts owed from cash flow on the trust student loans prior to
any amounts being distributed to the noteholders.
S-26
Sub-servicer
Servicing History and Experience
Citibank USA, National Association ("Citibank USA"), a national banking
association, is an indirect wholly owned subsidiary of Citigroup, with over
$7,120,000,000 in assets. Headquartered in Sioux Falls, South Dakota, Citibank
USA services student loans, principally Federally Family Education Loans (FFEL),
Parent Loans for Undergraduate Students (PLUS), Loan Consolidation, and
CitiAssist, Citibank's Private Loan. Citibank USA processes to originate and
service federally insured student loans as well as consumer loans made to
finance educational costs, including student loans made under Title IV, Part B
of the Higher Education Act of 1965, as amended (collectively referred to as
"Education Loans") in accordance with the laws, rules and regulations applicable
to those loans.
Citibank USA began its education loan servicing operation in 1998. It offers
student loan servicing to schools, guarantors and other third party lending
institutions. Citibank USA has a facility located in Sioux Falls, South Dakota.
Employees located at this facility assist with the origination and servicing of
student loans and also provide credit card services to Citigroup customers. This
arrangement with Citibank USA allows SLC to utilize the substantial employee
base that Citibank USA has in place to service its credit card customers and
creates certain operational and personnel line-balancing efficiencies that would
not otherwise be afforded SLC if SLC's loan portfolio were originated and
serviced by its own employees.
As of June 30, 2006, Citibank USA, National Association and its affiliates
had approximately 3,200 employees located at the Sioux Falls facility. More than
840 employees located at the Sioux Falls facility or other facilities service
student loans on behalf of SLC. As of June 30, 2006 Citibank USA serviced
approximately $28 billion in student loans.
Under the sub-servicing agreement, the sub-servicer will agree to perform
some or most all of the obligations of the servicer under the servicing
agreement, and will follow the same servicing procedures of the servicer.
USE OF PROCEEDS
The trust will use the net proceeds of $2,563,348,750 from the sale of the
notes, together with any other amount contributed by the depositor, to make the
initial deposits into the reserve account and the capitalized interest account,
and to purchase the trust student loans from the depositor on the closing date
under the sale agreement. The depositor will then use the proceeds paid to the
depositor by the trust to pay to SLC the respective purchase prices due to SLC
for the trust student loans purchased by the depositor. Expenses incurred to
establish the trust and issue the notes (other than fees that are due to the
underwriters) are payable by the depositor. Such expenses are not paid from
proceeds of the sale of the notes. Expenses to be paid by the depositor are
estimated to be $1,400,000.
S-27
THE TRUST STUDENT LOAN POOL
General
The eligible lender trustee, on behalf of the trust, will purchase the pool
of the trust student loans from the depositor under the sale agreement on the
closing date, and the trust will be entitled to collections on and proceeds of
the trust student loans on and after that date. Unless otherwise specified, all
information with respect to the trust student loans is presented herein as of
August 21, 2006, which is the statistical cutoff date.
Eligible Trust Student Loans
The depositor will purchase the trust student loans from SLC under the
purchase agreement. SLC originated or acquired the trust student loans.
The trust student loans were selected from SLC's portfolio of FFELP student
loans owned by SLC or one of its affiliates by employing several criteria,
including requirements that each trust student loan as of the statistical cutoff
date:
o is, or by October 19, 2006 will be, a consolidation loan that is
guaranteed as to principal and interest by a guarantee agency under a
guarantee agreement and the guarantee agency is, in turn, reinsured by the
U.S. Department of Education in accordance with FFELP;
o contains terms in accordance with those required by FFELP, the guarantee
agreements and other applicable requirements;
o is not more than 210 days past due;
o does not have a borrower who is noted in the related records of the
servicer as being currently involved in a bankruptcy proceeding; and
o has special allowance payments, if any, based on the three-month financial
commercial paper rate.
No trust student loan as of the statistical cutoff date was subject to any
prior obligation to sell that loan to a third party.
The addition of any add-on consolidation loans will not be a sale of a new
loan to the trust; rather that addition will merely serve to increase the
principal balance of the existing trust student loan and in the event of a
breach of any representation or warranty, the applicable seller will be required
to repurchase the entire trust student loan, including the portion attributable
to the add-on consolidation loan.
Characteristics of the Trust Student Loans
The following tables provide a description of certain characteristics of the
trust student loans as of the statistical cutoff date. The aggregate outstanding
principal balance of the trust student loans in each of the following tables
includes the principal balance due from borrowers, plus accrued interest to be
capitalized of $5,077,933 as of the statistical cutoff date. The tables do not
include the student loans originated after the statistical cutoff date that the
issuing entity expects to acquire on the closing date.
Following the addition of any trust student loans that were originated after
the statistical cutoff date and the addition of any add-on consolidation loans,
the aggregate characteristics of the final pool of trust student loans may vary
from those shown below; however, we do not believe that this variance would be
material.
The distribution by weighted average interest rate applicable to the trust
student loans on any date following the statistical cutoff date may vary
significantly from that in the following tables as a result of variations in the
effective rates of interest applicable to the trust student loans. Moreover, the
information below about the weighted average remaining terms to maturity of the
trust student loans as of the statistical cutoff date may vary significantly
from the actual terms to maturity of any of the trust student loans as a result
of prepayments or the granting of deferral and forbearance periods on any of the
trust student loans.
S-28
The following tables also contain information concerning the total number of
loans and the total number of borrowers in the portfolio of trust student loans.
For ease of administration, the servicer separates a consolidation loan on its
system into two separate loan segments representing subsidized and unsubsidized
segments of the same loan. The following tables reflect those loan segments
within the number of loans.
Percentages and dollar amounts in any table may not total 100% or the trust
student loan balance, as applicable, due to rounding.
COMPOSITION OF THE TRUST STUDENT LOANS
AS OF THE STATISTICAL CUTOFF DATE
Aggregate Outstanding Principal Balance................ $2,272,925,293
Number of Borrowers.................................... 94,418
Average Outstanding Principal Balance Per Borrower..... $24,073
Number of Loans........................................ 156,837
Average Outstanding Principal Balance Per Loan......... $14,492
Weighted Average Remaining Term to Scheduled
Maturity............................................. 259 months
Weighted Average Annual Borrower Stated Interest
Rate................................................. 4.73%
We determined the weighted average remaining term to maturity shown in the
table from the statistical cutoff date to the stated maturity date of the
applicable trust student loan without giving effect to any deferral or
forbearance periods that may be granted in the future. See Appendix A to the
base prospectus and "The Student Loan Pools--The Student Loan Corporation's
Student Loan Business" in the base prospectus.
The weighted average annual borrower interest rate shown in the table is
exclusive of special allowance payments. The weighted average spread, including
special allowance payments, to the three-month commercial paper rate was 2.64%
as of the statistical cutoff date. See "Federal Family Education Loan
Program--Special Allowance Payments" in Appendix A to the base prospectus.
For this purpose, the three-month financial commercial paper rate is the
average of the bond equivalent rates of the three-month commercial paper
(financial) rates in effect for each of the days in a calendar quarter as
reported by the Federal Reserve in Publication H.15 (or its successor) for that
calendar quarter.
S-29
DISTRIBUTION OF THE TRUST STUDENT LOANS
BY ANNUAL BORROWER STATED INTEREST RATES AS OF THE STATISTICAL CUTOFF DATE
Percent of
Pool by
Aggregate Outstanding
Outstanding Principal
Stated Interest Rates Number of Loans Principal Balance Balance
- -------------------------- --------------- ------------------ -----------
Less than 3.00% .......... 13,378 $ 223,694,494 9.84%
3.00% to 3.49% ........... 8,082 166,432,958 7.32%
3.50% to 3.99% ........... 8,665 171,337,579 7.54%
4.00% to 4.49% ........... 4,226 85,622,562 3.77%
4.50% to 4.99% ........... 50,372 705,288,494 31.03%
5.00% to 5.49% ........... 44,326 479,537,946 21.10%
Greater than 5.49% ....... 27,788 441,011,260 19.40%
- -------------------------- --------------- ------------------ -----------
Total ................ 156,837 $ 2,272,925,293 100.00%
DISTRIBUTION OF THE TRUST STUDENT LOANS
BY OUTSTANDING PRINCIPAL BALANCE PER BORROWER
AS OF THE STATISTICAL CUTOFF DATE
Percent of
Pool by
Aggregate Outstanding
Range of Outstanding Number of Outstanding Principal
Principal Balance Borrowers Principal Balance Balance
- -------------------------- --------------- ------------------ -----------
Less than $500.00 ........ 74 $ 20,020 *
$500.00 - $999.99 ........ 220 174,542 0.01%
$1,000.00 - $1,999.99 .... 996 1,549,006 0.07%
$2,000.00 - $2,999.99 .... 2,099 5,326,249 0.23%
$3,000.00 - $3,999.99 .... 2,291 8,084,018 0.36%
$4,000.00 - $5,999.99 .... 6,029 30,559,936 1.34%
$6,000.00 - $7,999.99 .... 6,780 47,061,541 2.07%
$8,000.00 - $9,999.99 .... 6,560 58,919,645 2.59%
$10,000.00 - $14,999.99 .. 15,833 196,673,121 8.65%
$15,000.00 - $19,999.99 .. 14,476 252,814,948 11.12%
$20,000.00 - $24,999.99 .. 8,310 185,667,813 8.17%
$25,000.00 - $29,999.99 .. 6,499 178,220,989 7.84%
$30,000.00 - $34,999.99 .. 4,614 149,520,264 6.58%
$35,000.00 - $39,999.99 .. 5,138 192,018,383 8.45%
$40,000.00 - $49,999.99 .. 5,031 224,656,923 9.88%
$50,000.00 - $59,999.99 .. 3,356 184,075,141 8.10%
$60,000.00 - $69,999.99 .. 1,891 122,195,966 5.38%
$70,000.00 - $79,999.99 .. 1,215 91,006,584 4.00%
$80,000.00 - $89,999.99 .. 820 69,410,800 3.05%
$90,000.00 - $99,999.99 .. 524 49,682,175 2.19%
$100,000.00 - $109,999.99 349 36,551,078 1.61%
$110,000.00 - $119,999.99 325 37,432,205 1.65%
$120,000.00 - $129,999.99 243 30,280,814 1.33%
$130,000.00 - $139,999.99 175 23,606,199 1.04%
$140,000.00 - $149,999.99 119 17,220,867 0.76%
$150,000.00 and greater .. 451 80,196,063 3.53%
- -------------------------- --------------- ------------------ -----------
Total ................ 94,418 $ 2,272,925,293 100.00%
- --------------------------
* Represents a percentage less than 0.01%.
S-30
DISTRIBUTION OF THE TRUST STUDENT LOANS
BY REMAINING TERM TO SCHEDULED MATURITY AS OF THE STATISTICAL CUTOFF DATE
Percent of
Pool by
Aggregate Outstanding
Number of Months Remaining Outstanding Principal
to Scheduled Maturity Number of Loans Principal Balance Balance
- -------------------------- --------------- ------------------ -----------
0 to 24 .................. 431 $ 875,742 0.04%
25 to 36 ................. 315 527,704 0.02%
37 to 48 ................. 321 543,187 0.02%
49 to 60 ................. 426 891,774 0.04%
61 to 72 ................. 365 829,408 0.04%
73 to 84 ................. 396 1,013,347 0.04%
85 to 96 ................. 452 1,373,804 0.06%
97 to 108 ................ 574 1,485,741 0.07%
109 to 120 ............... 22,405 79,741,904 3.51%
121 to 132 ............... 254 1,024,819 0.05%
133 to 144 ............... 12,204 70,029,920 3.08%
145 to 156 ............... 192 921,157 0.04%
157 to 168 ............... 248 1,728,475 0.08%
169 to 180 ............... 47,356 439,532,157 19.34%
181 to 192 ............... 77 839,540 0.04%
193 to 220 ............... 169 2,104,181 0.09%
221 to 260 ............... 42,629 678,291,628 29.84%
261 to 300 ............... 17,177 460,631,513 20.27%
Over 300 ................. 10,846 530,539,291 23.34%
- -------------------------- --------------- ------------------ -----------
Total ................ 156,837 $ 2,272,925,293 100.00%
We have determined the numbers of months remaining to scheduled maturity
shown in the table from the statistical cutoff date to the stated maturity date
of the applicable trust student loan without giving effect to any deferral or
forbearance periods that may be granted in the future. See Appendix A to the
base prospectus and "The Student Loan Pools--The Student Loan Corporation's
Student Loan Business" in the base prospectus. Also, see "Risk Factors--You Will
Bear Prepayment and Extension Risk Due to Actions Taken by Individual Borrowers
and Other Variables Beyond Our Control" in the base prospectus.
DISTRIBUTION OF THE TRUST STUDENT LOANS
BY CURRENT BORROWER PAYMENT STATUS AS OF THE STATISTICAL CUTOFF DATE
Percent of
Pool by
Aggregate Outstanding
Current Borrower Outstanding Principal
Payment Status Number of Loans Principal Balance Balance
- -------------------------- --------------- ------------------ -----------
Deferral ................. 26,058 $ 439,805,992 19.35%
Forbearance .............. 8,812 178,121,613 7.84%
Repayment ................
First year in repayment 121,967 1,654,997,688 72.81%
- -------------------------- --------------- ------------------ -----------
Total .............. 156,837 $ 2,272,925,293 100.00%
Current borrower payment status refers to the status of the borrower of each
trust student loan as of the statistical cutoff date. The borrower:
o may have temporarily ceased repaying the loan through a deferral or a
forbearance period; or
o may be currently required to repay the loan--repayment.
See Appendix A to the base prospectus and "The Student Loan Pools--The
Student Loan Corporation's Student Loan Business" in the base prospectus.
S-31
The weighted average number of months in repayment for all trust student
loans currently in repayment is approximately 1.5, calculated as the number of
months from the disbursement date to the statistical cutoff date.
SCHEDULED WEIGHTED AVERAGE REMAINING MONTHS IN STATUS OF THE
TRUST STUDENT LOANS BY CURRENT BORROWER PAYMENT STATUS
AS OF THE STATISTICAL CUTOFF DATE
Scheduled Months in Status
-------------------------------------
Current Borrower Payment Status Deferral Forbearance Repayment(1)
- ------------------------------- -------- ----------- ------------
Deferral ...................... 16.4 - 279.86
Forbearance ................... - 7.0 289.75
Repayment ..................... - - 250.34
- --------------------------
(1) Scheduled months shown in the table were determined without giving effect
to any current deferral or forbearance periods or deferral or forbearance
periods that may be granted in the future.
We have determined the scheduled months in status shown in the table without
giving effect to any deferral or forbearance periods that may be granted in the
future. Of the $439,805,992 aggregate outstanding principal balance of the trust
student loans in deferral as of the statistical cutoff date, $259,485,794 or
approximately 59.0% of such loans are to borrowers who had not graduated as of
that date. We expect that a significant portion of these loans could qualify for
additional deferrals or forbearances at the end of their current deferral
periods as the related borrowers continue their education beyond their current
degree programs. As a result, the overall duration of any applicable deferral
and forbearance periods as well as the likelihood of future deferral and
forbearance periods within this pool of trust student loans is likely to be
higher than in other pools of student loans without similar numbers of in-school
consolidation loans. See Appendix A to the base prospectus and "The Student Loan
Pools--The Student Loan Corporation's Student Loan Business" in the base
prospectus.
