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THIS OFFERING MEMORANDUM (THIS “OFFERING MEMORANDUM”) IS BEING PROVIDED ONLY TO (1) ”QUALIFIED INSTITUTIONAL BUYERS” (“QIBs”) AS DEFINED IN RULE 144A (“RULE 144A”) PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR (2) NON-U.S. PERSONS OUTSIDE THE UNITED STATES OF AMERICA PURSUANT TO THE REQUIREMENTS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT (“REGULATION S”). REPRODUCTION OR FURTHER DISTRIBUTION OF THIS OFFERING MEMORANDUM IS FORBIDDEN. THE OFFERING OF THE NOTES DESCRIBED IN THIS OFFERING MEMORANDUM WILL NOT BE REGISTERED UNDER THE SECURITIES ACT, ANY UNITED STATES STATE SECURITIES OR “BLUE SKY” LAWS OR ANY SECURITIES LAWS OF ANY OTHER JURISDICTION. OFFERING MEMORANDUM $1,231,596,000 Bank of America Student Loan Trust 2010-1 Issuing Entity Bank of America Student Loan Securitization Corporation Depositor Bank of America, National Association Sponsor, Master Servicer and Administrator Student Loan-Backed Notes On or about July 9, 2010, the trust will issue: Class Floating Rate Class A Notes Principal $1,231,596,000 Interest Rate three-month LIBOR plus 0.80% Maturity February 25, 2043 The trust will make payments primarily from collections on a pool of FFELP loans. Interest and principal on the notes will be paid quarterly on the 25th day of each January, April, July and October, beginning in October 2010. Credit enhancement for the notes consists of excess interest on the trust student loans, overcollateralization and cash on deposit in a reserve account, as described in this offering memorandum. In addition, the trust will deposit funds, on the closing date, into a capitalized interest account. These funds will be available only for a limited period of time. The interest rate on the notes will be determined by reference to LIBOR. A description of how LIBOR is determined appears under “Description of the Notes—Determination of Indices—LIBOR” in this offering memorandum. Other than as provided in this offering memorandum, no person has been authorized to give any information or to make any representations other than as contained in this offering memorandum and, if given or made, such information or representations must not be relied upon. This offering memorandum does not constitute an offer to sell, or a solicitation of an offer to buy, any securities other than the notes, nor an offer of such securities to any person in any state or other jurisdiction in which it is unlawful to make such offer or solicitation. The delivery of this offering memorandum at any time does not imply that the information in this offering memorandum is correct as of any time subsequent to its date. The notes have not been approved or disapproved by the Securities and Exchange Commission, any state securities commission or any other regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of this offering or the accuracy or adequacy of this offering memorandum. Any representation to the contrary is a criminal offense. The information contained in this offering memorandum is intended for use solely by QIBs as defined in Rule 144A or non-U.S. Persons outside the United States pursuant to the requirements of Regulation S to whom this document is delivered, and may not be reproduced in whole or in part. We are offering the notes through the initial purchasers when and if issued. Application has been made to the Irish Stock Exchange for the notes to be admitted to the official list and trading on its regulated market. We are not offering the notes in any state or other jurisdiction where the offer is prohibited. You should consider carefully the risk factors beginning on page 15 of this offering memorandum. The notes are asset-backed securities issued by, and are obligations of, the issuing entity, which is a trust. They are not obligations of or interests in the sponsor, the administrator, the indenture trustee, the eligible lender trustee, the Delaware trustee, the paying agent, the master servicer, the subservicer, the calculation agent, the depositor, the initial purchasers, or any of their affiliates. The notes are not guaranteed or insured by the United States or any governmental agency. ____________________________________ Initial Purchaser and Book-Runner BofA Merrill Lynch ________________________ Initial Purchasers and Co-Managers Barclays Capital Credit Suisse J.P. Morgan _______________________________ August 3, 2010 RBS THE INFORMATION IN THIS OFFERING MEMORANDUM, IF CONVEYED PRIOR TO THE TIME OF YOUR COMMITMENT TO PURCHASE ANY NOTES, SUPERSEDES ANY INFORMATION CONTAINED IN ANY PRIOR OFFERING MEMORANDUM RELATING TO THE NOTES. THIS OFFERING MEMORANDUM CONSTITUTES A PROSPECTUS (THE “PROSPECTUS”) FOR THE PURPOSES OF DIRECTIVE 2003/71/EC (THE “PROSPECTUS DIRECTIVE”). REFERENCES THROUGHOUT THIS DOCUMENT TO THE “OFFERING MEMORANDUM” SHALL BE TAKEN TO READ “PROSPECTUS” FOR SUCH PURPOSE. THE PROSPECTUS HAS BEEN APPROVED BY THE IRISH FINANCIAL REGULATOR AS COMPETENT AUTHORITY UNDER THE PROSPECTUS DIRECTIVE. THE IRISH FINANCIAL REGULATOR ONLY APPROVES THIS PROSPECTUS AS MEETING THE REQUIREMENTS IMPOSED UNDER IRISH AND EU LAW PURSUANT TO THE PROSPECTUS DIRECTIVE. SUCH APPROVAL RELATES ONLY TO THE NOTES WHICH ARE TO BE ADMITTED TO TRADING ON THE REGULATED MARKET OF THE IRISH STOCK EXCHANGE OR OTHER REGULATED MARKETS FOR THE PURPOSES OF DIRECTIVE 2004/39/EC OR WHICH ARE TO BE OFFERED TO THE PUBLIC IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA. THIS PROSPECTUS HAS BEEN PREPARED SOLELY FOR THE PURPOSE OF THE APPLICATION TO THE IRISH STOCK EXCHANGE FOR THE NOTES TO BE ADMITTED TO THE OFFICIAL LIST AND TRADING ON ITS REGULATED MARKET AND SHALL NOT BE USED OR DISTRIBUTED FOR ANY OTHER PURPOSES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE NOTES. ANY SUCH OFFER OR SOLICITATION MAY ONLY BE MADE ON THE BASIS OF THE OFFERING MEMORANDUM DATED JULY 2, 2010 RELATING TO, AND PREPARED IN CONNECTION WITH THE OFFER AND SALE OF, THE NOTES. NOTICE TO NEW HAMPSHIRE RESIDENTS: NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER NEW HAMPSHIRE REVISED STATUTES ANNOTATED, CHAPTER 421-B (“RSA 421-B”), WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.NOTICES 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. THIS OFFERING OF THE NOTES WILL NOT BE REGISTERED UNDER THE SECURITIES ACT, ANY UNITED STATES STATE SECURITIES OR “BLUE SKY” LAWS OR ANY SECURITIES ii LAWS OF ANY OTHER JURISDICTION, AND UNLESS THE NOTES ARE REGISTERED MAY NOT BE OFFERED OR SOLD, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, ANY APPLICABLE UNITED STATES STATE SECURITIES OR “BLUE SKY” LAWS OR ANY SECURITIES LAWS OF ANY OTHER JURISDICTION. ACCORDINGLY, THE NOTES ARE BEING OFFERED AND SOLD BY THE INITIAL PURCHASERS ONLY TO (1) A LIMITED NUMBER OF QIBS TO WHOM THIS OFFERING MEMORANDUM HAS BEEN FURNISHED IN RELIANCE ON RULE 144A AND IN ACCORDANCE WITH ANY APPLICABLE LAWS OF ANY STATE OF THE UNITED STATES, AND (2) NON-U.S. PERSONS OUTSIDE THE UNITED STATES OF AMERICA PURSUANT TO THE REQUIREMENTS OF REGULATION S. THERE IS NO UNDERTAKING TO REGISTER THE NOTES UNDER ANY UNITED STATES STATE OR FEDERAL SECURITIES LAWS OR ANY SECURITIES LAWS OF ANY OTHER JURISDICTION ON ANY FUTURE DATE. NO ACTION HAS BEEN OR WILL BE TAKEN BY THE DEPOSITOR OR THE INITIAL PURCHASERS THAT WOULD PERMIT A PUBLIC OFFERING OF THE NOTES IN ANY COUNTRY OR JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED. ACCORDINGLY, THE NOTES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, AND NONE OF THIS OFFERING MEMORANDUM, OR ANY CIRCULAR, OFFERING MEMORANDUM, 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 THIS OFFERING MEMORANDUM COME ARE REQUIRED BY THE DEPOSITOR AND THE INITIAL PURCHASERS 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 THIS OFFERING MEMORANDUM, IN ALL CASES AT THEIR OWN EXPENSE. THE NOTES CANNOT BE RESOLD UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. FOR A DESCRIPTION OF CERTAIN RESTRICTIONS ON RESALES AND TRANSFERS, SEE “DESCRIPTION OF THE NOTES— TRANSFER RESTRICTIONS” HEREIN. EACH INITIAL AND SUBSEQUENT PURCHASER OF THE NOTES WILL BE DEEMED BY ITS ACCEPTANCE OF SUCH NOTES TO HAVE MADE CERTAIN ACKNOWLEDGEMENTS, REPRESENTATIONS AND AGREEMENTS INTENDED TO RESTRICT THE RESALE OR OTHER TRANSFER THEREOF AS SET FORTH THEREIN AND DESCRIBED IN THIS OFFERING MEMORANDUM AND, IN CONNECTION THEREWITH, MAY BE REQUIRED TO PROVIDE CONFIRMATION OF ITS COMPLIANCE WITH SUCH RESALE AND OTHER TRANSFER RESTRICTIONS IN CERTAIN CASES. SEE “DESCRIPTION OF THE NOTES—TRANSFER RESTRICTIONS” HEREIN. ALTHOUGH APPLICATION HAS BEEN MADE TO ADMIT THE NOTES TO THE IRISH STOCK EXCHANGE, THERE IS NO MARKET FOR THE NOTES BEING OFFERED HEREBY AND THERE IS NO ASSURANCE THAT ONE WILL DEVELOP. THE INITIAL PURCHASERS EXPECT, BUT ARE NOT OBLIGATED, TO MAKE A MARKET IN THE NOTES SOLELY TO FACILITATE TRADING AMONG QIBS (UNDER RULE 144A) AND/OR NON-U.S. PERSONS (PURSUANT TO THE REQUIREMENTS OF REGULATION S). THERE IS NO ASSURANCE THAT SUCH MARKET, iii IF DEVELOPED, WILL CONTINUE. RESALES OF THE NOTES MAY BE MADE ONLY PURSUANT TO A VALID REGISTRATION STATEMENT, PURSUANT TO RULE 144A, PURSUANT TO REGULATION S OR PURSUANT TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT. ALL TRANSFERS OF THE NOTES ARE SUBJECT TO CERTAIN OTHER RESTRICTIONS DESCRIBED HEREIN. SEE “DESCRIPTION OF THE NOTES—TRANSFER RESTRICTIONS” HEREIN. THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THIS OFFERING MEMORANDUM HAS BEEN PREPARED BY THE DEPOSITOR. NONE OF THE INDENTURE TRUSTEE, THE ELIGIBLE LENDER TRUSTEE, THE DELAWARE TRUSTEE, THE MASTER SERVICER, THE SUBSERVICER, THE ADMINISTRATOR, THE CALCULATION AGENT OR THE INITIAL PURCHASERS MAKE ANY REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM, AND NOTHING HEREIN SHALL BE DEEMED TO CONSTITUTE SUCH A REPRESENTATION OR WARRANTY BY THE INDENTURE TRUSTEE, THE ELIGIBLE LENDER TRUSTEE, THE DELAWARE TRUSTEE, THE MASTER SERVICER, THE SUBSERVICER, THE ADMINISTRATOR, THE CALCULATION AGENT OR THE INITIAL PURCHASERS. NOTHING HEREIN SHALL BE DEEMED TO CONSTITUTE A PROMISE OR REPRESENTATION AS TO THE FUTURE PERFORMANCE OF THE DEPOSITOR, THE TRUST, THE TRUST STUDENT LOANS OR THE NOTES. IT IS EXPECTED THAT INVESTORS INTERESTED IN PURCHASING THE NOTES WILL CONDUCT THEIR OWN INDEPENDENT INVESTIGATION OF THE RISKS POSED BY AN INVESTMENT IN THE NOTES. REPRESENTATIVES OF THE DEPOSITOR, THE MASTER SERVICER, THE TRUST, THE ADMINISTRATOR AND THE INITIAL PURCHASERS WILL BE AVAILABLE TO ANSWER QUESTIONS CONCERNING THE NOTES, THE TRUST AND THE TRUST STUDENT LOANS FROM INVESTORS INTERESTED IN PURCHASING THE NOTES. REPRESENTATIVES OF THE SUBSERVICER WILL OFFER A PRESENTATION REGARDING THE SERVICING OF THE TRUST STUDENT LOANS PURSUANT TO AN ADDITIONAL NOTIFICATION AS PROVIDED BY THE INITIAL PURCHASERS. THE NOTES DO NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE SPONSOR, THE DEPOSITOR, THE INDENTURE TRUSTEE, THE ELIGIBLE LENDER TRUSTEE, THE DELAWARE TRUSTEE, THE MASTER SERVICER, THE SUBSERVICER, THE ADMINISTRATOR, THE CALCULATION AGENT OR THE INITIAL PURCHASERS OR ANY OF THEIR RESPECTIVE AFFILIATES, OTHER THAN THE TRUST. THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE NOTES OFFERED HEREBY NOR AN OFFER OF SUCH OFFERED SECURITIES TO ANY PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY iv OF THIS OFFERING MEMORANDUM AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS OFFERING MEMORANDUM IS INTENDED FOR USE SOLELY BY THE QIBS (UNDER RULE 144A) OR NON-U.S. PERSONS (PURSUANT TO THE REQUIREMENTS OF REGULATION S) TO WHOM THIS OFFERING MEMORANDUM IS DELIVERED FOR USE SOLELY IN CONNECTION WITH AN OFFERING EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE UNITED STATES STATE SECURITIES OR “BLUE SKY” LAWS, AND MAY NOT BE REPRODUCED OR USED, IN WHOLE OR IN PART, FOR ANY OTHER PURPOSE OR FURNISHED TO ANY OTHER PERSON. EACH PROSPECTIVE INVESTOR (AND EACH EMPLOYEE, REPRESENTATIVE, OR OTHER AGENT OF SUCH PROSPECTIVE INVESTOR) MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATIONS OF ANY KIND THE TAX TREATMENT AND TAX STRUCTURE OF THE TRANSACTION AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR OTHER TAX ANALYSES) THAT ARE PROVIDED TO THE PROSPECTIVE INVESTOR RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE. ANY SUCH DISCLOSURE OF THE TAX TREATMENT, TAX STRUCTURE AND OTHER TAX-RELATED MATERIALS SHALL NOT BE MADE FOR THE PURPOSE OF OFFERING TO SELL THE NOTES OFFERED HEREBY OR SOLICITING AN OFFER TO PURCHASE ANY SUCH NOTES. FOR PURPOSES OF THIS PARAGRAPH, THE TERMS “TAX TREATMENT” AND “TAX STRUCTURE” HAVE THE MEANING GIVEN TO SUCH TERMS UNDER TREASURY REGULATION SECTION 1.6011-4(c). PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS OFFERING MEMORANDUM OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE DEPOSITOR, THE SPONSOR, THE ADMINISTRATOR, THE CALCULATION AGENT, THE ELIGIBLE LENDER TRUSTEE, THE INDENTURE TRUSTEE, THE DELAWARE TRUSTEE, THE MASTER SERVICER, THE SUBSERVICER, THE INITIAL PURCHASERS OR ANY OF THEIR OFFICERS, EMPLOYEES OR AGENTS AS INVESTMENT, LEGAL, ACCOUNTING, REGULATORY OR TAX ADVICE. PRIOR TO PURCHASING ANY NOTES, A PROSPECTIVE PURCHASER SHOULD CONSULT WITH ITS OWN LEGAL, BUSINESS, ACCOUNTING, REGULATORY AND TAX ADVISERS TO DETERMINE THE APPROPRIATENESS AND CONSEQUENCES OF AN INVESTMENT IN THE NOTES IN ITS SPECIFIC CIRCUMSTANCES AND ARRIVE AT AN INDEPENDENT EVALUATION OF THE INVESTMENT BASED, AMONG OTHER THINGS, ON ITS OWN VIEWS AS TO THE RISKS ASSOCIATED WITH THE TRUST STUDENT LOANS, WHICH WILL AFFECT THE RETURN ON ITS INVESTMENT IN THE NOTES. The depositor has taken all reasonable care to confirm that the information contained in this offering memorandum is true and accurate in all material respects. In relation to the depositor, the sponsor, the trust, the administrator, the master servicer, the trust student loans and the notes, the depositor accepts full responsibility for the accuracy of the information contained in this offering memorandum. 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 offering memorandum. In connection with the proposed admission of the notes to the official list of the Irish Stock Exchange and trading on its regulated market, the depositor accepts responsibility for the information contained in this offering memorandum. To the best knowledge of the depositor, v having taken all reasonable care to ensure that such is the case, the information contained in this offering memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. IRS CIRCULAR 230 NOTICE THIS OFFERING MEMORANDUM IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING U.S. FEDERAL, STATE OR LOCAL TAX PENALTIES. THIS OFFERING MEMORANDUM HAS BEEN WRITTEN AND PROVIDED BY THE DEPOSITOR IN CONNECTION WITH THE PROMOTION OR MARKETING BY THE DEPOSITOR AND/OR THE INITIAL PURCHASERS OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THIS OFFERING MEMORANDUM. PROSPECTIVE INVESTORS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. vi TABLE OF CONTENTS Offering Memorandum Page Page Summary of Terms............................................ 1 Issuing Entity .............................................. 1 Depositor .................................................... 1 Sponsor, Master Servicer and Administrator ........................................ 1 Subservicer................................................. 2 Calculation Agent........................................ 2 Indenture Trustee, Paying Agent and Eligible Lender Trustee ........................ 2 Delaware Trustee ....................................... 2 The Notes ................................................... 2 Dates .......................................................... 2 Information About the Notes....................... 3 Information About the Trust ........................ 4 Formation of the Trust.......................... 4 Trust Assets ......................................... 5 Administration of the Trust.......................... 8 Distributions ......................................... 8 Transfer of the Assets to the Trust..... 10 Servicing of the Assets....................... 10 Compensation of the Master Servicer........................................ 11 Termination of the Trust ........................... 11 Optional Purchase.............................. 12 Residual Certificateholder ........................ 12 Tax Considerations................................... 13 ERISA Considerations.............................. 13 Ratings of the Notes ................................. 13 Listing Information .................................... 14 Risk Factors.............................................. 14 Identification Numbers.............................. 14 Risk Factors .................................................... 15 Because the Notes May Not Provide Regular or Predictable Payments, You May Not Receive the Return on Your Investment That You Expected . 15 The Notes Are Not Suitable Investments for All Investors .................................. 15 You Will Bear Prepayment and Extension Risk Due to Actions Taken by Individual Borrowers and Other Variables Beyond Our Control . 15 The Trust Will Have Limited Assets From Which to Make Payments on the Notes, Which May Result in Losses ................................................ 16 Certain Credit and Liquidity Enhancement Features Are Limited and if They Are Depleted, There May Be Shortfalls in Distributions to Noteholders.........................................17 Your Ability to Transfer the Notes May Be Limited ...........................................17 Current Illiquid Market Conditions May Continue in the Future ........................18 The Characteristics of the Statistical Trust Student Loans as of the Statistical Cutoff Date May Differ From the Pool of Trust Student Loans Sold to the Issuing Entity on the Closing Date .................................18 Your Notes Will Have Basis Risk, Which Could Compromise the Trust’s Ability to Pay Principal and Interest on Your Notes .....................................19 You May Incur Losses or Delays in Payments on Your Notes if Borrowers Default on the Trust Student Loans.....................................20 If a Guarantor of the Trust Student Loans Experiences Financial Deterioration or Failure, You May Suffer Delays in Payment or Losses on Your Notes .....................................20 The U.S. Department of Education’s Failure to Make Reinsurance Payments May Negatively Affect the Timely Payment of Principal and Interest on Your Notes........................21 Payment Offsets by FFELP Loan Guarantors or the U.S. Department of Education Could Prevent the Trust from Paying You the Full Amount of the Principal and Interest Due on Your Notes .............................22 You May Be Unable to Reinvest Principal Payments at the Yield You Earn on the Notes...............................23 A Failure to Comply with Student Loan Origination and Servicing Procedures Could Jeopardize Guarantor, Interest Subsidy and Special Allowance Payments on the Trust Student Loans, Which May Result in Delays in Payment or Losses on Your Notes ........................24 The Inability of the Depositor or the Master Servicer to Meet Its vii Repurchase Obligation May Result in Losses on Your Notes .................... 24 BANA’s Suspension of Origination of New FFELP Loans and BANA’s Subsequent Inability to Meet its Substitution Obligation May Cause You to Bear Prepayment Risk............ 25 The Notes May Be Repaid Early Due to an Exercise of the Purchase Option. If This Happens, Your Yield May Be Affected and You Will Bear Reinvestment Risk ............................. 25 FDIC Receivership or Conservatorship of BANA Could Result in Delays in Payments or Losses on Your Notes .. 26 A Master Servicer or Subservicer Default May Result in Additional Costs, Increased Servicing Fees by a Substitute Master Servicer or a Diminution in Servicing Performance, Any of Which May Have an Adverse Effect on Your Notes .................................................. 28 The Bankruptcy of the Subservicer Could Delay the Appointment of a Successor Subservicer or Reduce Payments on Your Notes ................... 29 Timely Payments on Your Notes Depend in Part on the Servicing Ability of the Subservicer.................... 29 The Trust’s Inclusion of Subserviced Trust Student Loans May Make It More Difficult to Find a Successor Master Servicer .................................. 30 The Indenture Trustee May Have Difficulty Liquidating Trust Student Loans After an Event of Default ......... 30 The Enactment of the Health Care and Education Reconciliation Act of 2010 and Any Other Changes in Law May Adversely Affect the Trust Student Loans, the Guarantors, the Depositor and BANA and, Accordingly, Adversely Affect Your Notes .................................................. 30 The Use of Master Promissory Notes May Compromise the Indenture Trustee’s Security Interest in the Trust Student Loans........................... 31 Certain Actions Can Be Taken Without Noteholder Approval .......................... 32 Limitations of Ratings; Withdrawal or Downgrade of Initial Ratings May Decrease the Prices of Your Notes; Unsolicited Ratings ............................ 33 Consumer Protection Laws May Affect Enforceability of the Trust Student Loans ..................................................33 The Trust May Be Affected by Delayed Payments From Borrowers Called to Active Military Service.........................34 Defined Terms .................................................35 Formation of the Trust .....................................35 The Trust ...................................................35 Capitalization of the Trust..........................36 Eligible Lender Trustee and Interim Eligible Lender Trustee.......................37 Indenture Trustee and Paying Agent ........38 Delaware Trustee ......................................39 The Depositor ..................................................39 The Seller, Sponsor, Master Servicer and Administrator .............................................40 General......................................................40 BANA’s Student Loan Financing Business .............................................41 General ...............................................41 Loan Originations................................41 Origination Process ............................43 Servicing .............................................43 Consolidation/Repayment Programs..43 Default Management ..........................44 Incentive Programs.............................44 Use of Proceeds ..............................................45 The Trust Student Loan Pool...........................46 General......................................................46 Eligible Trust Student Loans .....................46 FFELP Delinquencies, Defaults, Claims and Net Losses ...................................47 Characteristics of the Statistical Trust Student Loans.....................................49 Insurance of Trust Student Loans; Guarantors of Trust Student Loans ....50 Cure Period for Trust Student Loans ........51 Consolidation of Federal Benefit Billings and Receipts and Guarantor Claims with Other Trusts ................................52 Third-Party Originators of FFELP Loans...53 Termination of the Trust ............................53 Transfer and Servicing Agreements ................54 General......................................................54 Purchase of Student Loans by the Depositor; Representations and Warranties of the Seller ......................54 Sale of Student Loans to the Trust; Representations and Warranties of the Depositor.......................................55 Custodian of Promissory Notes.................56 Amendments to Transfer and Servicing Agreements.........................................56 Servicing and Administration ...........................56 General......................................................56 viii The Master Servicing Agreement and the Subservicing Agreement.............. 57 Servicing Procedures ............................... 58 Payments on Trust Student Loans ........... 60 Master Servicer Covenants ...................... 60 Servicing Compensation........................... 62 Evidence as to Compliance ...................... 62 Matters Regarding the Master Servicer.... 62 Servicer Default ........................................ 63 Rights Upon Master Servicer Default ....... 64 Waiver of Past Defaults ............................ 64 Custody of the Student Loan Promissory Notes .................................................. 65 Description of Subservicer........................ 65 The Administration Agreement and the Calculation Agent Agreement ............ 65 Administrator Default ................................ 67 Rights Upon Administrator Default ........... 67 Statements to Indenture Trustee and Trust ................................................... 68 Evidence as to Compliance ...................... 69 Description of Calculation Agent .............. 69 Description of the Notes.................................. 70 The Indenture ........................................... 70 Insolvency Events..................................... 74 Form and Denomination of the Notes ...... 75 Book-Entry Registration ..................... 75 Exchanges Between Regulation S Global Notes and Rule 144A Global Notes ................................ 79 Definitive Notes .................................. 80 The Notes ................................................. 81 Pool Factors.............................................. 82 Notice of Interest Rate.............................. 82 Determination of Indices........................... 82 Trust Accounts and Eligible Investments . 84 Distributions .............................................. 85 Priority of Payments Following Certain Events of Default Under the Indenture ............................................ 87 Voting Rights and Remedies .................... 88 Capitalized Interest Account..................... 88 Credit Enhancement................................. 88 Administration Fees.................................. 89 Servicing Compensation........................... 90 Trust Fees................................................. 90 Transfer Restrictions ................................ 91 Optional Purchase .................................... 96 Prepayments, Extensions, Weighted Average Lives and Expected Maturities of the Notes ...............................................97 Certain Legal Aspects of the Trust Student Loans.........................................................98 Transfer of Trust Student Loans ...............98 Consumer Protection Laws .....................100 Loan Origination and Servicing Procedures Applicable to Trust Student Loans...................................100 Certain Matters Relating to Bankruptcy ..101 Student Loans Generally Not Subject to Discharge in Bankruptcy...................103 U.S. Federal Income Tax Consequences......103 Tax Characterization of the Trust............105 Tax Consequences to Holders of Notes in General .........................................105 State Tax Consequences ..............................110 ERISA Considerations ...................................110 Accounting Considerations ............................113 Reports to Noteholders..................................113 Notice to Canadian Residents .......................114 Resale Restrictions .................................114 Representations of Purchasers...............114 Rights of Action—Ontario Purchasers Only...................................................115 Enforcement of Legal Rights ...................115 Taxation and Eligibility for Investment.....115 Notice to Investors .........................................115 Listing Information..........................................116 Plan of Distribution.........................................118 Ratings of the Notes ......................................118 Legal Matters .................................................119 Glossary For Offering Memorandum .............120 Annex A: Characteristics of the Statistical Trust Student Loan Pool.......................... A-1 Annex B: Prepayments, Extensions, Weighted Average Lives and Expected Maturities of the Notes ............................ B-1 Annex C: Federal Family Education Loan Program................................................... C-1 Annex D: Global Clearance, Settlement and Tax Documentation Procedures.............. D-1 ix Application has been made to the Irish Stock Exchange for the notes to be admitted to the official list and trading on its regulated market. We cannot assure you that the application will be granted. This offering memorandum may be used only for the purposes for which it has been published. The information in this offering memorandum, if conveyed prior to the time of your commitment to purchase any notes, supersedes in its entirety any information contained in any prior disclosure or statistical information relating to the notes that you may have received. You should rely only on the information in this offering memorandum in making your investment decision. FORWARD-LOOKING STATEMENTS Certain statements contained in or incorporated by reference in this offering memorandum 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 forwardlooking statements. x xi PAYMENT FLOWS AND DELIVERIES Loans for $ Bank of America Student Loan Securitization Corporation $ for Loans Seller $ for Loans $ for Notes Notes for $ Loans for $ Bank of America Student Loan Trust 2010-1 (Issuing Entity) Legal Title to Loans Interim Eligible Lender Trustee (for Bank of America Student Loan Securitization Corporation) Initial Purchasers Distributions of $ (on behalf of Investors) $ for Notes Notes for $ Legal Title to Loans Distributions of $ to Investors Investors Indenture Trustee xii Eligible Lender Trustee (for the Trust) 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 offering memorandum. You should read the full description of this information appearing elsewhere in this document to understand all of the terms of the offering of the notes. Issuing Entity Sponsor, Master Servicer and Administrator Bank of America Student Loan Trust 2010-1, which is a special purpose Delaware statutory trust. It was formed on April 22, 2010 under a short-form trust agreement dated as of April 22, 2010. The short-form trust agreement will be amended and restated on the closing date pursuant to an amended and restated trust agreement to be dated the closing date among the depositor, the eligible lender trustee, the Delaware trustee and the indenture trustee. Its principal address is in care of Deutsche Bank Trust Company Americas, 60 Wall Street, 26th Floor, New York, New York 10005. We sometimes refer to the issuing entity as the “trust.” Bank of America, National Association, which is a national banking association and a wholly-owned subsidiary of Bank of America Corporation. Its principal address is Bank of America Corporate Center, 100 N. Tryon Street, Charlotte, North Carolina 28255, Mail Code: NC1-007-06-82. We sometimes refer to Bank of America, National Association as “BANA.” BANA is the parent company of the depositor. In its capacity as master servicer, BANA will act as master servicer with respect to the trust student loans and will arrange for and oversee performance of its servicing obligations by ACS Education Services, Inc. (“ACS”). Depositor Bank of America Student Loan Securitization Corporation, which is a Delaware corporation. Bank of America Student Loan Securitization Corporation is a direct, wholly-owned special purpose, bankruptcy remote subsidiary of Bank of America, National Association. In its capacity as administrator under the administration agreement, BANA will provide certain administrative and ministerial services for the trust including, among other things, preparing or obtaining certain documents, reports, filings, instruments, certificates, opinions and notices required under the transaction documents. Its principal address is Bank of America Corporate Center, 100 N. Tryon Street, Charlotte, North Carolina 28255, Mail Code: NC1-007-06-82. BANA will enter into a calculation agent agreement with ACS Asset Management Group, Inc. (“ACS-AMG”) pursuant to which ACS-AMG will 1 Deutsche Bank Trust Company Americas is also the eligible lender trustee under the trust agreement and will hold legal title to the trust student loans on behalf of the trust. assume, as calculation agent, responsibility for calculating the deposits into the various trust accounts and calculating the deposits and distributions described under “Description of the Notes—Distributions—Quarterly Distributions from the Collection Account” in this offering memorandum. Delaware Trustee Wilmington Trust Company, which is a Delaware banking corporation. The Delaware trustee will act in the capacities required under the Delaware Statutory Trust Act and under the trust agreement. Its principal Delaware address is Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890. See “Servicing and Administration— Administration Agreement” in this offering memorandum. Subservicer ACS Education Services, Inc., which is a Delaware corporation. Its principal address is One World Trade Center, Suite 2200, Long Beach, California 90831. The Notes The trust will issue the notes under the indenture. The trust is offering the Floating Rate Class A Student Loan-Backed Notes, in the amount of $1,231,596,000, which are debt obligations of the trust. Calculation Agent ACS Asset Management Group, Inc., which is an Oregon corporation. Its principal address is One World Trade Center, Suite 2200, Long Beach, California 90831. Dates Indenture Trustee, Paying Agent and Eligible Lender Trustee The closing date for this offering will be July 9, 2010. Deutsche Bank Trust Company Americas, which is a New York banking corporation. Its principal trust address is 60 Wall Street, 26th Floor, New York, New York 10005. The information about the statistical trust student loans in this offering memorandum is calculated and presented as of June 1, 2010. We refer to this date as the statistical cutoff date. Under the indenture to be dated as of the closing date, Deutsche Bank Trust Company Americas will act as indenture trustee for the benefit of and to protect the interests of the noteholders. The indenture trustee will authenticate the notes, act as paying agent for the notes, and establish various accounts of the trust. The trust will be entitled to receive all collections and proceeds on the trust student loans on or after the closing date, which will be the cutoff date for the pool of trust student loans sold to the trust. A distribution date for the notes will occur on the 25th day of each January, April, July and October, beginning in 2 The notes will bear an annual interest rate equal to the sum of three-month LIBOR (except for the first accrual period) and 0.80%. October 2010 or, if any such day 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 day before the related distribution date. LIBOR for the first accrual period will be determined by the following formula: x + [13/28 * (y-x)] A monthly servicer payment date will be the 25th calendar day of each month or the next succeeding business day if such 25th day is not a business day, beginning in August 2010. where: A collection period is the three-month period ending on the last day of March, June, September and December, in each case for the distribution date in the following month. However, the first collection period will begin on the closing date and end on September 30, 2010. The indenture trustee will determine LIBOR as specified under “Description of the Notes—Determination of Indices—LIBOR” in this offering memorandum. The administrator will cause the calculation agent to calculate the amount of interest payable on the notes based on the actual number of days elapsed in each accrual period divided by 360. x = three-month LIBOR, and y = four-month LIBOR. Information About the Notes Principal Payments. Principal will be payable to the noteholders on each distribution date in an amount generally equal to the principal distribution amount for that distribution date until their principal balance is reduced to zero. The notes will receive payments primarily from collections on the trust student loans acquired by the trust on the closing date. Interest Payments. Interest will generally accrue on the outstanding principal balance of the notes during three-month accrual periods and will be paid out of available funds on each distribution date. In addition, on each distribution date, the amount of available funds remaining after the payments described in the 1st through 7th items in the chart on page 9 of this offering memorandum will be distributed to the noteholders as accelerated payments of note principal. Generally, 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 October 24, 2010, the day before the first distribution date. See “Description of the Notes— Distributions” in this offering memorandum for a more detailed description of principal