S-32
GEOGRAPHIC DISTRIBUTION OF THE
TRUST STUDENT LOANS AS OF THE STATISTICAL CUTOFF DATE
Percent of
Pool by
Aggregate Outstanding
Outstanding Principal
Geographic Distribution Number of Loans Principal Balance Balance
- ------------------------------- --------------- ----------------- ------------
Alabama ....................... 1,392 $ 19,917,282 0.88%
Alaska ........................ 153 2,097,145 0.09%
Arizona ....................... 1,978 27,109,504 1.19%
Arkansas ...................... 434 5,848,660 0.26%
California .................... 24,467 334,560,398 14.72%
Colorado ...................... 1,737 24,035,677 1.06%
Connecticut ................... 2,062 34,628,410 1.52%
Delaware ...................... 214 3,214,569 0.14%
District of Columbia .......... 1,386 24,019,137 1.06%
Florida ....................... 7,471 101,890,623 4.48%
Georgia ....................... 8,357 122,159,450 5.37%
Hawaii ........................ 599 9,169,489 0.40%
Idaho ......................... 459 4,953,969 0.22%
Illinois ...................... 8,625 130,314,463 5.73%
Indiana ....................... 1,201 16,952,604 0.75%
Iowa .......................... 386 6,044,091 0.27%
Kansas ........................ 585 7,260,316 0.32%
Kentucky ...................... 441 6,604,109 0.29%
Louisiana ..................... 1,383 21,513,694 0.95%
Maine ......................... 347 4,782,636 0.21%
Maryland ...................... 4,247 67,060,104 2.95%
Massachusetts ................. 3,057 49,797,905 2.19%
Michigan ...................... 2,770 38,957,548 1.71%
Minnesota ..................... 1,662 21,432,784 0.94%
Mississippi ................... 634 9,734,095 0.43%
Missouri ...................... 1,245 21,218,560 0.93%
Montana ....................... 173 2,222,012 0.10%
Nebraska ...................... 257 3,928,782 0.17%
Nevada ........................ 787 10,252,256 0.45%
New Hampshire ................. 462 7,055,495 0.31%
New Jersey .................... 6,115 93,038,080 4.09%
New Mexico .................... 435 5,872,236 0.26%
New York ...................... 36,462 531,079,317 23.37%
North Carolina ................ 4,791 62,161,214 2.73%
North Dakota .................. 108 1,502,396 0.07%
Ohio .......................... 2,249 35,482,028 1.56%
Oklahoma ...................... 609 9,336,408 0.41%
Oregon ........................ 2,029 25,583,245 1.13%
Pennsylvania .................. 3,223 54,045,989 2.38%
Rhode Island .................. 315 5,139,610 0.23%
South Carolina ................ 2,496 33,841,173 1.49%
South Dakota .................. 399 3,824,285 0.17%
Tennessee ..................... 1,305 19,979,885 0.88%
Texas ......................... 8,144 113,359,113 4.99%
Utah .......................... 356 4,503,533 0.20%
Vermont ....................... 126 2,120,534 0.09%
Virginia ...................... 3,698 58,889,344 2.59%
Washington .................... 2,618 36,200,868 1.59%
West Virginia ................. 220 3,490,129 0.15%
Wisconsin ..................... 1,267 18,610,414 0.82%
Wyoming ....................... 69 932,721 0.04%
Other ......................... 832 15,197,003 0.67%
- ------------------------------- --------------- ----------------- ------------
Total ..................... 156,837 $ 2,272,925,293 100.00%
We have based the geographic distribution shown in the table on the billing
addresses of the borrowers of the trust student loans shown on the servicer's
records as of the statistical cutoff date.
S-33
Each of the trust student loans provides or will provide for the amortization
of its outstanding principal balance over a series of regular payments. Except
as described below, each regular payment consists of an installment of interest
which is calculated on the basis of the outstanding principal balance of the
trust student loan. The amount received is applied first to interest accrued to
the date of payment and the balance of the payment, if any, is applied to reduce
the unpaid principal balance. Accordingly, if a borrower pays a regular
installment before its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be less
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if a borrower pays a monthly installment
after its scheduled due date, the portion of the payment allocable to interest
for the period since the preceding payment was made will be greater than it
would have been had the payment been made as scheduled, and the portion of the
payment applied to reduce the unpaid principal balance will be correspondingly
less. In addition, if a borrower pays a monthly installment after its scheduled
due date, the borrower may owe a fee on that late payment. If a late fee is
applied, such payment will be applied first to the applicable late fee, second
to interest and third to principal. As a result, the portion of the payment
applied to reduce the unpaid principal balance may be less than it would have
been had the payment been made as scheduled.
In either case, subject to any applicable deferral periods or forbearance
periods, and except as provided below, the borrower pays a regular installment
until the final scheduled payment date, at which time the amount of the final
installment is increased or decreased as necessary to repay the then outstanding
principal balance of that trust student loan.
SLC currently offers two incentive programs to borrowers of student loans it
holds. One incentive program allows for a 0.25% interest rate reduction to
borrowers who elect to have their installments deducted automatically from their
bank accounts. Another incentive program provides a 1.00% interest rate
reduction to borrowers who pay a specified number of consecutive installments on
time, starting with their first installment. This benefit is lost if a borrower
is delinquent with respect to any subsequent installment. If any such incentive
programs not required by the Higher Education Act are in effect for the trust
student loans on any distribution date on or after the June 2009 distribution
date when the outstanding principal balance of the notes exceeds the Adjusted
Pool Balance, the seller either will contribute funds to the collection account
in an amount equal to the interest that otherwise would have been paid on such
trust student loans in the absence of the borrower incentive programs or
terminate the borrower incentive programs.
In addition, through the servicer, SLC makes payment terms available to
borrowers of student loans it holds that may result in the lengthening of the
remaining term of the student loans. For example, not all of the loans owned by
SLC provide for level payments throughout the repayment term of the loans. Some
student loans provide for interest only payments to be made for a designated
portion of the term of the loans, with amortization of the principal of the
loans occurring only when payments increase in the latter stage of the term of
the loans. Other loans provide for a graduated phase-in of the amortization of
principal with a greater portion of principal amortization being required in the
latter stages than would be the case if amortization were on a level payment
basis. SLC also offers, through the servicer, an income-sensitive repayment
plan, under which repayments are based on the borrower's income, and an extended
repayment plan, under which certain borrowers may extend their repayment term up
to 30 years.
The following table provides certain information about trust student loans
subject to the repayment terms described in the preceding paragraphs.
DISTRIBUTION OF THE TRUST
STUDENT LOANS BY LOAN TYPE AS OF THE STATISTICAL CUTOFF DATE
Aggregate Percent of Pool by
Outstanding Outstanding
Loan Type Number of Loans Principal Balance Principal Balance
- --------------------------- --------------- --------------------- ------------------
Subsidized (Consolidated) . 75,467 $ 948,713,333 41.74%
Unsubsidized (Consolidated) 81,370 1,324,211,960 58.26%
- --------------------------- --------------- --------------------- ------------------
Total ................. 156,837 $ 2,272,925,293 100.00%
S-34
DISTRIBUTION OF THE TRUST
STUDENT LOANS BY REPAYMENT TERMS AS OF THE STATISTICAL CUTOFF DATE
Aggregate Percent of Pool by
Outstanding Outstanding
Loan Repayment Terms Number of Loans Principal Balance Principal Balance
- --------------------------- --------------- --------------------- ------------------
Level Repayment ........... 141,804 $ 2,009,372,899 88.40%
Other Repayment Options(1) 15,033 263,552,394 11.60%
- --------------------------- --------------- --------------------- ------------------
Total ................. 156,837 $ 2,272,925,293 100.00%
- --------------------------
(1) Includes, among others, graduated repayment, income-sensitive and
interest-only period loans.
The servicer, at the request of SLC and on behalf of the trust, may in the
future offer repayment terms similar to those described above to borrowers of
loans in the trust who are not entitled to these repayment terms as of the
statistical cutoff date. If repayment terms are offered to and accepted by
borrowers, the weighted average life of the securities could be lengthened.
The following table provides information about the trust student loans
regarding date of disbursement.
DISTRIBUTION OF THE TRUST
STUDENT LOANS BY DATE OF DISBURSEMENT AS OF THE STATISTICAL CUTOFF DATE
Percent of Pool by
Aggregate Outstanding Outstanding
Disbursement Date Number of Loans Principal Balance Principal Balance
- --------------------------- --------------- --------------------- ------------------
Pre-July 1, 2006 .......... 107,428 $ 1,614,769,931 71.04%
July 1, 2006 and thereafter 49,409 658,155,362 28.96%
- --------------------------- --------------- --------------------- ------------------
Total ................. 156,837 $ 2,272,925,293 100.00%
DISTRIBUTION OF THE TRUST
STUDENT LOANS BY NUMBER OF DAYS OF
DELINQUENCY AS OF THE STATISTICAL CUTOFF DATE
Percent of Pool by
Aggregate Outstanding Outstanding
Days Delinquent Number of Loans Principal Balance Principal Balance
- --------------------------- --------------- --------------------- ------------------
0-30 ...................... 151,046 $ 2,194,816,440 96.56%
31-60 ..................... 3,028 40,158,741 1.77%
61-90 ..................... 1,278 17,004,134 0.75%
91-120 .................... 600 7,024,891 0.31%
121-150 ................... 388 6,329,857 0.28%
151-180 ................... 338 5,138,790 0.23%
181-209 ................... 159 2,452,440 0.11%
- --------------------------- --------------- --------------------- ------------------
Total ................. 156,837 $ 2,272,925,293 100.00%
Insurance of Trust Student Loans; Guarantors of Trust Student Loans
General. Each trust student loan is currently required to be guaranteed as to
at least 97% of the outstanding principal and interest accrued under the loan at
the time of the making of a claim by one of the guarantee agencies described
below and reinsured by the U.S. Department of Education under the Higher
Education Act and must be eligible for special allowance payments and, in the
case of some trust student loans, interest subsidy payments by the U.S.
Department of Education.
As a general rule, student loans disbursed on or after July 1, 2006 are 97%
guaranteed (and student loans disbursed on or after October 1, 1993 and prior to
July 1, 2006 are 98% guaranteed) by the applicable guarantor, and reinsured
against default by the U.S. Department of Education. However, SLC, which was
designated as an Exceptional Performer by the U.S. Department of Education in
recognition of its exceptional level of performance in servicing FFELP student
loans, receives 99% for all eligible FFELP default claims filed by SLC for
student loans that SLC services. See "Risk Factors--You May Incur Losses or
Delays in Payments on Your Notes if Borrowers
S-35
Default on the Student Loans" in this prospectus supplement and "Appendix
A--Federal Family Education Loan Program--Guarantee Agencies under the FFELP" in
the base prospectus.
No insurance premium is charged to a borrower or a lender in connection with
a consolidation loan. However, FFELP lenders must pay a monthly rebate fee to
the U.S. Department of Education at an annualized rate of 1.05% on principal of
and interest on consolidation loans disbursed on or after October 1, 1993, or at
an annualized rate of 0.62% on consolidation loans for which consolidation loan
applications were received between October 1, 1998 and January 31, 1999. The
trust will pay this consolidation loan rebate prior to calculating Available
Funds.
Guarantee Agencies for the Trust Student Loans. The eligible lender trustee
has entered into a separate guarantee agreement with each of the guarantee
agencies listed below, under which each of the guarantors has agreed to serve as
guarantor for specified trust student loans.
Under the Higher Education Amendments of 1992, if the U.S. Department of
Education has determined that a guarantee agency is unable to meet its insurance
obligations, a loan holder may submit claims directly to the U.S. Department of
Education and the U.S. Department of Education is required to pay the full
guarantee payment in accordance with guarantee claim processing standards no
more stringent than those of the guarantee agency. However, the U.S. Department
of Education's obligation to pay guarantee claims directly in this fashion is
contingent upon the U.S. Department of Education making the determination
referred to above. We cannot assure you that the U.S. Department of Education
would ever make that determination with respect to a guarantee agency or, if
that determination was made, whether that determination or the ultimate payment
of guarantee claims would be made in a timely manner. See "Appendix A--Federal
Family Education Loan Program--Guarantee Agencies under the FFELP" in the base
prospectus.
The following table provides information with respect to the portion of the
trust student loans guaranteed by each guarantor:
DISTRIBUTION OF THE TRUST STUDENT LOANS BY
GUARANTEE AGENCY AS OF THE STATISTICAL CUTOFF DATE
Aggregate Percent of Pool
Outstanding by Outstanding
Guarantee Agency Number of Loans Principal Balance Principal Balance
- ---------------------------------------------------- --------------- --------------------- ------------------
California Student Aid Commission .................. 34,338 $ 441,884,102 19.44%
Educational Credit Management Corp. of Virginia .... 1,082 14,082,615 0.62%
Georgia Higher Education Assistance Corporation .... 2,578 34,618,469 1.52%
Illinois Student Assistance Commission ............. 7,683 120,536,044 5.30%
Kentucky Higher Education Assistance Authority ..... 570 8,481,762 0.37%
Nebraska Student Loan Program ...................... 4,611 76,061,714 3.35%
New York State Higher Education Services Corporation 61,817 935,652,773 41.17%
Tennessee Student Assistance Corporation ........... 273 3,635,700 0.16%
Texas Guaranteed Student Loan Corporation .......... 6,750 86,923,644 3.82%
United Student Aid Funds, Inc. ..................... 36,636 545,280,463 23.99%
Other .............................................. 499 5,768,006 0.25%
- ---------------------------------------------------- --------------- --------------------- ------------------
Total .......................................... 156,837 $ 2,272,925,293 100.00%
Some historical information about each of the guarantee agencies that
guarantees trust student loans comprising at least 10% of the expected Initial
Pool Balance is provided below. For purposes of the following tables we refer to
these guarantee agencies as the "Significant Guarantors." The information shown
for the Significant Guarantors relates to all student loans, including but not
limited to trust student loans, guaranteed by the Significant Guarantor.
We obtained the information in these tables from various sources, including
from the Significant Guarantors themselves or, if not available from the
Significant Guarantors, from U.S. Department of Education publications and data.
None of the depositor, SLC or the underwriters have audited or independently
verified this information for accuracy or completeness.
S-36
Guarantee Volume. The following table describes the approximate aggregate
principal amount of federally reinsured student loans, excluding consolidation
loans, that first became guaranteed by the Significant Guarantors in each of the
five federal fiscal years shown:
Loans Guaranteed
----------------------------------------------------------------------------------
Federal Fiscal Year
----------------------------------------------------------------------------------
Name of Guarantee Agency 2001 2002 2003 2004 2005
- ------------------------ -------------- -------------- -------------- -------------- --------------
California Student Aid .
Commission .......... 2,792,000,000 3,523,000,000 4,421,000,000 5,712,000,000 6,577,000,000
New York State Higher ..
Education Services ..
Corporation ......... 1,926,000,000 2,156,000,000 2,414,000,000 2,563,000,000 2,711,000,000
United Student Aid .....
Funds, Inc .......... 7,379,000,000 8,162,000,000 9,587,000,000 9,907,000,000 10,724,000,000
Reserve Ratio. A Significant Guarantor's reserve ratio is determined by
dividing its cumulative cash reserves by the original principal amount of the
outstanding loans it has agreed to guarantee. For this purpose:
o Cumulative cash reserves are cash reserves plus (1) sources of funds,
including insurance premiums, state appropriations, federal advances,
federal reinsurance payments, administrative cost allowances, collections
on claims paid and investment earnings, minus (2) uses of funds, including
claims paid to lenders, operating expenses, lender fees, the U.S.
Department of Education's share of collections on claims paid, returned
advances and reinsurance fees.
o The original principal amount of outstanding loans consists of the
original principal amount of loans guaranteed by the guarantor minus the
original principal amount of loans cancelled, claims paid, loans paid in
full and loan guarantees transferred to the guarantor from other
guarantors.
The following table shows the Significant Guarantors' reserve ratios for the
last five federal fiscal years:
Reserve Ratio as of Close of
Federal Fiscal Year
----------------------------------------------
Guarantors 2001 2002 2003 2004 2005
- ---------------------------------------------------- ------ ------ ------ ------ ------
California Student Aid Commission .................. 0.9% 0.4% 0.3% 0.3% 0.3%
New York State Higher Education Services Corporation 0.8% 0.7% 0.5% 0.4% 0.3%
United Student Aid Funds, Inc. ..................... 1.0% 0.7% 0.7% 0.6% 0.5%
Recovery Rates. A guarantor's recovery rate, which provides a measure of the
effectiveness of the collection efforts against defaulting borrowers after the
guarantee claim has been satisfied, is determined for each year by dividing the
cumulative amount recovered from borrowers by the guarantor by the cumulative
aggregate amount of default claims paid by the guarantor. The table below shows
the cumulative recovery rates for the Significant Guarantors for the last five
federal fiscal years for which information is available:
Recovery Rate
Federal Fiscal Year
----------------------------------------------
Guarantors 2001 2002 2003 2004 2005
- ---------------------------------------------------- ------ ------ ------ ------ ------
California Student Aid Commission .................. 19.3% 23.1% 27.2% 27% 31.1%
New York State Higher Education Services Corporation n/s n/s n/s n/s n/s
United Student Aid Funds, Inc. ..................... 33.9% 32.8% 30.1% 35.5% 35.1%
n/s: Not supplied by the New York State Higher Education Services
Corporation.
Claims Rate. The following table shows the claims rates of the Significant
Guarantors for the last five federal fiscal years:
Claims Rate
Federal Fiscal Year
----------------------------------------------
Guarantors 2001 2002 2003 2004 2005
- ---------------------------------------------------- ------ ------ ------ ------ ------
California Student Aid Commission .................. 2.6% 2.5% 2.1% 2.1% 2.8%
New York State Higher Education Services Corporation 1.6% 1.4% 1.9% 1.5% 1.7%
United Student Aid Funds, Inc. ..................... 2.5% 2.0% 1.4% 1.1% 1.4%
S-37
Each guarantee agency's guarantee obligations with respect to any trust
student loan are conditioned upon the satisfaction of all the conditions in the
applicable guarantee agreement. These conditions include, but are not limited
to, the following:
o the origination and servicing of the trust student loan being performed in
accordance with the FFELP, the Higher Education Act, the guarantee
agency's rules and other applicable requirements;
o the timely payment to the guarantee agency of the guarantee fee payable on
the trust student loan; and
o the timely submission to the guarantee agency of all required pre-claim
delinquency status notifications and of the claim on the trust student
loan.
Failure to comply with any of the applicable conditions, including those
listed above, may result in the refusal of the guarantee agency to honor its
guarantee agreement on the trust student loan, in the denial of guarantee
coverage for certain accrued interest amounts or in the loss of certain interest
subsidy payments and special allowance payments.
See "Appendix A--Federal Family Education Loan Program" to the base
prospectus.
California Student Aid Commission ("CSAC") has advised us that CSAC is
projecting that it will be able to meet all its financial obligations under the
FFEL program as they come due during the fiscal year beginning on October 1,
2006. Nonetheless, CSAC has advised us that CSAC presently is exploring an
arrangement with the State of California to ensure that it can meet all
obligations in the event of a short-term funding need.
Prospective investors may consult the U.S. Department of Education Data Books
for further information concerning the guarantors.
Cure Period for Trust Student Loans
SLC, the depositor or the servicer, as applicable, will be obligated to
purchase, or to substitute qualified substitute student loans for, any trust
student loan in the event of a material breach of certain representations,
warranties or covenants concerning the trust student loan, following a period
during which the breach may be cured. For purposes of trust student loans, the
cure period will be 210 days. However, in the case of breaches that may be cured
by the reinstatement of the guarantor's guarantee of the trust student loan, the
cure period will be 360 days. In each case the cure period begins on the earlier
of the date on which the breach is discovered and the date of the servicer's
receipt of the guarantor reject transmittal form with respect to the trust
student loan. The purchase or substitution will be made not later than the end
of the 210-day cure period or not later than the 60th day following the end of
the 360-day cure period, as applicable.
Notwithstanding the foregoing, if as of the last business day of any month
the aggregate principal amount of trust student loans for which claims have been
filed with and rejected by a guarantor as a result of a breach by the depositor
or the servicer or for which the servicer determines that claims cannot be filed
pursuant to the Higher Education Act as a result of that breach exceeds 1% of
the Pool Balance, then the servicer or the depositor, as applicable, will be
required to purchase, within 30 days of a written request by the owner trustee
or the indenture trustee, such affected trust student loans in an aggregate
principal amount so that after the purchases the aggregate principal amount of
affected trust student loans is less than 1% of the Pool Balance. The trust
student loans to be purchased by the servicer or the depositor pursuant to the
preceding sentence will be based on the date of claim rejection, with the trust
student loans with the earliest of these dates to be purchased first. See
"Servicing and Administration--Servicer Covenants" and "Transfer
Agreements--Sale of Student Loans to the Issuing Entity; Representations and
Warranties of the Depositor" and "--Purchase of Student Loans by the Depositor;
Representations and Warranties of the Sellers" in the base prospectus.
Consolidation of Federal Benefit Billings and Receipts and Guarantor Claims with
Other Trusts
Due to a U.S. Department of Education policy limiting the granting of new
lender identification numbers, the eligible lender trustee will be allowed under
the trust agreement to permit other trusts established by the depositor to
securitize student loans to use the U.S. Department of Education lender
identification number applicable to the trust. In that event, the billings
submitted to the U.S. Department of Education for interest subsidy and special
allowance payments on loans in the trust would be consolidated with the billings
for the payments for student loans in other trusts using the same lender
identification number and payments on the billings would be made by the U.S.
Department of Education in lump sum form. These lump sum payments would then be
allocated among the various trusts using the same lender identification number.
S-38
In addition, the sharing of the lender identification number with other
trusts may result in the receipt of claim payments from guarantee agencies in
lump sum form. In that event, these payments would be allocated among the trusts
in a manner similar to the allocation process for interest subsidy and special
allowance payments.
The U.S. Department of Education regards the eligible lender trustee as the
party primarily responsible to the U.S. Department of Education for any
liabilities owed to the U.S. Department of Education or guarantee agencies
resulting from the eligible lender trustee's activities in the FFELP. As a
result, if the U.S. Department of Education or a guarantee agency were to
determine that the eligible lender trustee owes a liability to the U.S.
Department of Education or a guarantee agency on any student loan included in a
trust using the shared lender identification number, the U.S. Department of
Education or that guarantee agency would be likely to collect that liability by
offset against amounts due the eligible lender trustee under the shared lender
identification number, including amounts owed in connection with the trust.
In addition, other trusts using the shared lender identification number may
in a given quarter incur consolidation origination fees that exceed the interest
subsidy and special allowance payments payable by the U.S. Department of
Education on the loans in the other trusts, resulting in the consolidated
payment from the U.S. Department of Education received by the eligible lender
trustee under the lender identification number for that quarter equaling an
amount that is less than the amount owed by the U.S. Department of Education on
the loans in the trust for that quarter.
The servicing agreement for the trust and the servicing agreements for the
other trusts established by the depositor that share the lender identification
number to be used by the trust will require any trust to indemnify the other
trusts against a shortfall or an offset by the U.S. Department of Education or a
guarantee agency arising from the student loans held by the eligible lender
trustee on the trust's behalf.
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DESCRIPTION OF THE NOTES
General
The notes will be issued under an indenture substantially in the form filed
as an exhibit to the registration statement to which this prospectus supplement
relates. The issuance of the notes was authorized by a resolution of the Board
of Directors of the Depositor. The following summary describes some terms of the
notes, the indenture and the trust agreement. The base prospectus describes
other terms of the notes. See "Description of the Notes" and "Certain
Information Regarding the Notes" in the base prospectus. The following summary
presents only brief descriptions of the material terms of these transaction
documents and is subject to actual provisions of the notes, the indenture and
the trust agreement.
The Notes
The Class A Notes.
Distributions of Interest. Interest will accrue on the outstanding principal
balances of the class A notes at their respective interest rates. Interest will
accrue during each applicable accrual period and will be payable to the class A
noteholders on each distribution date. Interest accrued as of any distribution
date but not paid on that distribution date will be due on the next distribution
date together with an amount equal to interest on the unpaid amount at the
applicable rate per annum specified in the definition of Class A Note Interest
Shortfall in the Glossary. Interest payments on the class A notes for any
distribution date will generally be funded from Available Funds and the other
sources of funds for payment described in this prospectus supplement (subject
to all prior required distributions). See "--Distributions" and "--Credit
Enhancement" in this prospectus supplement. If these sources are insufficient
to pay the Class A Noteholders' Interest Distribution Amount for that
distribution date, the shortfall will be allocated pro rata to the class A
noteholders, based upon the total amount of interest then due on each class of
class A notes.
The interest rate for each class of class A notes for each accrual period
will be equal to three-month LIBOR, except for the first accrual period, plus or
minus the following applicable spread:
Class of Notes Spread
------------------------------------------ ---------------
Class A-1 ................................ minus 0.02%
Class A-2 ................................ plus 0.00%
Class A-3 ................................ plus 0.02%
Class A-4 ................................ plus 0.08%
Class A-5 ................................ plus 0.10%
Class A-6 ................................ plus 0.16%
LIBOR for the first accrual period for all classes of notes will be
determined by the following formula:
x + [a/b x (y - x)]
where:
x = two-month LIBOR;
y = three-month LIBOR;
a = the actual number of days from the maturity date of two-month LIBOR to
the first distribution date; and
b = the actual number of days from the maturity date of two-month LIBOR and
the maturity date of three-month LIBOR;
The administrator will determine LIBOR for the specified maturity for each
accrual period on the second business day before the beginning of that accrual
period, as described under "--Determination of LIBOR below.
Distributions of Principal. Principal payments will be made to the class A
noteholders on each distribution date in an amount generally equal to the
Principal Distribution Amount multiplied by the Class A Percentage for that
distribution date, until the principal balance of each class of the class A
notes is reduced to zero. Principal payments
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on the class A notes will generally be funded from Available Funds and the other
sources of funds for payment described in this prospectus supplement (subject to
all prior required distributions). See "--Distributions", "--Credit Enhancement"
and "--The Class B Notes--Subordination of the Class B Notes" in this prospectus
supplement. If these sources are insufficient to pay the Class A Noteholders'
Principal Distribution Amount for a distribution date, the shortfall will be
added to the principal payable to the class A noteholders with respect to
principal on subsequent distribution dates.
Amounts on deposit in the reserve account, other than amounts in excess of
the Specified Reserve Account Balance, will not be available to make principal
payments on the class A notes except at maturity of the applicable class of
notes or on the final distribution upon termination of the trust.
Principal payments will be applied on each distribution date in the
priorities set forth under "--Distributions" below.
However, notwithstanding any other provision to the contrary, following the
occurrence of an event of default and the exercise by the indenture trustee of
remedies under the indenture, principal payments on the class A notes will be
made pro rata, without preference or priority.
The aggregate outstanding principal balance of each class of class A notes
will be due and payable in full on its maturity date. The actual date on which
the aggregate outstanding principal and accrued interest of a class of class A
notes is paid may be earlier than its maturity date, based on a variety of
factors as described in "You Will Bear Prepayment and Extension Risk Due to
Actions Taken by Individual Borrowers and Other Variables Beyond Our Control"
under "Risk Factors" in the base prospectus.
The Class B Notes.
Distributions of Interest. Interest will accrue on the principal balance of
the class B notes at the class B interest rate. Interest will accrue during each
accrual period and will be payable to the class B noteholders on each
distribution date. Interest accrued as of any distribution date but not paid on
that distribution date will be due on the next distribution date, together with
an amount equal to interest on the unpaid amount at the class B interest rate.
Interest payments on the class B notes for any distribution date will generally
be funded from Available Funds and the other sources of funds for payment
described in this prospectus supplement (subject to all prior required
distributions). See "--Distributions", "--Credit Enhancement--Reserve Account"
and "--The Class B Notes--Subordination of the Class B Notes" below.
The interest rate for the class B notes with respect to each accrual period
will be equal to three-month LIBOR plus 23%, except for the first accrual
period. The administrator will determine LIBOR for the class B notes for each
accrual period in the same manner as for the class A notes.
Distributions of Principal. Principal payments will be made to the class B
noteholders on each distribution date on and after the Stepdown Date, provided
that a Trigger Event has not occurred and is continuing, in an amount generally
equal to the Class B Noteholders' Principal Distribution Amount for that
distribution date. Principal payable on any distribution date will generally be
funded from the portion of Available Funds and the other sources of funds for
payment described in this prospectus supplement (subject to all prior required
distributions). Amounts on deposit in the reserve account (other than amounts in
excess of the Specified Reserve Account Balance) will not be available to make
principal payments on the class B notes except at their maturity and on the
final distribution upon termination of the trust. See "--Distributions" and
"--Credit Enhancement--Reserve Account" in this prospectus supplement.
The outstanding principal balance of the class B notes will be due and
payable in full on the class B maturity date to the extent of Available Funds.
The actual date on which the final distribution on the class B notes will be
made may be earlier than the class B maturity date, however, based on a variety
of factors.
Subordination of the Class B Notes. On any distribution date, distributions
of interest on the class B notes will be subordinated to the payment of
interest, and if a Class B Interest Subordination Condition is in effect, to the
payment of principal, on the class A notes. On any distribution date, principal
payments on the class B notes will be subordinated to the payment of both
interest and principal on the class A notes.
Consequently, on any distribution date, Available Funds, amounts on deposit
in the reserve account remaining after payment of the primary servicing fee,
and, through the March 2008 distribution date, amounts on deposit
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in the capitalized interest account will be applied to the payment of interest
on the class A notes prior to any payment of interest on the class B notes, and
no payments of the principal balance on the class B notes will be made on that
distribution date until the class A notes have received the applicable Class A
Noteholders' Principal Distribution Amount.
Notwithstanding the foregoing, if
(1) on any distribution date following distributions under clauses (a)
through (j) under "--Distributions--Distributions from the Collection Account"
below to be made on that distribution date, the outstanding principal balance of
the class A notes, would be in excess of:
o the outstanding principal balance of the trust student loans as of the
last day of the related collection period plus
o any accrued but unpaid interest on the trust student loans as of the last
day of the related collection period plus
o the balance of the capitalized interest account on the distribution date
following those distributions made with respect to clauses (b) and (c) (or
clause (b) if a Class B Interest Subordination Condition is in effect)
under "--Distributions--Distributions from the Collection Account" below
plus
o the balance of the add-on consolidation loan account on that distribution
date plus
o the balance of the reserve account on the distribution date following
those distributions made under clauses (a) through (j)
"--Distributions--Distributions from the Collection Account" below minus
o the Specified Reserve Account Balance for that distribution date, or
(2) an event of default relating to payment or bankruptcy under the indenture
affecting the class A notes has occurred and is continuing,
then, until the conditions described in (1) or (2) above no longer exist, the
amounts on deposit in the collection account and the reserve account will be
applied on that distribution date to the payment of the Class A Noteholders'
Distribution Amount before any amounts are applied to the payment of the Class B
Noteholders' Distribution Amount. So long as any class A notes are outstanding,
the failure to pay interest on any class B notes will not constitute an event of
default.
Determination of LIBOR
LIBOR, for any accrual period, will be the London interbank offered rate for
deposits in U.S. Dollars having the specified maturity commencing on the first
day of the accrual period, as that rate appears on Telerate Page 3750, Bloomberg
Page BBAM, or another page of these or any other financial reporting service in
general use in the financial services industry, as of 11:00 a.m., London time,
on the related LIBOR Determination Date. If no rate is so reported on the
related LIBOR Determination Date, the rate for that day will be determined on
the basis of the rates at which deposits in U.S. Dollars, having the specified
maturity and in a principal amount of not less than U.S. $1,000,000, are offered
at approximately 11:00 a.m., London time, on that LIBOR Determination Date, to
prime banks in the London interbank market by the Reference Banks, The
administrator will request the principal London office of each Reference Bank to
provide a quotation of its rate. If the Reference Banks provide at least two
quotations, the rate for that day will be the arithmetic mean of the quotations.
If the Reference Banks provide fewer than two quotations, the rate for that day
will be the arithmetic mean of the rates quoted by major banks in New York City,
selected by the administrator, at approximately 11:00 a.m., New York time, on
that LIBOR Determination Date, for loans in U.S. Dollars to leading European
banks having the specified maturity and in a principal amount of not less than
U.S. $1,000,000. If the banks selected as described above are not providing
quotations, LIBOR in effect for the applicable accrual period will be LIBOR for
the specified maturity in effect for the previous accrual period.
For this purpose:
o "LIBOR Determination Date" means, for each accrual period, the second
business day before the beginning of that accrual period.
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o "Reference Banks" means four major banks in the London interbank market
selected by the administrator.
For purposes of calculating LIBOR, a business day is any day on which banks
in New York City and the City of London are open for the transaction of
international business. Interest due for any accrual period will always be
determined based on the actual number of days elapsed in the accrual period over
a 360-day year.
Notice of Interest Rates
Information concerning the past and current LIBOR, any other applicable
index, and the interest rates applicable to the notes will be available on SLC's
website at http://www.studentloan.com or by telephoning the administrator at
(800) 967-2400 between the hours of 9 a.m. and 4 p.m., Eastern time, on any
business day and will also be available through Moneyline Telerate Service or
Bloomberg L.P. For each class of notes listed on the Irish Stock Exchange, the
administrator will also notify the Irish paying agent, and will cause the Irish
Stock Exchange to be notified, of the current interest rate for each class of
notes listed on the exchange prior to the first day of each accrual period.
Additional Information Concerning Accounts and Eligible Investments
The indenture administrator will establish and maintain the collection
account for the benefit of the noteholders, in the name of the indenture
trustee, into which all payments on the trust student loans will be deposited.
The indenture administrator will also establish the reserve account and the
capitalized interest account in the name of the indenture trustee, for the
benefit of the noteholders;.
The indenture administrator will invest funds in the collection account, the
add-on consolidation loan account, the reserve account and the capitalized
interest account in eligible investments as provided in the indenture. Eligible
investments are generally limited to investments acceptable to the rating
agencies as being consistent with the ratings of the notes. Subject to some
conditions, eligible investments may include debt instruments or other
obligations (including asset-backed notes) issued by the depositor or its
affiliates, other trusts originated by the depositor or its affiliates or third
parties and repurchase obligations of those persons with respect to federally
guaranteed student loans that are serviced by the servicer or an affiliate
thereof. Eligible investments are limited to obligations or debt instruments
that are expected to mature not later than the business day immediately
preceding the next applicable distribution date, or, with respect to the
collection account only, the next monthly servicing fee payment date, to the
extent of the primary servicing fee. See "Servicing and
Administration--Accounts" in the base prospectus for a more complete description
of eligible investments.