payments. See also “Description of the Notes—Priority of Payments Following Certain Events 3 Security for the Notes. The notes will be secured by the assets of the trust, which consist primarily of the trust student loans. of Default Under the Indenture” in this offering memorandum for a description of the cash flows on each distribution date following the occurrence of an event of default and the acceleration of the maturity of the notes. Overcollateralization. On the closing date, the sum of the initial pool balance of the trust and the initial deposits into the capitalized interest account and the reserve account will be approximately 108.34% of the aggregate principal balance of the notes. Overcollateralization is intended to provide credit enhancement for the notes. In general, the amount of overcollateralization is intended to equal the product of (a) the overcollateralization percentage stated above minus 100% and (b) the then current aggregate principal balance of the notes. The amount of overcollateralization will vary from time to time depending on the rate and timing of principal payments on the trust student loans, capitalization of interest, certain borrower fees and the incurrence of losses on the trust student loans. See “Description of the Notes—Credit Enhancement—Overcollateralization” in this offering memorandum. Maturity Date. The notes will mature no later than February 25, 2043; however, the actual maturity of the notes could occur earlier if, for example: • there are prepayments on the trust student loans; or • the master servicer exercises its option to purchase all remaining trust student loans, which will not occur until the first distribution date on which the pool balance is 10% or less of the initial pool balance. 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 the notes under various assumed prepayment scenarios may be found under “Prepayments, Extensions, Weighted Average Lives and Expected Maturities of the Notes” in Annex B attached to this offering memorandum. Information About the Trust Formation of the Trust 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 Company, Clearstream, Luxembourg and the Euroclear System. You will not receive a certificate representing your notes except in very limited circumstances. The trust is a Delaware statutory trust. 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 offering memorandum. 4 a consolidation loan. See “Annex C— Federal Family Education Loan Program” attached to this offering memorandum for a description of each type of FFELP loan. The depositor will acquire the trust student loans from BANA on the closing date under the purchase agreement and will subsequently sell them to the trust on the closing date under the sale agreement. The sale agreement and the purchase agreement will each be dated as of the closing date. As of the statistical cutoff date, the statistical trust student loans comprised the trust student loan pool, and had a pool balance of approximately $1,289,117,766.67. Any reference herein to the statistical trust student loans and/or the statistical pool balance also refers to the trust student loans and the trust student loan pool balance. Deutsche Bank Trust Company Americas, as interim eligible lender trustee, will hold legal title to the trust student loans for the depositor under an interim trust agreement prior to the transfer of the trust student loans to the eligible lender trustee on behalf of the trust. The statistical information presented in this offering memorandum is based on a statistical pool of trust student loans as of the statistical cutoff date. The trust student loans sold to the issuing entity on the closing date will be selected from the statistical pool. The weighted average characteristics of the trust student loans sold to the issuing entity on the closing date may not be identical to, but will not materially differ from, the weighted average characteristics of the statistical trust student loans in “Annex A—Characteristics of the Statistical Trust Student Loan Pool” attached to this offering memorandum. Trust Assets The assets of the trust will include: • the trust student loans; • collections and other payments on the trust student loans; and • funds it will hold from time to time in its trust accounts, including a collection account, a capitalized interest account, a reserve account and a rebate account. The rest of this section describes the trust student loans and trust accounts more fully. As of the statistical cutoff date, the weighted average annual interest rate of the statistical trust student loans was approximately 6.32% and their weighted average remaining term to scheduled maturity was approximately 129 months. Trust Student Loans. The trust student loans are education loans to students and parents of students made under the Federal Family Education Loan Program, known as the FFELP. Approximately 91.01% of the statistical trust student loans by principal balance are Stafford loans, and approximately 8.99% are PLUS or Graduate PLUS loans. None of the trust student loans is Any special allowance payments on the trust student loans are based on the three-month financial commercial paper rate as to approximately 99.95% of the statistical trust student loans by principal balance and the 91-day treasury bill rate as to approximately 0.05% of the 5 “The Trust Student Loan Pool— Insurance of Trust Student Loans; Guarantors of Trust Student Loans” in this offering memorandum. statistical trust student loans by principal balance. For more details concerning the trust student loans, see “Annex A— Characteristics of the Statistical Trust Student Loan Pool” attached to this offering memorandum. Collection Account. The indenture trustee will establish and maintain the collection account as an asset of the trust in the name of the indenture trustee. The trust will make an initial deposit from the net proceeds of the sale of the notes into the collection account on the closing date. The deposit will be in cash or eligible investments equal to the excess, if any, of the pool balance as of the statistical cutoff date over the pool balance as of the closing date. Approximately 88.06% of the statistical trust student loans by principal balance are 97% guaranteed and approximately 11.94% of the statistical trust student loans by principal balance are 98% guaranteed, in each case, with respect to principal and interest by one of the guaranty agencies described in Annex A attached to this offering memorandum and reinsured by the U.S. Department of Education under the Higher Education Act. The master servicer will cause all collections on the trust student loans, interest subsidy payments, special allowance payments and certain other funds to be deposited into the collection account, including investment earnings on amounts on deposit in the trust accounts, as described in this offering memorandum. See “Description of the Notes—Distributions—Deposits into the Collection Account” in this offering memorandum. The trust student loans will be acquired by the depositor directly from BANA, which originated the loans, based on criteria described in this offering memorandum under “The Trust Student Loan Pool.” Significant Guarantors. The guaranty agencies described in Annex A attached to this offering memorandum guarantee all of the trust student loans. The California Student Aid Commission guarantees approximately 34.54% of the statistical trust student loans by principal balance, the Texas Guaranteed Student Loan Corporation guarantees approximately 23.34% of the statistical trust student loans by principal balance and the New York State Higher Education Services Corporation guarantees approximately 10.51% of the statistical trust student loans by principal balance. No other guarantor guarantees more than 10% of the statistical trust student loans. The trust student loans are also reinsured by the U.S. Department of Education. See Capitalized Interest Account. The indenture trustee will establish and maintain a capitalized interest account as an asset of the trust in the name of the indenture trustee. The trust will make an initial deposit from the net proceeds of the sale of the notes into the capitalized interest account on the closing date. The deposit will be in cash or eligible investments equal to $42,000,000. Amounts on deposit in the capitalized interest account will not be replenished. 6 Amounts remaining in the reserve account on any distribution date in excess of the specified reserve account balance, after making the payments described below, will be deposited into the collection account for distribution on that distribution date. The administrator will cause the calculation agent to instruct the indenture trustee, in writing, to withdraw funds on deposit in the capitalized interest account to cover shortfalls, if any, in payments described in the 1st through 3rd items in the chart of page 9 of this offering memorandum. To the extent funds are available in the capitalized interest account, they will be used prior to using amounts on deposit in the reserve account as described below. Amounts on deposit in the capitalized interest account may also be utilized to cover shortages, if any, with respect to amounts required to be remitted to the Department of Education from the rebate account, as described below in this offering memorandum. 