Consolidation Loan Add-On Period
The Higher Education Act permits borrowers to add additional eligible
education loans to an existing consolidation loan up to 180 days after the
origination of that consolidation loan. If the borrower of a trust student loan
wanted to include an additional student loan in that borrower's existing
consolidation loan and if the trust could not fund that additional student loan,
the related trust student loan would have to be removed from the trust and
treated as having been prepaid in full. To mitigate this effect, during the
consolidation loan add-on period, which is the period from the closing date
through April 15, 2007, the trust will be permitted to fund add-on consolidation
loans, which would increase the outstanding principal balance of an existing
trust student loan, but only to the extent of funds on deposit in the add-on
consolidation loan account.
To the extent that the principal balance of an additional student loan that a
borrower of a trust student loan wanted to include in that borrower's existing
consolidation loan exceeded the funds then available in the add-on consolidation
loan account, the servicer will be required under the servicing agreement to
repurchase the entire trust student loan.
On the closing date, the depositor will fund the add-on consolidation loan
account with proceeds from the sale of the notes in an amount of $18,750,000,
which amount will constitute 0.74% of the Pool Balance as of the statistical
cutoff date and 73% of the outstanding principal amount of the notes. No
additional deposits will be made into the add-on consolidation loan account.
Amounts may be withdrawn from time to time during the consolidation loan add-on
period to fund add-on consolidation loans and for no other purposes. Add-on
consolidation loans will be added to the trust at a price equal to their
outstanding principal balance plus accrued and unpaid interest, if any, thereon,
and following the repayment in full to the applicable lender of the outstanding
eligible education loan which the borrower wants to add to an existing trust
student loan, the outstanding principal balance of the related trust student
loan will be increased by the amount withdrawn from the add-on consolidation
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loan account with respect to such repayment. Any funds remaining on deposit in
the add-on consolidation loan account at the end of the consolidation loan
add-on period will be transferred to the collection account on the business day
immediately following the end of that period and will be included as part of
Available Funds on the immediately following distribution date.
With respect to add-on consolidation loans, the indenture administrator at
the direction of the administrator will transfer from the add-on consolidation
loan account (but only to the extent of available amounts on deposit therein) an
amount equal to the principal balance of each add-on consolidation loan plus
accrued and unpaid interest, if any, thereon to the applicable lender in
repayment of the related trust student loan, and the principal balance of the
related trust student loan will be increased by the same amount.
Servicing Compensation
The servicer will be entitled to receive the servicing fee in an amount equal
to the primary servicing fee and the carryover servicing fee as compensation for
performing the functions as servicer for the trust. The primary servicing fee
will be payable on each monthly servicing payment date and will be paid solely
out of Available Funds and amounts on deposit in the reserve account on that
date. The carryover servicing fee will be payable to the servicer on each
distribution date out of Available Funds after payment on that distribution date
of clauses (a) through (g) under "--Distributions--Distributions from the
Collection Account" in this prospectus supplement. The carryover servicing fee
will be subject to increase agreed to by the administrator, the eligible lender
trustee and the servicer to the extent that a demonstrable and significant
increase occurs in the costs incurred by the servicer in providing the services
to be provided under the servicing agreement, whether due to changes in
applicable governmental regulations, guarantor program requirements or
regulations, or postal rates. The servicer will be solely responsible for the
payment of fees due to the sub-servicer and the administrator.
Additional Information Concerning Servicing Procedures
The servicer will keep ongoing records on the trust student loans and its
collection activities utilizing the same standards it uses for similar student
loans owned by SLC and its affiliates in compliance with the applicable
guarantee agreements and all other applicable federal and state laws, including
the Higher Education Act. It will also furnish periodic statements to the
indenture trustee, the indenture administrator, the eligible lender trustee and
the noteholders. See "Servicing and Administration--Statements to Indenture
Trustee, Indenture Administrator and Trust" in the base prospectus.
Additional Information Concerning Payments on Student Loans
The servicing agreement will not require the servicer to make advances to any
trust and no such advances have been made by the servicer with respect to any
trust student loans.
Additional Information Concerning Servicer Covenants
The servicer will not reschedule, revise, defer or otherwise compromise
payments due on any trust student loan except during any applicable
interest-only, deferral or forbearance periods or otherwise in accordance with
the same standards it uses for similar student loans owned by SLC and its
affiliates in compliance with the applicable guarantee agreements and all other
applicable federal and state laws, including the Higher Education Act. See
"Servicing and Administration--Servicer Covenants" in the base prospectus.
All expenses related to the resignation or removal for cause of the servicer
or any successor servicer will be paid solely by the servicer being replaced.
Distributions
Deposits into the Collection Account. On or before the third business day
immediately prior to each distribution date, the servicer and the administrator
will provide the indenture administrator with certain information as to the
preceding collection period, including the amount of Available Funds received
from the trust student loans (and the add-on consolidation loan account, if
applicable) and the aggregate purchase amount of the trust student loans to be
purchased by SLC, the depositor or the servicer.
Except as provided in the next paragraph, the servicer will deposit all
payments on the trust student loans and all proceeds of the trust student loans
collected by it during each collection period into the collection account within
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two business days of receipt. Except as provided in the next paragraph, the
eligible lender trustee will deposit all interest subsidy payments and all
special allowance payments on the student loans received by it for each
collection period into the collection account within two business days of
receipt.
Distributions from the Collection Account. On each monthly servicing payment
date that is not a distribution date, the administrator will instruct the
indenture administrator to pay to the servicer the primary servicing fee due for
the period from and including the preceding monthly servicing payment date from
amounts on deposit in the collection account.
On or before each distribution date, the administrator will instruct the
indenture administrator to first pay or reimburse itself and the indenture
trustee for all amounts due to it and the indenture trustee under the indenture
for the related distribution date, next to pay or reimburse the owner trustee
for all amounts due to it under the trust agreement for the related distribution
date, next to pay or reimburse the eligible lender trustee for all amounts due
to it under the eligible lender trust agreements for the related distribution
date (these amounts payable to the indenture administrator, the indenture
trustee, the owner trustee and the eligible lender trustee not to exceed $30,000
per annum in the aggregate) and then make the following deposits and
distributions in the amounts and in the order of priority shown below, except as
otherwise provided under "Description of the Notes--The Notes--The Class B
Notes--Subordination of the Class B Notes" and "--The Notes--The Class A
Notes--Distributions of Principal", to the extent of the Available Funds for
that distribution date, amounts transferred from the capitalized interest
account through the March 2008 distribution date with respect to clauses (b) and
(c) below (or clause (b) below if a Class B Interest Subordination Condition is
in effect) for that distribution date and amounts transferred from the reserve
account with respect to that distribution date:
(a) to the servicer, the primary servicing fee due on that distribution
date;
(b) to the class A noteholders, the Class A Noteholders' Interest
Distribution Amount, pro rata, based on the amounts payable as Class A
Noteholders' Interest Distribution Amount;
(c) if the Class B Interest Subordination Condition is not in effect, to
the class B noteholders, the Class B Noteholders' Interest Distribution
Amount;
(d) sequentially, to the class A-1, class A-2, class A-3 class A-4, class
A-5 and class A-6 noteholders, in that order, until each such class is paid
in full, the Class A Noteholders' Principal Distribution Amount;
(e) if the Class B Interest Subordination Condition is in effect, to the
class B noteholders, the Class B Noteholders' Interest Distribution Amount;
(f) on or after the Stepdown Date, to the class B noteholders until paid
in full, the Class B Noteholders' Principal Distribution Amount; provided
that (x) if a Trigger Event has occurred and is continuing and (y) any class
A notes are outstanding, then the remaining Available Funds will be
distributed sequentially to the class A-1, class A-2, class A-3, class A-4,
class A-5 and class A-6 noteholders, in that order, until each such class is
paid in full;
(g) to the reserve account, the amount, if any, necessary to reinstate the
balance of the reserve account to the Specified Reserve Account Balance;
(h) to the servicer, the aggregate unpaid amount of the carryover
servicing fee, if any;
(i) to the indenture administrator, the indenture trustee, the owner
trustee, the eligible lender trustee, the Irish paying agent and The Irish
Stock Exchange Limited in respect of its fees, pro rata, for all amounts due
to each and not previously paid for the related distribution date; and
(j) to the holder of the trust certificate (initially, the depositor or an
affiliate thereof), any remaining amounts after application of the preceding
clauses.
Notwithstanding the foregoing, in the event the trust student loans are not
sold on the trust auction date, on each subsequent distribution date on which
the Pool Balance is equal to 10% or less of the Initial Pool Balance, the
administrator will direct the indenture administrator to distribute as
accelerated payments of principal on the notes all amounts that would otherwise
be paid to the holder of the trust certificate.
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The trust certificate will represent the ownership of the residual interest
in the trust. Under the purchase agreement between the depositor and SLC, the
depositor will transfer the trust certificate to SLC as part of the
consideration for the sale of the trust student loans being sold to the
depositor by SLC under the related purchase agreement.
Distributions Following an Event of Default and Acceleration of the Maturity of
the Notes
Following the occurrence of an event of default and an acceleration of the
notes, as described under "Description of the Notes--The Indenture--Events of
Default; Rights upon Event of Default" in the base prospectus, the priority of
distributions on each distribution date shown above under
"--Distributions--Distributions from the Collection Account" will be made in the
following order of priority:
first, to the indenture trustee and the indenture administrator for amounts
due to the indenture trustee and the indenture administrator, respectively, for
fees and expenses (but only to the extent not paid by the administrator or the
depositor), to the owner trustee for amounts due to it under the trust agreement
and to the eligible lender trustee for amounts due to it under the eligible
lender trust agreements;
second, to the servicer for due and unpaid primary servicing fees;
third, to the class A noteholders, for amounts due and unpaid on the class A
notes for interest at the applicable rate of interest on those notes, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the class A notes for that interest;
fourth, to the class A noteholders, ratably, an amount sufficient to reduce
the respective principal balances of those class A notes to zero, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the class A notes for that principal;
fifth, to the class B noteholders for amounts due and unpaid on the class B
notes for interest at the applicable rate of interest on those notes;
sixth, to the class B noteholders, an amount sufficient to reduce the
outstanding principal amount of the class B notes to zero;
seventh, to the servicer, for any unpaid carryover servicing fees; and
eighth, to the trust certificateholder, any remaining funds.
Voting Rights and Remedies
Noteholders will have the voting rights and remedies described in the base
prospectus. See "Transfer Agreements--Amendments to Transfer Agreements",
"Servicing and Administration--Servicer Default", "Servicing and
Administration--Rights upon Servicer Default", "Servicing and
Administration--Waiver of Past Defaults", "Servicing and
Administration--Administrator Default", "Servicing and Administration--Rights
upon Administrator Default", "Description of the Notes--The
Indenture--Modification of Indenture", "Description of the Notes--The
Indenture--Events of Default; Rights upon Event of Default" and "Certain
Information Regarding the Notes--Definitive Notes" in the base prospectus.
Credit Enhancement
Excess Interest. Excess interest is created when interest collections
received on the trust student loans during a collection period and related
investment earnings exceed the interest on the note at the related note interest
rates and certain fees and expenses of the trust. Excess interest with respect
to the trust student loans is intended to provide "first loss" protection for
the notes. Excess interest (as part of all interest collections) will be
collected and deposited into the collection account and will become part of the
Available Funds. There can be no assurance as to the rate, timing or amount, if
any, of excess interest. The application of excess interest to the payment of
principal on your notes will affect the weighted average life and yield on your
investment. Excess interest not applied to make required distributions on any
distribution date, and not deposited into the reserve account, will be paid to
the trust certificateholder and will not be available on subsequent distribution
dates to make payments on any class of the notes.
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Reserve Account. The reserve account will be created with an initial deposit
by the trust on the closing date of cash in an amount equal to $6,296,875. The
reserve account may be replenished on each distribution date, by a deposit into
it of the amount, if any, necessary to reinstate the balance of the reserve
account to the Specified Reserve Account Balance from the amount of Available
Funds remaining after payment for that distribution date under clauses (a)
through (f) under "--Distributions--Distributions from the Collection Account"
in this prospectus supplement above.
If the market value of securities and cash in the reserve account on any
distribution date is sufficient to pay the remaining principal balance of and
interest accrued on the notes and any carryover servicing fee, these assets will
be so applied on that distribution date.
If the amount on deposit in the reserve account on any distribution date
after giving effect to all deposits or withdrawals from the reserve account on
that distribution date is greater than the Specified Reserve Account Balance for
that distribution date, the administrator will instruct the indenture
administrator to deposit the amount of the excess into the collection account
for distribution on that distribution date.
Amounts held from time to time in the reserve account will continue to be
held for the benefit of the trust. Funds will be withdrawn from cash in the
reserve account on any distribution date or, in the case of the payment of any
primary servicing fee, on any monthly servicing payment date, to the extent that
the amount of Available Funds and the amount on deposit in the capitalized
interest account on that distribution date or monthly servicing payment date is
insufficient to pay any of the items specified in clauses (a) through (c) (or,
if a Class B Interest Subordination Condition is in effect, clauses (a) and (b)
from the capitalized interest account and clauses (a), (b) and (e) from
Available Funds) under "--Distributions--Distributions from the Collection
Account" above. These funds also will be withdrawn at maturity of a class of
notes or on the final distribution upon termination of the trust to the extent
that the amount of Available Funds at that time is insufficient to pay any of
the items specified in clauses (d) and (f) and, in the case of the final
distribution upon termination of the trust, clause (h) under
"--Distributions--Distributions from the Collection Account" above. These funds
will be paid from the reserve account to the persons and in the order of
priority specified above for distributions out of the collection account.
The reserve account is intended to enhance the likelihood of timely
distributions of interest to the noteholders and to decrease the likelihood that
the noteholders will experience losses. In some circumstances, however, the
reserve account could be reduced to zero. Except on the final distribution upon
termination of the trust, amounts on deposit in the reserve account, other than
amounts in excess of the Specified Reserve Account Balance, will not be
available to cover any carryover servicing fees. Amounts on deposit in the
reserve account will be available to pay principal on the notes and accrued
interest at the maturity of the notes, and to pay the carryover servicing fee
and carry-over amounts on the final distribution upon termination of the trust.
Capitalized Interest Account. The capitalized interest account will be
created with an initial deposit by the trust on the closing date of cash in an
amount equal to $61,000,000. The initial deposit will not be replenished.
Amounts held from time to time in the capitalized interest account will be
held for the benefit of the class A noteholders and the class B noteholders, as
applicable. If on any distribution date through the March 2008 distribution
date, the amount of Available Funds is insufficient to pay or allocate any of
the items specified in clauses (b) and (c) (or clause (b) if a Class B Interest
Subordination Condition is in effect) under "--Distributions--Distributions from
the Collection Account" above, amounts on deposit in the capitalized interest
account on that distribution date will be withdrawn by the indenture
administrator to cover those shortfalls, to the extent of funds on deposit
therein, and will be allocated in the same order of priority shown under
"--Distributions--Distributions from the Collection Account" above.
All remaining funds on deposit in the capitalized interest account on the
March 2008 distribution date will be transferred to the collection account and
included in Available Funds on that distribution date.
The capitalized interest account is intended to enhance the likelihood of
timely distributions of interest to the noteholders through the March 2008
distribution date.
Priority of the Notes. On any distribution date, distributions of interest on
the class B notes will be subordinated to the payment of interest, and if a
Class B Interest Subordination Condition is in effect, to the payment of
principal, on the class A notes. Distributions of principal on the class B notes
will be subordinated to the payment of both interest and principal on all of the
class A notes. See "Description of the Notes--The Notes--The Class B
Notes--Subordination of the Class B Notes" in this prospectus supplement.
S-47
Trust Fees and Expenses
Expenses incurred to establish the trust and issue the notes (other than fees
that are due to the underwriters) are payable by the depositor. Such expenses
are not paid from proceeds of the sale of the notes.
The table below sets forth the fees payable by or on behalf of the trust
after issuance of the notes.
Party Amount
- ---------------------- ------------------------------------------------------
Servicer(1)........... The primary servicing fee for any month is equal to
1/12th of an amount not to exceed 0.50% of the
outstanding principal amount of the trust student
loans, plus the amount of any carryover servicing fee.
Eligible Lender $5,000 per annum total, payable in advance.
Trustee, Indenture
Trustee and
Indenture
Administrator(2)....
Owner Trustee(2)...... $4,000 per annum, payable in advance.
Irish Paying Agent(3). (euro)650 per annum, payable annually in arrears from
the date of listing.
- --------------------------
(1) To be paid before any amounts are distributed to the noteholders.
(2) Fees and expenses up to $30,000 per annum in the aggregate to be paid before
amounts distributed to the noteholders. Remaining amounts, if any, will be
subordinate to amounts payable to the noteholders.
(3) Subordinate to amounts payable to the noteholders.
Determination of Indices
For a discussion of the day count basis, interest rate determination dates,
interest rate change dates and possible interest rate indices applicable for a
class of notes, see "Certain Information Regarding the Notes--Determination of
Indices" in the base prospectus.
Optional Purchase
The servicer may purchase or arrange for the purchase of all remaining trust
student loans on any distribution date on or after the first distribution date
when the pool balance is 10% or less of the Initial Pool Balance.
The exercise of this purchase option will result in the early retirement of
the remaining notes. The purchase price will equal the amount required to prepay
in full, including all accrued interest, the remaining trust student loans as of
the end of the preceding collection period, but not less than a prescribed
minimum purchase amount and not more than a prescribed maximum purchase amount.
This prescribed minimum purchase amount is the amount that would be
sufficient to:
o pay to noteholders the interest payable on the related distribution date;
and
o reduce the outstanding principal amount of each class of notes then
outstanding on the related distribution date to zero.
The prescribed maximum purchase amount is an amount equal to the fair market
value of the remaining trust student loans, including accrued but unpaid
interest, as of the end of the related collection period. See "The Student Loan
Pools--Termination" in the base prospectus.
Auction of Trust Assets
If the servicer does not purchase or arrange for the purchase of all
remaining trust student loans on the first distribution date after the date on
which the pool balance is 10% or less of the Initial Pool Balance, the indenture
administrator will engage a third-party financial advisor, which may be an
affiliate of SLC and which may include an underwriter of the securities or the
administrator, to try to auction any trust student loans remaining in the trust.
Only third parties unrelated to SLC may make bids to purchase these trust
student loans on the trust auction date.
The trust auction date will be the third business day before the related
distribution date. An auction will be consummated only if the servicer has first
waived its optional purchase right. The servicer will waive its option to
purchase the remaining trust student loans if it fails to notify the eligible
lender trustee, the indenture trustee and the
S-48
indenture administrator, in writing, that it intends to exercise its purchase
option before the financial advisor, on behalf of the indenture administrator,
accepts a bid to purchase the trust student loans.
If at least two bids are received, the financial advisor, on behalf of the
indenture administrator, will solicit and re-solicit new bids from all
participating bidders until only one bid remains or the remaining bidders
decline to resubmit bids. The financial advisor, on behalf of the indenture
administrator, will accept the highest of the remaining bids if it equals or
exceeds the higher of:
o the minimum purchase amount described under "--Optional Purchase" above
(plus any amounts owed to the servicer as carryover servicing fees); or
o the fair market value of the trust student loans, including accrued but
unpaid interest, as of the end of the related collection period.
If at least two bids are not received or the highest bid after the
re-solicitation process does not equal or exceed that amount, the financial
advisor will not complete the sale. The indenture administrator at the direction
of the depositor will be required to consult with a financial advisor, including
an underwriter of the securities or the administrator, to determine the fair
market value of the trust student loans. The indenture administrator and the
financial advisor will be entitled to the reimbursement of all of their and
their respective agents' fees, expenses and costs whether or not such auction
sale is consummated.
The net proceeds of any auction sale will be used to retire any outstanding
notes on the related distribution date.
If the sale is not completed, as described above, the financial advisor, on
behalf of the indenture administrator, will continue to solicit and re-solicit
bids for sale of the trust student loans upon the same terms described above,
including the servicer's waiver of its option to purchase the remaining trust
student loans, until the financial advisor has received at least one bid that
equals or exceeds the minimum purchase amount described under "Optional
Purchase" above.
The financial advisor may or may not succeed in soliciting acceptable bids
for the trust student loans either on the trust auction date or subsequently.
If the trust student loans are not sold as described above, on each
subsequent distribution date, if the amount on deposit in the reserve account
after giving effect to all withdrawals, except withdrawals payable to the
depositor, exceeds the specified reserve account balance, the administrator will
direct the indenture administrator to distribute the amount of the excess as
accelerated payments of note principal.
See "The Student Loan Pools--Termination" in the base prospectus.
Upon termination of the trust, any remaining assets of that trust, after
giving effect to final distributions to the noteholders, will be transferred to
the reserve account and paid as provided under "Description of the Notes--Credit
Enhancement--Reserve Account" in this prospectus supplement.
S-49
STATIC POOLS
Information concerning the static pool performance data of previous FFELP
student loan securitizations of the sponsor may be obtained through the
following procedure: first, go to the sponsor's Internet site, which is
http://www.citimortgagembs.com; second, click on the "Reg AB" bar located on the
left hand side of the window titled "Welcome to MBS Investor Information
Security Data"; and third, choose "SLC" from the drop-down menu titled "Shelf".
This website presents the static pool performance data of the sponsor's previous
securitizations involving student loans in the form of published charts. The
information presented with respect to pools that were established prior to
January 1, 2006 is not to be deemed a part of this prospectus supplement, the
base prospectus or the related registration statement. We caution you that this
pool of trust student loans may not perform in a similar manner to student loans
in other trusts.
Prepayments, Extensions, Weighted Average Lives and Expected Maturities of the
Notes
The rate of payment of principal of the notes and the yield on the notes will
be affected by prepayments on the trust student loans that may occur as
described below. Therefore, payments on the notes could occur significantly
earlier than expected. Consequently, the actual maturities on the notes could be
significantly earlier, average lives of the notes could be significantly
shorter, and periodic balances could be significantly lower, than expected. Each
trust student loan is prepayable in whole or in part, without penalty, by the
borrowers at any time, or as a result of a borrower's default, death, disability
or bankruptcy and subsequent liquidation or collection of guarantee payments
with respect thereto. The rate of those prepayments cannot be predicted and may
be influenced by a variety of economic, social, competitive and other factors,
including as described below. In general, the rate of prepayments may tend to
increase to the extent that alternative financing becomes available on more
favorable terms or at interest rates significantly below the interest rates
applicable to the trust student loans. Prepayments could increase as a result of
certain borrower benefit programs, among other factors. In addition, the
depositor is obligated to repurchase any trust student loan (or substitute an
eligible student loan) as a result of a breach of any of its representations and
warranties relating to trust student loans contained in the sale agreement, and
the servicer is obligated to purchase any trust student loan pursuant to the
servicing agreement as a result of a breach of certain covenants with respect to
that trust student loan, in each case, where that breach materially adversely
affects the interests of the trust in that trust student loan and is not cured
within the applicable cure period. See "Transfer Agreements--Purchase of Student
Loans by the Depositor; Representations and Warranties of Sellers" and
"Servicing and Administration--Servicer Covenants" in the base prospectus. See
also "Summary--Termination of the Trust" in this prospectus supplement
regarding the servicer's option to purchase the trust student loans when the
Pool Balance is less than or equal to 10% of the Initial Pool Balance and the
auction of the trust student loans if the servicer does not exercise that
option.
On the other hand, the rate of principal payments and the yield on the notes
will be affected by scheduled payments with respect to, and maturities and
average lives of, the trust student loans. These may be lengthened as a result
of, among other things, grace periods, deferral periods, forbearance periods, or
repayment term or monthly payment amount modifications agreed to by the
servicer. Therefore, payments on the notes could occur significantly later than
expected. Consequently, actual maturities and weighted average lives of the
notes could be significantly longer than expected and periodic balances could be
significantly higher than expected. The rate of payment of principal of the
notes and the yield on the notes may also be affected by the rate of defaults
resulting in losses on defaulted trust student loans which have been liquidated,
by the severity of those losses and by the timing of those losses, which may
affect the ability of the guarantors to make timely guarantee payments with
respect thereto. In addition, the maturity of certain of the trust student loans
could extend beyond the latest legal maturity date for the notes.
The rate of prepayments on the trust student loans cannot be predicted due to
a variety of factors, some of which are described above, and any reinvestment
risks resulting from a faster or slower incidence of prepayment of trust student
loans will be borne entirely by the noteholders. Such reinvestment risks may
include the risk that interest rates and the relevant spreads above particular
interest rate indices are lower at the time noteholders receive payments from
the trust than those interest rates and those spreads would otherwise have been
if those prepayments had not been made or had those prepayments been made at a
different time.
Exhibit I, "Prepayments, Extensions, Weighted Average Lives and Expected
Maturities of the Notes," attached to this prospectus supplement, shows the
projected weighted average life, expected maturity date and percentages of
remaining principal balance of each class of notes under various assumed
prepayment scenarios.
S-50
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
Cadwalader, Wickersham & Taft LLP will deliver an opinion that, for federal
income tax purposes, the class A notes will be and, although not free from
doubt, the class B notes will be treated as indebtedness, as described under
"Certain U.S. Federal Income Tax Considerations" in the base prospectus. The
class B notes may be treated as issued with "original issue discount," as
described under "Certain U.S. Federal Income Tax Considerations" in the base
prospectus.
EUROPEAN UNION DIRECTIVE ON THE TAXATION OF SAVINGS INCOME
On June 3, 2003, the European Council of Economics and Finance Ministers
(ECOFIN) agreed on proposals under which Member States will be required to
provide to the tax authorities of another Member State details of payments of
interest (or similar income) paid by a person within its jurisdiction to an
individual resident in that other Member State, except that, for a transitional
period, Belgium, Luxembourg and Austria will instead be required to operate a
withholding system in relation to those payments (the ending of that
transitional period being dependent upon the conclusion of certain other
agreements relating to information exchange with certain other countries). The
proposals took effect on July 1, 2005.
The Directive has been enacted into Irish legislation. Since January 1, 2004,
where any person in the course of a business or profession carried on in Ireland
makes an interest payment to, or secures an interest payment for the immediate
benefit of, the beneficial owner of that interest, where that beneficial owner
is an individual, that person must, in accordance with the methods prescribed in
the legislation, establish the identity and residence of that beneficial owner.
Where such a person makes such a payment to a "residual entity" then that
interest payment is a "deemed interest payment" of the "residual entity" for the
purpose of this legislation. A "residual entity", in relation to "deemed
interest payments", must, in accordance with the methods prescribed in the
legislation, establish the identity and residence of the beneficial owners of
the interest payments received that are comprised in the "deemed interest
payments."
"Residual entity" means a person or undertaking established in Ireland or in
another Member State or in an "associated territory" to which an interest
payment is made for the benefit of a beneficial owner that is an individual,
unless that person or undertaking is within the charge to corporation tax or a
tax corresponding to corporation tax, or it has, in the prescribed format for
the purposes of this legislation, elected to be treated in the same manner as an
undertaking for collective investment in transferable securities within the
meaning of the UCITS Directive 85/611/EEC, or it is such an entity or it is an
equivalent entity established in an "associated territory", or it is a legal
person (not being an individual) other than certain Finish or Swedish legal
persons that are excluded from the exemption from this definition in the
European Union Directive on the Taxation of Savings Income.
Procedures relating to the reporting of details of payments of interest (or
similar income) made by any person in the course of a business or profession
carried on in Ireland, to beneficial owners that are individuals or to residual
entities resident in another Member State or an "associated territory" and
procedures relating to the reporting of details of deemed interest payments made
by residual entities where the beneficial owner is an individual resident in
another Member State or an "associated territory", will apply from a date not
earlier than July 1, 2005 to be specified by the Minister for Finance of
Ireland. For the purposes of these paragraphs "associated territory" means
Andorra, Aruba, Netherlands Antilles, Jersey, Gibraltar, Guernsey, Isle of Man,
Anguilla, British Virgin Islands, Cayman Islands, Montserrat, Leichtenstein,
Monaco, San Marino, the Swiss Confederation, and Turks and Caicos Islands.
Prospective investors in the notes should consult their professional advisers
on the tax implications of the purchase, holding, redemption or sale of the
notes and the receipt of interest thereon under the laws of their country of
residence, citizenship or domicile.
S-51
CERTAIN ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended, ("ERISA"),
and Section 4975 of the Code impose certain restrictions on employee benefit
plans, individual retirement accounts, Keogh plans, other retirements
arrangements and any entities whose underlying assets include plan assets by
reason of a plan's investment in such entities (including certain insurance
company general accounts and wholly owned subsidiaries thereof) (collectively,
"Plans").
ERISA also imposes various duties on persons who are fiduciaries of Plans
subject to ERISA, and ERISA and Section 4975 of the Code prohibit certain
transactions between a Plan and its so-called Parties in Interest under ERISA or
Disqualified Persons under the Code ("Parties in Interest"). Parties in Interest
and Disqualified Persons that participate in a prohibited transaction may be
subject to a civil penalty imposed pursuant to ERISA or an excise tax pursuant
to Section 4975 of the Code unless a statutory or administrative exemption is
available.
Although there can be no certainty in this regard, the notes, which are
denominated as debt, should be treated as debt and not as "equity interests" for
purposes of ERISA and Section 4975 of the Code, pursuant to U.S. Department of
Labor Regulation 29 CFR ss. 2510.3-101, as further described in the base
prospectus. However, acquisition of the notes could still cause prohibited
transactions under Section 406 of ERISA and/or Section 4975 of the Code if a
note is acquired or held by a Plan with respect to which any of the trust or any
owner of an equity interest therein or the seller is a Party in Interest or
Disqualified Person. Accordingly, before making an investment in the notes, a
Plan investor must determine whether, and each fiduciary causing the notes to be
purchased by, on behalf of or using the assets of a Plan, will be deemed to have
represented that, the Plan's purchase and holding of the notes will not
constitute or otherwise result in a prohibited transaction in violation of
Section 406 of ERISA or Section 4975 of the Code which is not covered by a class
or other applicable exemption from the prohibited transaction rules as described
in the base prospectus.
Before making an investment in the notes, prospective Plan investors should
consult with their legal advisors concerning the impact of ERISA and Section
4975 of the Code and the potential consequences of the investment in their
specific circumstances. Moreover, in addition to determining whether the
investment constitutes a direct or indirect prohibited transaction with a Party
in Interest or Disqualified Person and whether exemptive relief is available to
cover such transaction, each Plan fiduciary should take into account, among
other considerations:
o whether the fiduciary has the authority to make the investment;
o the Plan's funding objectives; and
o whether under the general fiduciary standards of investment prudence and
diversification an investment in the notes is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA), and, if no election has been made under Section 410(d)
of the Code, church plans (as defined in Section 3(33) of ERISA), are not
subject to Section 406 of ERISA or Section 4975 of the Code. However, those
plans may be subject to the provisions of applicable federal, state or local law
("Similar Law") materially similar to the foregoing provisions of ERISA or
Section 4975 of the Code. Fiduciaries of those plans should consider applicable
Similar Law when investing in the notes. Each fiduciary of such a plan will be
deemed to represent that the plan's acquisition and holding of the notes will
not result in a non-exempt violation of applicable Similar Law.
S-52
REPORTS TO NOTEHOLDERS
Quarterly distribution reports and annual servicing and administration
reports concerning the trust will be delivered to noteholders. See "Reports to
Noteholders" in the base prospectus. The first quarterly distribution report is
expected to be available on or about December 15, 2006.
Except in very limited circumstances, you will not receive these reports
directly from the trust. Instead, you will receive them through Cede & Co., as
nominee of DTC and registered holder of the notes. See "Certain Information
Regarding the Notes--Book-Entry Registration" in the base prospectus.
UNDERWRITING
The notes listed below are offered severally by the underwriters, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that the notes will be ready for delivery in
book-entry form only through the facilities of DTC, Clearstream and the
Euroclear System, on or about September 19, 2006, against payment in immediately
available funds.