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: All funds remaining on deposit in the capitalized interest account on the April 2012 distribution date will be deposited into the collection account and included as a part of available funds on that distribution date. • 0.25% of the pool balance as of the end of the related collection period; and • $1,289,117.77. The specified reserve account balance will be subject to adjustment as described in this offering memorandum. In no event will it exceed the aggregate outstanding balance of the notes. The reserve account will be available on each distribution date and each monthly servicer payment date to cover any shortfalls in payments of primary servicing and administration fees and the noteholders’ interest distribution amount. Reserve Account. The indenture trustee will establish and maintain a reserve account as an asset of the trust in the name of the indenture trustee. The trust will make an initial deposit from the net proceeds of the sale of the notes into the reserve account on the closing date. The deposit will be in cash or eligible investments equal to $3,222,794.42. In addition, the reserve account will be available on the maturity date for the notes and upon termination of the trust, to cover shortfalls in payments of the noteholders’ principal and accrued interest on the notes. Amounts on deposit 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—Credit Enhancement—Reserve Account” in this offering memorandum. If the market value of the reserve account on any distribution date is sufficient to pay the remaining principal balance, and interest accrued on the notes and any carryover servicing fees, 7 The administrator will cause the calculation agent to instruct the indenture trustee, in writing, to withdraw funds on deposit in the collection account, the rebate account and, to the extent required, the capitalized interest account and the reserve account, on each monthly servicer payment date and/or distribution date, as applicable. Available funds will be applied on each distribution date generally as shown in the chart below. amounts on deposit in that account will be so applied on that distribution date. 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. See “Description of the Notes—Credit Enhancement—Reserve Account” in this offering memorandum. Rebate Account. The indenture trustee will establish and maintain a rebate account as an asset of the trust in the name of the indenture trustee. On or before each monthly servicer payment date, the administrator will instruct the indenture trustee, in writing, to transfer from the collection account to the rebate account the monthly accrual of interest paid by borrowers on trust student loans originated on or after April 1, 2006 that exceeds the special allowance support levels applicable to such trust student loans, which we refer to in this offering memorandum as “floor income.” These deposited amounts will be used to offset the amount of floor income, if any, that is expected to be netted by the U.S. Department of Education against the interest subsidy payments and/or special allowance payments otherwise due to the trust for that collection period. At the end of the next succeeding collection period all sums deposited into the rebate account during the previous collection period will be withdrawn on the related distribution date and become part of available funds on such date. See “Description of the Notes— Distributions” in this offering memorandum for a more detailed description of distributions. Administration of the Trust Distributions 8 DISTRIBUTION DATE CASHFLOWS Collection Account 1st MASTER SERVICER (Primary Servicing Fee) 2nd ADMINISTRATOR and CALCULATION AGENT (Administration Fees) 3rd NOTEHOLDERS (Interest Distribution Amount) 4th NOTEHOLDERS (Principal Distribution Amount) 5th RESERVE ACCOUNT (Amount, if any, necessary to reinstate the reserve account balance to the Specified Reserve Account Balance) 6th INDENTURE TRUSTEE, ELIGIBLE LENDER TRUSTEE AND DELAWARE TRUSTEE (Any unpaid fees and expenses including without limitation any indemnity amounts, to the extent such amounts have not been paid by the administrator) 7th MASTER SERVICER (Carryover Servicing Fee, if any) 8th NOTEHOLDERS (Any remaining amounts, until the principal balance of the notes has been reduced to zero) 9th RESIDUAL CERTIFICATEHOLDER (Any remaining amounts) 9 circumstances set forth in the subservicing agreement, the subservicer may terminate its servicing obligations with respect to the trust student loans. In the event that the subservicing agreement is terminated, the master servicer will be obligated to either appoint a new subservicer or take over servicing of the related trust student loans. See “Servicing and Administration—Servicing Procedures” in this offering memorandum. 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 or warranty under the sale agreement which has a material adverse effect on the interest of the trust in any trust student loan, generally it will have to cure the breach, repurchase or substitute that trust student loan or reimburse the trust for losses resulting from the breach. BANA will be responsible for payment of all compensation due to the subservicer for performance of its servicing obligations under the subservicing agreement. BANA will have similar obligations as seller under the purchase agreement. See “Transfer and Servicing Agreements—Purchase of Student Loans by the Depositor; Representations and Warranties of the Seller” in this offering memorandum. Under the servicing agreements, in the event that a trust student loan is denied the benefit of any applicable guarantee due to a material breach or servicing error with respect to such trust student loan, the master servicer or the subservicer will be obligated to purchase or substitute, as applicable, the affected trust student loan. See “Servicing and Administration—Master Servicer Covenants” and “—Matters Regarding the Master Servicer” in this offering memorandum. BANA will remain obligated and be liable to the trust, the eligible lender trustee, the indenture trustee, the administrator and the noteholders for the servicing of the trust student loans in accordance with the terms of the master servicing agreement without any decrease in its obligations and liability by virtue of the appointment of any subservicer and to the same extent and under the same conditions as if BANA alone were servicing the trust student loans. Under some circumstances, the master servicer may transfer its obligations as master servicer. See “Servicing and Servicing of the Assets On the closing date, the trust will enter into a master servicing agreement with BANA, under which BANA will act as master servicer with respect to the trust student loans and will arrange for and oversee performance of its servicing obligations by the subservicer. BANA will enter into a subservicing agreement with ACS pursuant to which ACS will assume, as subservicer, responsibility for servicing, maintaining custody of and collecting payments on the trust student loans. It will also submit the required application to bill and collect payments from the guaranty agencies and the U.S. Department of Education. Under certain limited 10 dates or distribution dates, as applicable, that remain unpaid. Administration—Matters Regarding the Master Servicer” in this offering memorandum. The primary servicing fee for any month will equal 1/12 of 0.90% of the pool balance, calculated as of the closing date or the first day of the preceding calendar month, as the case may be. Under the terms of the servicing agreements, if the master servicer or the subservicer, as applicable, breaches a covenant under the applicable servicing agreement regarding a trust student loan that has a materially adverse effect on the interest of the trust, generally it will have to cure the breach, purchase that trust student loan or reimburse the trust for losses resulting from the breach. Under the terms of the subservicing agreement, if the subservicer breaches a covenant regarding a trust student loan and fails to cure such breach within the time period allotted under the subservicing agreement, generally the subservicer will be obligated to purchase the related trust student loan or reimburse the trust for losses resulting from such breach. See “Servicing and Administration— Master Servicer Covenants” in this offering memorandum. See also, “The Trust Student Loan Pool—Insurance of Trust Student Loans” and “—Cure Period for Trust Student Loans” in this offering memorandum. The carryover servicing fee is the sum of: • the amount of specified increases in the costs incurred by the master servicer; • the amount of specified conversion, transfer and removal fees; • any amounts described in the first two bullets that remain unpaid from prior distribution dates; • the amount of specified increases in the fees payable by the master servicer pursuant to the subservicing agreement that exceed its primary servicing fee; and • interest on any unpaid amounts. The carryover servicing fee will be payable to the master servicer on each distribution