Subject to the terms and conditions in the underwriting agreement to be
dated on or about the pricing date, the depositor has agreed to cause the trust
to sell to each of the underwriters named below, and each of the underwriters
has severally agreed to purchase, the principal amounts of the notes shown
opposite its name:
Underwriter Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes
- ---------------------------------- --------------- --------------- --------------- ---------------
Citigroup Global Markets Inc. $ 84,500,000 $ 341,250,000 $ 88,400,000 $ 390,000,000
Credit Suisse Securities (USA) LLC 15,600,000 63,000,000 16,320,000 72,000,000
Goldman, Sachs & Co. 14,300,000 57,750,000 14,960,000 66,000,000
Lehman Brothers Inc. 15,600,000 63,000,000 16,320,000 72,000,000
--------------- --------------- --------------- ---------------
Total $ 130,000,000 $ 525,000,000 $ 136,000,000 $ 600,000,000
Underwriter Class A-5 Notes Class A-6 Notes Class B Notes
- ---------------------------------- --------------- --------------- ---------------
Citigroup Global Markets Inc. $ 289,250,000 $ 426,400,000 $ 50,050,000
Credit Suisse Securities (USA) LLC 53,400,000 78,720,000 9,240,000
Goldman, Sachs & Co. 48,950,000 72,160,000 8,470,000
Lehman Brothers Inc. 53,400,000 78,720,000 9,240,000
--------------- --------------- ---------------
Total $ 445,000,000 $ 656,000,000 $ 77,000,000
The underwriters have agreed, subject to the terms and conditions of the
underwriting agreement, to purchase all of the notes listed above if any of the
notes are purchased. The underwriters have advised the depositor that they
propose initially to offer the notes to the public at the prices listed below,
and to certain dealers at these prices less concessions not in excess of the
concessions listed below. The underwriters may allow and such dealers may
reallow concessions to other dealers not in excess of the reallowances listed
below. After the initial public offering, these prices and concessions may be
changed.
Initial Public Underwriting Proceeds to
Offering Price Discount The Depositor Concession Reallowance
------------------ ------------------ ------------------ ------------------ ------------------
Per Class A-1 Note 100% 0.1750% 99.8250% 0.1050% 0.0525%
Per Class A-2 Note 100% 0.1800% 99.8200% 0.1080% 0.0540%
Per Class A-3 Note 100% 0.2000% 99.8000% 0.1200% 0.0600%
Per Class A-4 Note 100% 0.2150% 99.7850% 0.1290% 0.0645%
Per Class A-5 Note 100% 0.2350% 99.7650% 0.1410% 0.0705%
Per Class A-6 Note 100% 0.2500% 99.7500% 0.1500% 0.0750%
Per Class B Note 100% 0.3000% 99.7000% 0.1800% 0.0900%
Total $ 2,569,000,000 $ 5,651,250 $ 2,563,348,750
S-53
The prices and proceeds shown in the table do not include any accrued
interest. The actual prices and proceeds will include interest, if any, from the
closing date. The proceeds shown are before deducting estimated expenses of
$1,400,000 payable by the depositor.
The depositor and SLC have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The notes are new issues of securities with no established trading market.
The depositor has been advised by the underwriters that the underwriters intend
to make a market in the notes but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the notes.
Citigroup Global Markets Inc. is an affiliate of SLC. Affiliates of the
trust expect to enter into market-making transactions in the securities and may
act as principal or agent in any of these transactions. Any such purchases or
sales will be made at prices related to prevailing market prices at the time of
sale.
In the ordinary course of their business, the underwriters and certain of
their affiliates have in the past, and may in the future, engage in commercial
and investment banking activities with SLC, the depositor and their respective
affiliates.
The trust may, from time to time, invest the funds in the trust accounts
in eligible investments acquired from the underwriters.
During and after the offering, the underwriters may engage in
transactions, including open market purchases and sales, to stabilize the prices
of the notes.
The underwriters, for example, may over-allot the notes for the account of
the underwriting syndicate to create a syndicate short position by accepting
orders for more notes than are to be sold.
In addition, the underwriters may impose a penalty bid on the
broker-dealers who sell the notes. This means that if an underwriter purchases
notes in the open market to reduce a broker-dealer's short position or to
stabilize the prices of the notes, it may reclaim the selling concession from
the broker-dealers who sold those notes as part of the offering.
In general, over-allotment transactions and open market purchases of the
notes for the purpose of stabilization or to reduce a short position could cause
the price of a note to be higher than it might be in the absence of such
transactions.
Each underwriter has represented and agreed that:
o it has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement
to engage in investment activity, within the meaning of section 21
of the Financial Services and Markets Act 2000 (the "FSMA"),
received by it in connection with the issue or sale of any notes in
circumstances in which section 21(1) of the FSMA does not apply to
the issuing entity; and
o it has complied and will comply with all applicable provisions of
the FSMA with respect to anything done by it in relation to the
notes in, from or otherwise involving the United Kingdom.
No action has been or will be taken by the depositor or the underwriters that
would permit a public offering of the notes in any country or jurisdiction other
than in the United States, where action for that purpose is required.
Accordingly, the notes may not be offered or sold, directly or indirectly, and
neither this prospectus supplement, the base prospectus, the initial
free-writing prospectus, the term sheet distributed to potential investors prior
to the pricing of this transaction (collectively, the "pre-pricing disclosure
package"), nor any circular, prospectus, form of application, advertisement or
other material may be distributed in or from or published in any country or
jurisdiction, except under circumstances that will result in compliance with any
applicable laws and regulations. Persons into whose hands all or any part of the
pre-pricing disclosure package comes are required by the depositor and the
underwriters to comply with all applicable laws and regulations in each country
or jurisdiction in which they purchase, sell or deliver the notes or have in
their possession or distribute such pre-pricing disclosure package, in all cases
at their own expense.
The depositor has not authorized any offer of the notes to the public in
the United Kingdom within the meaning of the FSMA. The notes may not lawfully be
offered or sold to persons in the United Kingdom except in circumstances which
do not result in an offer to the public in the United Kingdom within the meaning
of these regulations or otherwise in compliance with all applicable provisions
of these regulations and the FSMA.
S-54
LISTING AND GENERAL INFORMATION
Application will be made to The Irish Stock Exchange Limited for the class A
notes to be admitted to the Official List and to trading on its regulated
market. There can be no assurance that such listing will be obtained.
For so long as the class A notes are listed on The Irish Stock Exchange
Limited from the date of this prospectus supplement, all of the material
contracts referred to herein and in the accompanying prospectus, including the
indenture, the sale agreement, the purchase agreement, the servicing agreement,
the administration agreement and other basic documents will be made available
for inspection at the principal office of the depositor, where electronic or
physical copies thereof may be obtained upon request. Once the notes have been
listed, trading may be effected on The Irish Stock Exchange Limited. The Irish
Stock Exchange Limited will also be advised if any class of notes is delisted.
The notes, the indenture, the sale agreement, the purchase agreement, the
servicing agreement and the administration agreement are governed by the laws of
the State of New York. The trust agreement is governed by the laws of the State
of Delaware.
The depositor has taken all reasonable care to confirm that the information
contained in this prospectus supplement and the attached prospectus is true
and accurate in all material respects. In relation to the depositor, the trust,
SLC and the notes, the depositor accepts full responsibility for the accuracy of
the information contained in this prospectus supplement and the attached
prospectus. Having made all reasonable inquiries, the depositor confirms that,
to the best of its knowledge, there have not been omitted material facts the
omission of which would make misleading any statements of fact or opinion
contained in this prospectus supplement or the attached prospectus, when taken
as a whole.
The depositor confirms that there has been no material adverse change in the
assets of the trust since August 21, 2006, which is the statistical cutoff date,
and the date of the information with respect to the assets of the trust set
forth in this prospectus supplement.
The indenture administrator will serve as the registrar for the notes. The
address for the indenture administrator is Citibank, N.A., 111 Wall Street, 15th
Floor, New York, New York 10005.
LEGAL PROCEEDINGS
As of the date of this prospectus supplement, none of the depositor, SLC,
the indenture trustee or the eligible lender trustee are involved in any
governmental, litigation or arbitration proceeding relating to the issuance of
the notes that could be considered to be material to the noteholders. We are not
aware of any proceedings relating to the issuance of the notes, whether pending
or threatened.
RATINGS OF THE NOTES
The notes are required to be rated as follows:
Rating Agency
Class (Moody's / S&P / Fitch)
--------- -----------------------
A-1 Notes Aaa/AAA/AAA
A-2 Notes Aaa/AAA/AAA
A-3 Notes Aaa/AAA/AAA
A-4 Notes Aaa/AAA/AAA
A-5 Notes Aaa/AAA/AAA
A-6 Notes Aaa/AAA/AAA
B Notes Aa1/AA+/AA+
A rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the assigning rating agency.
S-55
LEGAL MATTERS
Cadwalader, Wickersham & Taft LLP, as counsel to the trust, SLC, the
servicer, the depositor and the administrator, will give opinions on specified
legal matters for the trust, SLC, the depositor, the servicer and the
administrator. Cadwalader, Wickersham & Taft LLP will give an opinion on
specified federal income tax matters for the trust. Richards, Layton & Finger,
P.A., as Delaware counsel for the trust, will give an opinion on specified legal
matters for the trust. Stroock & Stroock & Lavan LLP also will give opinions on
specified legal matters for the underwriters.
S-56
GLOSSARY
FOR PROSPECTUS SUPPLEMENT
"Adjusted Pool Balance" means, for any distribution date, (i) if the Pool
Balance as of the last day of the related collection period is greater than 40%
of the Initial Pool Balance, the sum of that Pool Balance, the Capitalized
Interest Account Balance and the Specified Reserve Account Balance for that
distribution date, or (ii) if the Pool Balance as of the last day of the related
collection period is less than or equal to 40% of the Initial Pool Balance, the
sum of that Pool Balance and the Capitalized Interest Account Balance.
"Available Funds" means, as to a distribution date or any related monthly
servicing payment date, the sum of the following amounts received with respect
to the related collection period or, in the case of a monthly servicing payment
date, the applicable portion of these amounts:
o all collections on the trust student loans, including any guarantee
payments received on the trust student loans, but net of:
(a) any collections in respect of principal on the trust student loans
applied by the trust to repurchase guaranteed loans from the guarantors under
the guarantee agreements, and
(b) amounts required by the Higher Education Act to be paid to the U.S.
Department of Education or to be repaid to borrowers, whether or not in the
form of a principal reduction of the applicable trust student loan, on the
trust student loans for that collection period , if any;
o any interest subsidy payments and special allowance payments with respect
to the trust student loans during that collection period;
o all proceeds of the liquidation of defaulted trust student loans which
were liquidated during that collection period in accordance with the
servicer's customary servicing procedures, net of expenses incurred by the
servicer related to their liquidation and any amounts required by law to
be remitted to the borrower on the liquidated student loans, and all
recoveries on liquidated student loans which were written off in prior
collection periods or during that collection period;
o the aggregate purchase amounts received during that collection period for
those trust student loans repurchased by the depositor or purchased by the
servicer or for trust student loans sold to another eligible lender
pursuant to the servicing agreement;
o the aggregate purchase amounts received during that collection period for
those trust student loans purchased by SLC;
o the aggregate amounts, if any, received from any of SLC, the depositor or
the servicer, as the case may be, as reimbursement of non-guaranteed
interest amounts, or lost interest subsidy payments and special allowance
payments, on the trust student loans pursuant to the sale agreement or the
servicing agreement;
o amounts received by the trust pursuant to the servicing agreement during
that collection period as to yield or principal adjustments;
o any interest remitted by the administrator to the collection account prior
to that distribution date or monthly servicing payment date;
o investment earnings for that distribution date earned on amounts on
deposit in each trust account;
o amounts received by the trust from SLC in respect of borrower benefits;
o on the March 2008 distribution date, all funds then on deposit in the
capitalized interest account that are transferred into the collection
account on that distribution date;
o on the June 15, 2007 distribution date, any amounts transferred from the
add-on consolidation loan account following the end of the consolidation
loan add-on period; and
S-57
o amounts transferred from the reserve account in excess of the Specified
Reserve Account Balance as of that distribution date.
provided that if on any distribution date there would not be sufficient funds,
after application of Available Funds, as defined above, and application of
amounts available from the capitalized interest account and the reserve account,
to pay any of the items specified in clauses (a) through (c) (or, if a Class B
Interest Subordination Condition is in effect, clauses (a) and (b) from the
capitalized interest account and clauses (a), (b) and (e) from the reserve
account) under "Description of the Notes--Distributions--Distributions from the
Collection Account", then Available Funds for that distribution date will
include, in addition to the Available Funds as defined above, amounts on deposit
in the collection account, or amounts held by the administrator, or which the
administrator reasonably estimates to be held by the administrator, for deposit
into the collection account which would have constituted Available Funds for the
distribution date succeeding that distribution date, up to the amount necessary
to pay those items, and the Available Funds for the succeeding distribution date
will be adjusted accordingly.
"Capitalized Interest Account Balance" means, for any distribution date
through and including the March 2008 distribution date:
o if neither of conditions (1) and (2) described under "Description of the
Notes--The Notes--The Class B Notes--Subordination of the Class B Notes"
above are in effect, the amount on deposit in the capitalized interest
account on the distribution date following those distributions with
respect to clauses (b) and (c) (or clause (b) if a Class B Interest
Subordination Condition is in effect) under
"--Distributions--Distributions from the Collection Account" above; or
o if either of conditions (1) or (2) described under "Description of the
Notes--The Notes--The Class B Notes--Subordination of the Class B Notes"
above is in effect, the excess, if any, of (x) the amount on deposit in
the capitalized interest account on the distribution date following those
distributions with respect to clause (b) under
"--Distributions--Distributions from the Collection Account" above over
(y) the Class B Noteholders' Interest Distribution Amount.
"Class A Note Interest Shortfall" means, for any distribution date, the
excess of:
o the Class A Noteholders' Interest Distribution Amount on the preceding
distribution date, over
o the amount of interest actually distributed to the class A noteholders on
that preceding distribution date,
plus interest on the amount of that excess, to the extent permitted by law, at
the interest rate applicable for each such class of notes from that preceding
distribution date to the current distribution date.
"Class A Note Principal Shortfall" means, as of the close of any distribution
date, the excess of:
o the Class A Noteholders' Principal Distribution Amount on that
distribution date, over
o the amount of principal actually distributed to the class A noteholders on
that distribution date.
"Class A Noteholders' Distribution Amount" means, for any distribution date,
the sum of the Class A Noteholders' Interest Distribution Amount and the Class A
Noteholders' Principal Distribution Amount for that distribution date.
"Class A Noteholders' Interest Distribution Amount" means, for any
distribution date, the sum of:
o the amount of interest accrued at the class A note interest rates for the
related accrual period on the aggregate outstanding principal balances of
all classes of class A notes on the immediately preceding distribution
date (or in the case of the first distribution date, the closing date)
after giving effect to all principal distributions to the class A
noteholders on that preceding distribution date, and
o the Class A Note Interest Shortfall for that distribution date.
"Class A Noteholders' Principal Distribution Amount" means, for any
distribution date, the Principal Distribution Amount multiplied by the Class A
Percentage for that distribution date, plus any Class A Note Principal Shortfall
as of the close of business on the preceding distribution date; provided that
the Class A Noteholders' Principal Distribution Amount will not exceed the
outstanding principal balance of the class A notes.
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In addition, on the maturity date for any class of class A notes, the principal
required to be distributed to the related noteholders will include the amount
required to reduce the outstanding balance of that class to zero.
"Class A Percentage" means 100% minus the Class B Percentage.
"Class B Interest Subordination Condition" means, if after giving effect to
all required distributions of principal and interest on the notes on any
distribution date, the outstanding principal balance of the trust student loans,
plus accrued but unpaid interest thereon as of the last day of the related
collection period, amounts then on deposit in the add-on consolidation loan
account as of that distribution date, amounts then on deposit in the capitalized
interest account as of that distribution date, and amounts then on deposit in
the reserve account in excess of the Specified Reserve Account Balance as of
that distribution date, would be less than the outstanding principal balance of
the class A notes.
"Class B Note Interest Shortfall" means, for any distribution date, the
excess of:
o the Class B Noteholders' Interest Distribution Amount on the preceding
distribution date, over
o the amount of interest actually distributed to the class B noteholders on
that preceding distribution date,
plus interest on the amount of that excess, to the extent permitted by law, at
the class B note interest rate from that preceding distribution date to the
current distribution date.
"Class B Note Principal Shortfall" means, as of the close of any distribution
date, the excess of:
o the Class B Noteholders' Principal Distribution Amount on that
distribution date, over
o the amount of principal actually distributed to the class B noteholders on
that distribution date.
"Class B Noteholders' Distribution Amount" means, for any distribution date,
the sum of the Class B Noteholders' Interest Distribution Amount and the Class B
Noteholders' Principal Distribution Amount for that distribution date.
"Class B Noteholders' Interest Distribution Amount" means, for any
distribution date, the sum of:
o the amount of interest accrued at the class B note rate for the related
accrual period on the outstanding principal balance of the class B notes
on the immediately preceding distribution date (or in the case of the
first distribution date, the closing date), after giving effect to all
principal distributions to class B noteholders on that preceding
distribution date, and
o the Class B Note Interest Shortfall for that distribution date.