date out of available funds remaining after all payments owing on the notes have been made. Compensation of the Master Servicer The master servicer will receive two separate fees: a primary servicing fee and a carryover servicing fee. See “Description of the Notes— Distributions” and “—Servicing Compensation” in this offering memorandum. The primary servicing fee will be payable in arrears out of available funds on each monthly servicer payment date or distribution date, as applicable, beginning in August 2010. Primary servicing fees due and payable to the master servicer will include amounts from any prior monthly servicer payment Termination of the Trust The trust will terminate upon: • 11 the maturity or other liquidation of the last trust student loan and the This prescribed minimum purchase amount is the amount that would be sufficient to: disposition of any amount received upon its liquidation; and • the payment of all amounts required to be paid to the noteholders; or • the purchase, or the arrangement for the purchase, by the master servicer 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, as described under “Description of the Notes— Optional Purchase” in this offering memorandum. • pay to noteholders the interest payable on the related distribution date; and • reduce the outstanding principal balance of the notes to zero. See “Description of the Notes—Optional Purchase” and “The Trust Student Loan Pool—Termination of the Trust” in this offering memorandum. Residual Certificateholder See “The Trust Student Loan Pool— Termination of the Trust” in this offering memorandum. Under the trust agreement, the trust will also issue a residual certificate to the depositor. This residual certificate will represent the beneficial ownership interest in the trust. The depositor will be the initial holder of the residual certificate. At any time thereafter, the depositor may transfer ownership of the residual certificate to another affiliate of BANA and/or it may be sold to an unaffiliated third party. The residual certificate is not being offered for sale by this offering memorandum. Optional Purchase The master 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 on which 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 and unpaid interest, the remaining trust student loans as of the end of the preceding collection period, but not less than a prescribed minimum purchase amount. Distributions on the Residual Certificate. The residual certificate will not bear interest and will not have a principal balance. Distributions on the residual certificate will be made only after the outstanding principal balance of the notes has been reduced to zero. See “Description of the Notes—Distributions” in this offering memorandum. 12 Tax Considerations • an exemption from the prohibited transaction provisions of Section 406 of the Employee Retirement Income Security Act of 1974, as amended, and Section 4975 of the Internal Revenue Code of 1986, as amended, applies, so that the purchase or holding of the notes will not result in a non-exempt prohibited transaction; and • the purchase or holding of the notes will not cause a non-exempt violation of any substantially similar federal, state, local or foreign laws. Subject to important considerations described in this offering memorandum: • In the opinion of federal tax counsel for the trust, the notes will be characterized as debt for federal income tax purposes; • In the opinion of federal tax counsel for the trust, the trust will not be characterized as an association or a publicly traded partnership taxable as a corporation for federal income tax purposes; and • Each fiduciary who purchases a note will be deemed to represent that an exemption exists and applies to it and that no non-exempt violations of any substantially similar laws will occur. In the opinion of Delaware tax counsel for the trust, the same characterizations would apply for Delaware state income tax purposes as for federal income tax purposes and noteholders who are not otherwise subject to Delaware taxation on income will not become subject to Delaware tax solely as a result of their ownership of notes. See “ERISA Considerations” in this offering memorandum for additional information concerning the application of ERISA. Ratings of the Notes The tax accounting for the notes for U.S. federal income tax purposes is highly complex. For a discussion of the rules and for a general discussion of the tax treatment of the notes, see “U.S. Federal Income Tax Consequences” in this offering memorandum. ERISA Considerations The notes are required to be rated at issuance in the highest rating category by Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, and Moody’s Investors Service, Inc. These rating agencies are sometimes referred to herein as “S&P” and “Moody’s,” respectively. Subject to important considerations and conditions described in this offering memorandum, the notes may, in general, be purchased by or on behalf of an employee benefit plan or other retirement arrangement, including an insurance company general account, only if: Other credit rating agencies that we have not engaged to rate the notes may nevertheless issue unsolicited credit ratings on the notes. If any such unsolicited ratings are issued, we cannot assure you that they will not be different from those ratings assigned by S&P or Moody’s. 13 A rating addresses only the likelihood of the timely payment of stated interest and the payment of principal at final maturity, and does not address the timing or likelihood of principal distributions prior to final maturity. See “Ratings of the Notes” in this offering memorandum. Identification Numbers The notes will have the following CUSIP Numbers, ISINs and European Common Codes: CUSIP Numbers • Rule 144A CUSIP No.: 06052L AA5 • Regulation S CUSIP No.: U0662T AA0 Listing Information Application has been made to the Irish Stock Exchange for the notes to be admitted to the official list and trading on its regulated market. We cannot assure you that the application will be granted. So long as the notes are listed on the Irish Stock Exchange, and its rules so require, the administrator will cause notices relating to the notes, including if the notes are delisted, to be published on the Irish Stock Exchange’s website at http://www.ise.ie/. International Securities Identification Numbers (ISIN) The notes have been accepted for clearing and settlement through Clearstream, Luxembourg and Euroclear. • Rule 144A International Securities Identification No. (ISIN): US06052LAA52 • Regulation S International Securities Identification No. (ISIN): USU0662TAA08 European Common Codes Risk Factors • Some of the factors you should consider before making an investment in the notes are described in this offering memorandum under “Risk Factors.” Rule 144A European Common Code: 051856015 • Regulation S European Common Code: 051856040 14 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 notes. These risk factors could affect your investment in or return on the notes. Because the Notes May Not Provide Regular or Predictable Payments, You May Not Receive the Return on Your Investment That You Expected The notes may not provide a regular or predictable schedule of payments or payment on any specific date due to, among other things, prepayments and defaults on the trust student loans. See “Prepayments, Extensions, Weighted Average Lives and Expected Maturities of the Notes” in this offering memorandum. Accordingly, you may not receive the return on your investment that you expected. The Notes Are Not Suitable Investments for All Investors The notes are complex investments that should be considered only by investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment, default and market risk, and tax consequences of such an investment, as well as the interaction of these factors. You Will Bear Prepayment and Extension Risk Due to Actions Taken by Individual Borrowers and Other Variables Beyond Our Control A borrower may prepay a trust student loan in whole or in part, at any time. The rate of prepayments on the trust student loans may be influenced by a variety of economic, social, legislative, competitive and other factors, including changes in interest rates, the availability of alternative financings and the general economy. Various loan consolidation programs available to eligible borrowers may increase the likelihood of prepayments. See “BANA’s Student Loan Financing Business— Consolidation/Repayment Programs” in this offering memorandum. In addition, the trust may receive unscheduled 15 payments due to defaults on the trust student loans and purchases thereof by the master servicer or the depositor. Because the pool includes thousands of trust student loans, it is impossible to predict the amount and timing of payments that will be received and paid to noteholders in any period. Consequently, the length of time that your notes are outstanding and accruing interest may be shorter than you expect. On the other hand, the expected maturity of the trust student loans may be extended as a result of grace periods, deferment periods and, under some circumstances, forbearance periods. This may lengthen the remaining term of the trust student loans and delay principal