"Class B Noteholders Principal Distribution Amount" means, for any
distribution date, the Principal Distribution Amount multiplied by the Class B
Percentage for that distribution date, plus any Class B Note Principal Shortfall
as of the close of business on the preceding distribution date; provided that
the Class B Noteholders' Principal Distribution Amount will not exceed the
principal balance of the class B notes. In addition, on the class B maturity
date, the principal required to be distributed to the class B noteholders will
include the amount required to reduce the outstanding principal balance of the
class B notes to zero.
"Class B Percentage" means, with respect to any distribution date:
o prior to the Stepdown Date or with respect to any distribution date on
which a Trigger Event is in effect, zero; and
o on and after the Stepdown Date and provided that no Trigger Event is in
effect, a fraction expressed as a percentage, the numerator of which is
the aggregate principal balance of the class B notes immediately prior to
that distribution date and the denominator of which is the aggregate
principal balance of all outstanding notes.
"DTC" means The Depository Trust Company, or any successor thereto.
"Fitch" means Fitch, Inc., also known as Fitch Ratings, or any successor
rating agency.
S-59
"Initial Pool Balance" means the Pool Balance of the trust student loans as
of the closing date.
"Moody's" means Moody's Investors Service, Inc., or any successor rating
agency.
"Pool Balance" means, for any date, the aggregate principal balance of the
trust student loans as of the close of business on that date, including accrued
interest that is expected to be capitalized, plus the amount, if any, on deposit
in the add-on consolidation loan account on that date.
"Principal Distribution Amount" means, (i) as to the initial distribution
date, the amount by which the aggregate outstanding principal balance of the
notes exceeds the Adjusted Pool Balance as of the end of the initial collection
period, and (ii) as to each subsequent distribution date, the amount by which
the Adjusted Pool Balance for the preceding distribution date exceeds the
Adjusted Pool Balance for that distribution date.
"Realized Loss" means the excess of the principal balance, including any
interest that had been or had been expected to be capitalized, of any liquidated
student loan over liquidation proceeds for a student loan to the extent
allocable to principal, including any interest that had been or had been
expected to be capitalized.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., or any successor rating agency.
"Significant Guarantors" means the guarantee agencies that each guarantee or
will guarantee trust student loans comprising at least 10% of the Initial Pool
Balance.
"Specified Reserve Account Balance" means, for any distribution date, the
greater of:
(a) 0.25% of the Pool Balance as of the close of business on the last day of the
related collection period; and
(b) $3,778,125;
provided that in no event will that balance exceed the aggregate outstanding
principal balance of the notes.
"Stepdown Date" means the earlier to occur of (i) the March 2013 distribution
date and (ii) the first date on which the outstanding principal
amount of the class A notes have been reduced to zero.
"Trigger Event" means, on any distribution date (i) while any of the class A
notes are outstanding, that the outstanding principal balance of the class A
notes, after giving effect to distributions to be made on that distribution
date, exceeds the Pool Balance plus the reserve account balance as of the end of
the related collection period or (ii) if there has not been an optional purchase
or sale of the trust student loans through an auction after the Pool Balance
falls below 10% of the Initial Pool Balance.
S-60
EXHIBIT I
PREPAYMENTS, EXTENSIONS, WEIGHTED AVERAGE LIVES
AND EXPECTED MATURITIES OF THE NOTES
Prepayments on pools of student loans can be measured or calculated based on
a variety of prepayment models. The models used to calculate prepayments in this
prospectus supplement are the pricing prepayment curve ("PPC") model and the
constant percentage rate ("CPR") model. The following tables show, for each
class of notes, the weighted average lives, expected maturities and percentages
of the original principal amount remaining at certain distribution dates based
on various assumptions.
PPC Assumptions
The PPC model assumes that:
o Student loans will prepay at an annual rate of 1/12th of 1.0% in the
first month after origination;
o The prepayment rate will increase by an annual rate of 1/12th of
1.0% per month up to the 119th month after origination; and
o The monthly prepayment rate will be constant at 10% per annum in the
120th month after origination and in all subsequent months.
This assumption is called "100% PPC." For example, at 100% PPC, student
loans with a loan age of 72 months are assumed to prepay at 6.0% CPR; at 50%
PPC, student loans with a loan age of 48 months are assumed to prepay at 2.0%
CPR; at 200% PPC, student loans with a loan age of 96 months are assumed to
prepay at 16.0% CPR; and so forth. The following table illustrates the CPR in
effect for the indicated months of seasoning at various percentages of PPC.
Constant Prepayment Rate
Number of Months Seasoning
-----------------------------------------
Percentage of PPC 24 48 72 96 120
- ----------------- ----- ----- ----- ----- -----
50% 1.0% 2.0% 3.0% 4.0% 5.0%
100% 2.0% 4.0% 6.0% 8.0% 10.0%
150% 3.0% 6.0% 9.0% 12.0% 15.0%
200% 4.0% 8.0% 12.0% 16.0% 20.0%
CPR Assumptions
The CPR assumes that student loans will prepay in each month according to
the following formula:
Monthly Prepayments = Balance After Scheduled Payments x (1-(1-CPR)^1/12)
Accordingly, monthly prepayments assuming a $1000 balance after scheduled
payments would be as follows for various CPR examples:
CPR 0% 5% 7% 12% 15%
- ------------------ ------- ------- ------- ------- -------
Monthly Prepayment $0.00 $4.27 $6.03 $10.60 $13.45
I-1
Other Assumptions
For purposes of the PPC model and the CPR model, it is assumed, among
other things, that:
o the statistical cutoff date for the trust student loans is as of
August 21, 2006;
o the closing date will be on September 19, 2006;
o all trust student loans (as grouped within the "rep lines" described
below) are in repayment status with accrued interest having been
capitalized upon entering repayment;
o no trust student loan moves from repayment to any other status;
o no delinquencies or defaults occur on any of the trust student
loans, no repurchases for breaches of representations, warranties or
covenants occur, and all borrower payments are collected, in full,
on the 1st day of each month;
o consolidation rebate fees are paid based on the principal balance of
the student loans at the beginning of the related monthly collection
period and reduce the amount in the collection account that would
otherwise earn investment income;
o there are government payment delays of 60 days for interest subsidy
and special allowance payments;
o index levels for calculation of borrower and government payments
are:
o 91-day Treasury bill rate of 4.97%; and
o 3-month commercial paper rate of 5.26%;
o quarterly distributions begin on December 15, 2006, and payments are
made quarterly on the 15th day of every March, June, September and
December thereafter, whether or not the 15th is a business day;
o the interest rate for each class of outstanding notes is a constant
rate of three-month LIBOR plus or minus the applicable spread, which
on all distribution dates will be equal to:
o Class A-1 notes: 5.37%;
o Class A-2 notes: 5.40%;
o Class A-3 notes: 5.44%;
o Class A-4 notes: 5.48%;
o Class A-5 notes: 5.51%;
o Class A-6 notes: 5.56%; and
o Class B notes: 5.65%;
o a servicing fee equal to 1/12th of the then outstanding principal
amount of the trust student loans times 0.50% is paid monthly by the
trust to the servicer;
o the reserve account has an initial balance equal to $6,296,875 and
at all times a balance equal to the greater of (1) 0.25% of the
applicable Pool Balance and (2) $3,778,125;
o the collection account has an initial current balance equal to $0;
o the add-on consolidation loan account has an initial balance equal
to $18,750,000;
o the capitalized interest account has an initial balance equal to
$61,000,000 and on the March 2008 distribution date, that amount
will be included in Available Funds;
I-2
o all payments are assumed to be made at the end of the month and
amounts on deposit in the collection account, add-on consolidation
loan account, reserve account and capitalized interest account,
including reinvestment income earned in the previous month, net of
servicing fees and consolidation rebate fees, are reinvested in
eligible investments at the assumed reinvestment rate of 4.77% per
annum through the end of the collection period and, reinvestment
earnings are available for distribution from the prior collection
period;
o the average loan age is 1 month;
o prepayments on the trust student loans are applied monthly in
accordance with PPC or CPR, as the case may be, as described above;
o an optional redemption by the servicer occurs on the distribution
date immediately following the collection period during which the
Pool Balance falls below 10% of the Initial Pool Balance; and
o the pool of trust student loans consists of 629 representative loans
("rep lines"), which have been created for modeling purposes from
individual trust student loans based on combinations of similar
individual student loan characteristics, which include, but are not
limited to, loan status, interest rate, loan type, index, margin,
rate cap and remaining term.
The following tables have been prepared based on the assumptions described
above (including the assumptions regarding the characteristics and performance
of the rep lines, which will differ from the characteristics and performance of
the actual pool of trust student loans) and should be read in conjunction
therewith. In addition, the diverse characteristics, remaining terms and loan
ages of the trust student loans could produce slower or faster principal
payments than implied by the information in here, even if the dispersions of
weighted average characteristics, remaining terms and loan ages are the same as
the assumed characteristics, remaining terms and loan ages.
I-3
The PPC Model
The PPC model does not purport to describe historical prepayment
experience or to predict the prepayment rate of any actual student loan pool.
The student loans will not prepay at any constant percentage of PPC, nor will
all of the student loans prepay at the same rate. You must make an independent
decision regarding the appropriate principal prepayment scenarios to use in
making any investment decision.
This model shows the weighted average remaining lives and expected
maturity dates of the notes at each payment date under various PPC scenarios.
Weighted Average Lives and Expected Maturity Dates of the Notes
at Various PPC Percentages(1)
Weighted
Average Life
(years)(2) 0% 50% 100% 150% 200%
- --------------- ------------------ ------------------ ------------------ ------------------ ------------------
Class A-1 notes 1.10 1.05 1.00 0.95 0.90
Class A-2 notes 4.11 3.40 3.00 2.72 2.53
Class A-3 notes 7.43 5.84 5.00 4.46 4.05
Class A-4 notes 10.70 8.29 7.00 6.16 5.57
Class A-5 notes 15.32 11.98 10.00 8.76 7.87
Class A-6 notes 21.36 17.35 14.52 12.54 11.18
Class B notes 15.18 12.80 11.28 10.26 9.57
Expected
Maturity Date 0% 50% 100% 150% 200%
- --------------- ------------------ ------------------ ------------------ ------------------ ------------------
Class A-1 notes March 15, 2008 March 15, 2008 March 15, 2008 March 15, 2008 March 15, 2008
Class A-2 notes June 15, 2013 March 15, 2012 June 15, 2011 December 15, 2010 June 15, 2010
Class A-3 notes September 15, 2014 December 15, 2012 March 15, 2012 June 15, 2011 December 15, 2010
Class A-4 notes December 15, 2019 December 15, 2016 June 15, 2015 March 15, 2014 June 15, 2013
Class A-5 notes June 15, 2024 June 15, 2020 March 15, 2018 September 15, 2016 September 15, 2015
Class A-6 notes March 15, 2030 December 15, 2025 December 15, 2022 September 15, 2020 March 15, 2019
Class B notes March 15, 2030 December 15, 2025 December 15, 2022 September 15, 2020 March 15, 2019
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the date on which the Pool Balance falls below 10% of the
Initial Pool Balance.
(2) The weighted average life of the notes (assuming a 360-day year consisting
of twelve 30-day months) is determined by: (1) multiplying the amount of
each principal payment on the applicable class of notes by the number of
years from the closing date to the related distribution date, (2) adding
the results, and (3) dividing that sum by the aggregate principal amount
of the applicable class of notes as of the closing date.
I-4
Class A-1 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various PPC Percentages(1)
Distribution Date 0% 50% 100% 150% 200%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 84% 83% 81% 80% 78%
March 2008 0% 0% 0% 0% 0%
March 2009 0% 0% 0% 0% 0%
March, 2010 0% 0% 0% 0% 0%
March, 2011 0% 0% 0% 0% 0%
March 2012 0% 0% 0% 0% 0%
March 2013 0% 0% 0% 0% 0%
March 2014 0% 0% 0% 0% 0%
March 2015 0% 0% 0% 0% 0%
March 2016 0% 0% 0% 0% 0%
March 2017 0% 0% 0% 0% 0%
March 2018 0% 0% 0% 0% 0%
March 2019 0% 0% 0% 0% 0%
March 2020 0% 0% 0% 0% 0%
March 2021 0% 0% 0% 0% 0%
March 2022 0% 0% 0% 0% 0%
March 2023 0% 0% 0% 0% 0%
March 2024 0% 0% 0% 0% 0%
March 2025 0% 0% 0% 0% 0%
March 2026 0% 0% 0% 0% 0%
March 2027 0% 0% 0% 0% 0%
March 2028 0% 0% 0% 0% 0%
March 2029 0% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-5
Class A-2 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various PPC Percentages(1)
Distribution Date 0% 50% 100% 150% 200%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 94% 91% 88% 85% 82%
March 2009 77% 70% 62% 55% 47%
March, 2010 60% 46% 33% 19% 7%
March, 2011 42% 21% 0% 0% 0%
March 2012 23% 0% 0% 0% 0%
March 2013 3% 0% 0% 0% 0%
March 2014 0% 0% 0% 0% 0%
March 2015 0% 0% 0% 0% 0%
March 2016 0% 0% 0% 0% 0%
March 2017 0% 0% 0% 0% 0%
March 2018 0% 0% 0% 0% 0%
March 2019 0% 0% 0% 0% 0%
March 2020 0% 0% 0% 0% 0%
March 2021 0% 0% 0% 0% 0%
March 2022 0% 0% 0% 0% 0%
March 2023 0% 0% 0% 0% 0%
March 2024 0% 0% 0% 0% 0%
March 2025 0% 0% 0% 0% 0%
March 2026 0% 0% 0% 0% 0%
March 2027 0% 0% 0% 0% 0%
March 2028 0% 0% 0% 0% 0%
March 2029 0% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-6
Class A-3 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various PPC Percentages(1)
Distribution Date 0% 50% 100% 150% 200%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 100% 100% 100% 100% 100%
March 2009 100% 100% 100% 100% 100%
March, 2010 100% 100% 100% 100% 100%
March, 2011 100% 100% 100% 24% 0%
March 2012 100% 74% 0% 0% 0%
March 2013 100% 0% 0% 0% 0%
March 2014 36% 0% 0% 0% 0%
March 2015 0% 0% 0% 0% 0%
March 2016 0% 0% 0% 0% 0%
March 2017 0% 0% 0% 0% 0%
March 2018 0% 0% 0% 0% 0%
March 2019 0% 0% 0% 0% 0%
March 2020 0% 0% 0% 0% 0%
March 2021 0% 0% 0% 0% 0%
March 2022 0% 0% 0% 0% 0%
March 2023 0% 0% 0% 0% 0%
March 2024 0% 0% 0% 0% 0%
March 2025 0% 0% 0% 0% 0%
March 2026 0% 0% 0% 0% 0%
March 2027 0% 0% 0% 0% 0%
March 2028 0% 0% 0% 0% 0%
March 2029 0% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-7
Class A-4 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various PPC Percentages(1)
Distribution Date 0% 50% 100% 150% 200%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 100% 100% 100% 100% 100%
March 2009 100% 100% 100% 100% 100%
March, 2010 100% 100% 100% 100% 100%
March, 2011 100% 100% 100% 100% 89%
March 2012 100% 100% 92% 69% 48%
March 2013 100% 92% 61% 33% 8%
March 2014 100% 67% 31% 0% 0%
March 2015 90% 42% 1% 0% 0%
March 2016 71% 17% 0% 0% 0%
March 2017 51% 0% 0% 0% 0%
March 2018 32% 0% 0% 0% 0%
March 2019 14% 0% 0% 0% 0%
March 2020 0% 0% 0% 0% 0%
March 2021 0% 0% 0% 0% 0%
March 2022 0% 0% 0% 0% 0%
March 2023 0% 0% 0% 0% 0%
March 2024 0% 0% 0% 0% 0%
March 2025 0% 0% 0% 0% 0%
March 2026 0% 0% 0% 0% 0%
March 2027 0% 0% 0% 0% 0%
March 2028 0% 0% 0% 0% 0%
March 2029 0% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-8
Class A-5 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various PPC Percentages(1)
Distribution Date 0% 50% 100% 150% 200%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 100% 100% 100% 100% 100%
March 2009 100% 100% 100% 100% 100%
March, 2010 100% 100% 100% 100% 100%
March, 2011 100% 100% 100% 100% 100%
March 2012 100% 100% 100% 100% 100%
March 2013 100% 100% 100% 100% 100%
March 2014 100% 100% 100% 99% 61%
March 2015 100% 100% 100% 55% 16%
March 2016 100% 100% 63% 15% 0%
March 2017 100% 90% 27% 0% 0%
March 2018 100% 59% 0% 0% 0%
March 2019 100% 31% 0% 0% 0%
March 2020 92% 6% 0% 0% 0%
March 2021 64% 0% 0% 0% 0%
March 2022 41% 0% 0% 0% 0%
March 2023 21% 0% 0% 0% 0%
March 2024 1% 0% 0% 0% 0%
March 2025 0% 0% 0% 0% 0%
March 2026 0% 0% 0% 0% 0%
March 2027 0% 0% 0% 0% 0%
March 2028 0% 0% 0% 0% 0%
March 2029 0% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-9
Class A-6 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various PPC Percentages(1)
Distribution Date 0% 50% 100% 150% 200%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 100% 100% 100% 100% 100%
March 2009 100% 100% 100% 100% 100%
March, 2010 100% 100% 100% 100% 100%
March, 2011 100% 100% 100% 100% 100%
March 2012 100% 100% 100% 100% 100%
March 2013 100% 100% 100% 100% 100%
March 2014 100% 100% 100% 100% 100%
March 2015 100% 100% 100% 100% 100%
March 2016 100% 100% 100% 100% 84%
March 2017 100% 100% 100% 87% 62%
March 2018 100% 100% 98% 68% 46%
March 2019 100% 100% 81% 52% 0%
March 2020 100% 100% 65% 40% 0%
March 2021 100% 87% 52% 0% 0%
March 2022 100% 74% 42% 0% 0%
March 2023 100% 63% 0% 0% 0%
March 2024 100% 53% 0% 0% 0%
March 2025 86% 43% 0% 0% 0%
March 2026 71% 0% 0% 0% 0%
March 2027 60% 0% 0% 0% 0%
March 2028 52% 0% 0% 0% 0%
March 2029 44% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-10
Class B Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various PPC Percentages(1)
Distribution Date 0% 50% 100% 150% 200%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 100% 100% 100% 100% 100%
March 2009 100% 100% 100% 100% 100%
March, 2010 100% 100% 100% 100% 100%
March, 2011 100% 100% 100% 100% 100%
March 2012 100% 100% 100% 100% 100%
March 2013 99% 98% 97% 96% 95%
March 2014 93% 89% 85% 81% 79%
March 2015 87% 80% 73% 66% 60%
March 2016 81% 71% 64% 53% 46%
March 2017 75% 62% 51% 42% 34%
March 2018 69% 54% 42% 33% 25%
March 2019 63% 47% 35% 25% 0%
March 2020 57% 40% 28% 19% 0%
March 2021 52% 34% 23% 0% 0%
March 2022 45% 29% 18% 0% 0%
March 2023 40% 24% 0% 0% 0%
March 2024 35% 20% 0% 0% 0%
March 2025 30% 17% 0% 0% 0%
March 2026 25% 0% 0% 0% 0%
March 2027 21% 0% 0% 0% 0%
March 2028 18% 0% 0% 0% 0%
March 2029 15% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-11
The CPR Model
The CPR is stated as an annualized rate and is calculated as the
percentage of principal outstanding at the beginning of a period (after applying
scheduled payments) that prepays during that period.
The CPR model does not purport to describe historical prepayment
experience or to predict the prepayment rate of any actual student loan pool.
The student loans will not prepay at any constant CPR, nor will all of the
student loans prepay at the same rate. You must make an independent decision
regarding the appropriate principal prepayment scenarios to use in making any
investment decision.
The below models show the weighted average remaining lives and expected
maturity dates of the notes at each payment date under various CPR scenarios.
Weighted Average Lives and Expected Maturity Dates of the Notes
at Various CPRs(1)
Weighted
Average Life
(years)(2) 0% 4% 8% 12% 16%
- --------------- ------------------ ------------------ ------------------ ------------------ ------------------
Class A-1 notes 1.10 0.62 0.45 0.37 0.32
Class A-2 notes 4.11 2.24 1.56 1.22 1.02
Class A-3 notes 7.43 4.18 2.80 2.11 1.66
Class A-4 notes 10.70 6.73 4.63 3.47 2.76
Class A-5 notes 15.32 10.94 7.93 6.00 4.77
Class A-6 notes 21.36 16.92 13.40 10.65 8.69
Class B notes 15.18 12.88 11.24 9.95 9.00
Expected
Maturity Date 0% 4% 8% 12% 16%
- --------------- ------------------ ------------------ ------------------ ------------------ ------------------
Class A-1 notes March 15, 2008 September 15, 2007 June 15, 2007 March 15, 2007 March 15, 2007
Class A-2 notes June 15, 2013 June 15, 2010 March 15, 2009 September 15, 2008 March 15, 2008
Class A-3 notes September 15, 2014 June 15, 2011 December 15, 2009 December 15, 2008 June 15, 2008
Class A-4 notes December 15, 2019 September 15, 2015 December 15, 2012 June 15, 2011 June 15, 2010
Class A-5 notes June 15, 2024 September 15, 2019 June 15, 2016 March 15, 2014 September 15, 2012
Class A-6 notes March 15, 2030 September 15, 2025 March 15, 2022 March 15, 2019 March 15, 2017
Class B notes March 15, 2030 September 15, 2025 March 15, 2022 March 15, 2019 March 15, 2017
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the date on which the Pool Balance falls below 10% of the
Initial Pool Balance.
(2) The weighted average life of the notes (assuming a 360-day year consisting
of twelve 30-day months) is determined by: (1) multiplying the amount of
each principal payment on the applicable class of notes by the number of
years from the closing date to the related distribution date, (2) adding
the results, and (3) dividing that sum by the aggregate principal amount
of the applicable class of notes as of the closing date.
I-12
Class A-1 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various CPR Percentages(1)
Distribution Date 0% 4% 8% 12% 16%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 84% 50% 14% 0% 0%
March 2008 0% 0% 0% 0% 0%
March 2009 0% 0% 0% 0% 0%
March 2010 0% 0% 0% 0% 0%
March 2011 0% 0% 0% 0% 0%
March 2012 0% 0% 0% 0% 0%
March 2013 0% 0% 0% 0% 0%
March 2014 0% 0% 0% 0% 0%
March 2015 0% 0% 0% 0% 0%
March 2016 0% 0% 0% 0% 0%
March 2017 0% 0% 0% 0% 0%
March 2018 0% 0% 0% 0% 0%
March 2019 0% 0% 0% 0% 0%
March 2020 0% 0% 0% 0% 0%
March 2021 0% 0% 0% 0% 0%
March 2022 0% 0% 0% 0% 0%
March 2023 0% 0% 0% 0% 0%
March 2024 0% 0% 0% 0% 0%
March 2025 0% 0% 0% 0% 0%
March 2026 0% 0% 0% 0% 0%
March 2027 0% 0% 0% 0% 0%
March 2028 0% 0% 0% 0% 0%
March 2029 0% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-13
Class A-2 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various CPR Percentages(1)
Distribution Date 0% 4% 8% 12% 16%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 94% 85%
March 2008 94% 67% 41% 16% 0%
March 2009 77% 35% 0% 0% 0%
March 2010 60% 4% 0% 0% 0%
March 2011 42% 0% 0% 0% 0%
March 2012 23% 0% 0% 0% 0%
March 2013 3% 0% 0% 0% 0%
March 2014 0% 0% 0% 0% 0%
March 2015 0% 0% 0% 0% 0%
March 2016 0% 0% 0% 0% 0%
March 2017 0% 0% 0% 0% 0%
March 2018 0% 0% 0% 0% 0%
March 2019 0% 0% 0% 0% 0%
March 2020 0% 0% 0% 0% 0%
March 2021 0% 0% 0% 0% 0%
March 2022 0% 0% 0% 0% 0%
March 2023 0% 0% 0% 0% 0%
March 2024 0% 0% 0% 0% 0%
March 2025 0% 0% 0% 0% 0%
March 2026 0% 0% 0% 0% 0%
March 2027 0% 0% 0% 0% 0%
March 2028 0% 0% 0% 0% 0%
March 2029 0% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-14
Class A-3 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various CPR Percentages(1)
Distribution Date 0% 4% 8% 12% 16%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 100% 100% 100% 100% 66%
March 2009 100% 100% 83% 0% 0%
March 2010 100% 100% 0% 0% 0%
March 2011 100% 1% 0% 0% 0%
March 2012 100% 0% 0% 0% 0%
March 2013 100% 0% 0% 0% 0%
March 2014 36% 0% 0% 0% 0%
March 2015 0% 0% 0% 0% 0%
March 2016 0% 0% 0% 0% 0%
March 2017 0% 0% 0% 0% 0%
March 2018 0% 0% 0% 0% 0%
March 2019 0% 0% 0% 0% 0%
March 2020 0% 0% 0% 0% 0%
March 2021 0% 0% 0% 0% 0%
March 2022 0% 0% 0% 0% 0%
March 2023 0% 0% 0% 0% 0%
March 2024 0% 0% 0% 0% 0%
March 2025 0% 0% 0% 0% 0%
March 2026 0% 0% 0% 0% 0%
March 2027 0% 0% 0% 0% 0%
March 2028 0% 0% 0% 0% 0%
March 2029 0% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-15
Class A-4 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various CPR Percentages(1)
Distribution Date 0% 4% 8% 12% 16%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 100% 100% 100% 100% 100%
March 2009 100% 100% 100% 86% 56%
March 2010 100% 100% 82% 43% 7%
March 2011 100% 100% 49% 5% 0%
March 2012 100% 75% 19% 0% 0%
March 2013 100% 51% 0% 0% 0%
March 2014 100% 29% 0% 0% 0%
March 2015 90% 8% 0% 0% 0%
March 2016 71% 0% 0% 0% 0%
March 2017 51% 0% 0% 0% 0%
March 2018 32% 0% 0% 0% 0%
March 2019 14% 0% 0% 0% 0%
March 2020 0% 0% 0% 0% 0%
March 2021 0% 0% 0% 0% 0%
March 2022 0% 0% 0% 0% 0%
March 2023 0% 0% 0% 0% 0%
March 2024 0% 0% 0% 0% 0%
March 2025 0% 0% 0% 0% 0%
March 2026 0% 0% 0% 0% 0%
March 2027 0% 0% 0% 0% 0%
March 2028 0% 0% 0% 0% 0%
March 2029 0% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-16
Class A-5 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various CPR Percentages(1)
Distribution Date 0% 4% 8% 12% 16%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 100% 100% 100% 100% 100%
March 2009 100% 100% 100% 100% 100%
March 2010 100% 100% 100% 100% 100%
March 2011 100% 100% 100% 100% 56%
March 2012 100% 100% 100% 63% 12%
March 2013 100% 100% 90% 26% 0%
March 2014 100% 100% 58% 0% 0%
March 2015 100% 100% 29% 0% 0%
March 2016 100% 83% 4% 0% 0%
March 2017 100% 57% 0% 0% 0%
March 2018 100% 32% 0% 0% 0%
March 2019 100% 10% 0% 0% 0%
March 2020 92% 0% 0% 0% 0%
March 2021 64% 0% 0% 0% 0%
March 2022 41% 0% 0% 0% 0%
March 2023 21% 0% 0% 0% 0%
March 2024 1% 0% 0% 0% 0%
March 2025 0% 0% 0% 0% 0%
March 2026 0% 0% 0% 0% 0%
March 2027 0% 0% 0% 0% 0%
March 2028 0% 0% 0% 0% 0%
March 2029 0% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-17
Class A-6 Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various CPR Percentages(1)
Distribution Date 0% 4% 8% 12% 16%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 100% 100% 100% 100% 100%
March 2009 100% 100% 100% 100% 100%
March 2010 100% 100% 100% 100% 100%
March 2011 100% 100% 100% 100% 100%
March 2012 100% 100% 100% 100% 100%
March 2013 100% 100% 100% 100% 84%
March 2014 100% 100% 100% 98% 67%
March 2015 100% 100% 100% 81% 53%
March 2016 100% 100% 100% 66% 41%
March 2017 100% 100% 87% 54% 0%
March 2018 100% 100% 74% 43% 0%
March 2019 100% 100% 62% 0% 0%
March 2020 100% 92% 51% 0% 0%
March 2021 100% 79% 42% 0% 0%
March 2022 100% 67% 0% 0% 0%
March 2023 100% 58% 0% 0% 0%
March 2024 100% 49% 0% 0% 0%
March 2025 86% 40% 0% 0% 0%
March 2026 71% 0% 0% 0% 0%
March 2027 60% 0% 0% 0% 0%
March 2028 52% 0% 0% 0% 0%
March 2029 44% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-18
Class B Notes
Percentages of Original Principal of the Notes Remaining at Certain Distribution
Dates at Various CPR Percentages(1)
Distribution Date 0% 4% 8% 12% 16%
- ----------------- ----- ----- ----- ----- -----
Closing Date 100% 100% 100% 100% 100%
March 2007 100% 100% 100% 100% 100%
March 2008 100% 100% 100% 100% 100%
March 2009 100% 100% 100% 100% 100%
March 2010 100% 100% 100% 100% 100%
March 2011 100% 100% 100% 100% 100%
March 2012 100% 100% 100% 100% 100%
March 2013 99% 98% 97% 96% 94%
March 2014 93% 88% 86% 79% 75%
March 2015 87% 80% 72% 65% 59%
March 2016 81% 71% 62% 54% 46%
March 2017 75% 63% 52% 44% 0%
March 2018 69% 55% 44% 35% 0%
March 2019 63% 49% 37% 0% 0%
March 2020 57% 42% 31% 0% 0%
March 2021 52% 36% 25% 0% 0%
March 2022 45% 31% 0% 0% 0%
March 2023 40% 26% 0% 0% 0%
March 2024 35% 22% 0% 0% 0%
March 2025 30% 18% 0% 0% 0%
March 2026 25% 0% 0% 0% 0%
March 2027 21% 0% 0% 0% 0%
March 2028 18% 0% 0% 0% 0%
March 2029 15% 0% 0% 0% 0%
March 2030 0% 0% 0% 0% 0%
March 2031 0% 0% 0% 0% 0%
March 2032 0% 0% 0% 0% 0%
March 2033 0% 0% 0% 0% 0%
March 2034 0% 0% 0% 0% 0%
March 2035 0% 0% 0% 0% 0%
- ----------
(1) Assuming for purposes of this table that, among other things, the optional
redemption by the servicer occurs on the distribution date immediately
following the collection period during which the Pool Balance falls below
10% of the Initial Pool Balance.
I-19
PRINCIPAL OFFICES
DEPOSITOR
SLC Student Loan Receivables I, Inc.
750 Washington Boulevard, 9th Floor
Stamford, Connecticut 06901
ADMINISTRATOR AND SERVICER
The Student Loan Corporation
750 Washington Boulevard, 9th Floor
Stamford, Connecticut 06901
SLC STUDENT LOAN TRUST 2006-2
Citibank, N.A., U.S. Bank National Citibank, N.A.,
as Eligible Lender Trustee Association, as Indenture
388 Greenwich Street, 14th as Indenture Trustee Administrator
Floor 100 Wall St, 16th Floor 388 Greenwich Street,
New York, New York 10013 New York, New York 10005 14th Floor
New York, New York 10013
IRISH PAYING AGENT
Custom House Administration and Corporate Services Limited
25 Eden Quay
Dublin 1, Ireland
IRISH LISTING AGENT
McCann FitzGerald Listing Services Limited
2 Habourmaster Place
International Financial Services Centre
Dublin 1, Ireland
LEGAL ADVISORS TO THE DEPOSITOR, THE TRUST, THE ADMINISTRATOR AND THE SERVICER
Cadwalader, Wickersham & Taft LLP
One World Financial Center
New York, New York 10281
Richards, Layton & Finger, P.A.
920 King Street
Wilmington, Delaware 19801
LEGAL ADVISORS TO UNDERWRITERS
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
UNDERWRITERS
Citigroup Global Markets Inc. Credit Suisse Securities LLC (USA) Goldman Sachs & Co. Lehman Brothers Inc.
388 Greenwich Street, 19th Floor 11 Madison Avenue, 4th Floor 85 Broad Street 745 Seventh Avenue, 7th Floor
New York, New York 10013 New York, New York 10010 New York, New York 10004 New York, New York 10019
$2,569,000,000
SLC Student Loan Trust 2006-2
Issuing Entity
SLC Student Loan Receivables I, Inc.
Depositor
The Student Loan Corporation
Sponsor, Seller, Servicer and Administrator
Student Loan Asset-Backed Notes
- --------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
- --------------------------------------------------------------------------------
Citigroup
Credit Suisse
Goldman, Sachs & Co.
Lehman Brothers
September 13, 2006
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information.
We are not offering notes in any state or other jurisdiction where the offer
is not permitted.
We represent the accuracy of the information in this propectus supplement and
prospectus only as of the dates of their respective covers.
Until 90 days after the date of this prospectus supplement, all dealers that
effect transactions in the notes, whether or not participating in this offering,
may be required to deliver a prospectus supplement and prospectus. This is in
addition to the dealers' obligation to deliver a prospectus supplement and
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.