payments on your notes. In addition, the amount available for distribution to you will be reduced if borrowers fail to pay timely the principal and interest due on the trust student loans. Consequently, the length of time that your notes are outstanding and accruing interest may be longer than you expect. The right of the master servicer to purchase or arrange for the purchase of all remaining trust student loans after the pool balance is 10% or less of the initial pool balance creates additional uncertainty regarding the timing of payments to noteholders. The effect of these factors is impossible to predict. To the extent they create reinvestment risk, you will bear that risk. The Trust Will Have Limited Assets From Which to Make Payments on the Notes, Which May Result in Losses 16 The trust will not have, nor will it be permitted to have, significant assets or sources of funds other than the trust student loans, the guarantee agreements, the reserve account and the capitalized interest account. Consequently, you must rely upon payments on the trust student loans from the borrowers and guarantors and amounts on deposit in the reserve account and the capitalized interest account for payments on your notes. If these sources of funds are unavailable or insufficient to make payments on your notes, you may experience a loss on your investment. Certain Credit and Liquidity Enhancement Features Are Limited and if They Are Depleted, There May Be Shortfalls in Distributions to Noteholders Certain credit and liquidity enhancement features, including the reserve account and the capitalized interest account, are limited in amount. In addition, the amounts on deposit in the capitalized interest account will not be replenished and are available for a limited duration, and the period during which such funds will be available will not be extended. In certain circumstances, if there is a shortfall in available funds, such accounts may be depleted. This depletion could result in shortfalls and delays in distributions to noteholders. Your Ability to Transfer the Notes May Be Limited This offering of the notes will not be registered under the Securities Act, any United States state securities laws or “Blue Sky” laws, or any securities laws of any other jurisdiction. Consequently, the notes are not transferable other than in accordance with an exemption from the registration provisions of the Securities Act and applicable United States state securities laws and upon satisfaction of certain other provisions of the indenture pursuant to which the notes are issued. It is intended, however, that transfers of interests in the notes will be cleared and settled through Clearstream, Luxembourg or Euroclear, as applicable, and will be effected in accordance with the rules and 17 procedures of Clearstream, Luxembourg or Euroclear or their respective depositories. There is currently no private market for the notes and it is uncertain whether such a market will develop. The initial purchasers expect, but are not obligated, to make a market in the notes solely to facilitate trading among QIBs (pursuant to Rule 144A) and non-U.S. Persons (pursuant to the requirements of Regulation S). There is no assurance that either such market, if developed, will continue. If a secondary market does not develop, the spread between the bid price and the ask price for your notes may widen, thereby reducing the net proceeds to you from the sale of your notes. Current Illiquid Market Conditions May Continue in the Future Despite recent federal market interventions and programs, the recent period of general market illiquidity may continue or even worsen and may adversely affect the secondary market for your notes. Accordingly, you may not be able to sell your notes when you want to do so or you may be unable to obtain the price that you wish to receive for your notes and, as a result, you may suffer a loss on your investment. The Characteristics of the Statistical Trust Student Loans as of the Statistical Cutoff Date May Differ From the Pool of Trust Student Loans Sold to the Issuing Entity on the Closing Date The statistical information in this offering memorandum reflects only the characteristics of the trust student loans as of the statistical cutoff date. The statistical information presented in this offering memorandum is based on a statistical pool of trust student loans as of the statistical cutoff date. The weighted average characteristics of the trust student loans sold to the issuing entity on the closing date will be selected from the statistical pool and will not be identical to, but will not materially differ from, the characteristics of the 18 trust student loans in “Annex A— Characteristics of the Statistical Trust Student Loan Pool” attached to this offering memorandum. The trust student loans actually sold to the trust on the closing date will have characteristics that differ somewhat from the characteristics of the statistical trust student loans as of the statistical cutoff date due to payments received on and other changes in these loans that occur during the period from the statistical cutoff date to the closing 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 statistical trust student loans presented in this offering memorandum as of the statistical cutoff date. Your Notes Will Have Basis Risk, Which Could Compromise the Trust’s Ability to Pay Principal and Interest on Your Notes 19 Basis risk is the risk that shortfalls might occur because, among other things, the effective interest rates of the trust student loans (after taking into account special allowance payments, if any) adjust on the basis of certain indices and the interest rate of the notes adjusts on the basis of a different index or adjusts on different dates than that of the trust student loans. If a shortfall were to occur, the trust’s ability to pay principal and/or interest on your notes could be compromised. See “Annex A—Characteristics of the Statistical Trust Student Loan Pool—Composition of the Trust Student Loans as of the Statistical Cutoff Date” attached to this offering memorandum which specifies the percentages of trust student loans that (after taking into account special allowance payments, if any) adjust based on the 91-day treasury bill rate or the commercial paper rate, as applicable. You must rely on forms of credit enhancement, to the extent available, to mitigate the basis risk associated with your notes. There can be no assurance that the amount of credit enhancement will be sufficient to cover the basis risk associated with the notes. You May Incur Losses or Delays in Payments on Your Notes if Borrowers Default on the Trust Student Loans If a borrower defaults on a trust student loan that is only 98% or 97% guaranteed, the trust will experience a loss of approximately 2% or 3%, as the case may be, of the outstanding principal and accrued interest on that trust student loan. If defaults occur on the trust student loans and the credit enhancement described in this offering memorandum is insufficient, you may suffer a delay in payment or losses on your notes. If a Guarantor of the Trust Student Loans Experiences Financial Deterioration or Failure, You May Suffer Delays in Payment or Losses on Your Notes All of the trust student loans will be unsecured. As a result, the only source for payment of a trust student loan other than from the borrower is the guarantee provided by the applicable guarantor. Student loans acquired by the trust may be subject to guarantee agreements with a number of individual guarantors. A deterioration of a guarantor’s financial condition and ability to honor guarantee claims could result in a failure of that guarantor to make guarantee payments to the eligible lender trustee in a timely manner, or at all. The financial condition of a guarantor could be adversely affected by a number of factors, including the amount of claims made against that guarantor as a result of borrower defaults. 20 A FFELP guarantor’s financial condition and ability to honor guarantee claims could be adversely affected by a number of other factors including: • the amount of claims made against that guarantor as a result of borrower defaults; • the amount of claims reimbursed to that guarantor from the U.S. Department of Education, which range from 75% to 100% of the guaranteed portion of the related loan, depending on the date such loan was made and the historical performance of the guarantor; • changes in legislation that may reduce expenditures from the U.S. Department of Education that support federal guarantors or that may require guarantors to pay more of their reserves to the U.S. Department of Education; and • the continued voluntary waiver by the guarantor of the guarantee fee payable by a borrower upon disbursement of a student loan. If the financial condition of a guarantor deteriorates, it may fail to make guarantee payments in a timely manner, or at all. In that event, as described below, you may suffer delays in payment or losses on your notes. The U.S. Department of Education’s Failure to Make Reinsurance Payments May Negatively Affect the Timely Payment of Principal and Interest on Your Notes 21 If a FFELP guarantor is unable to meet its guarantee obligations, the trust may submit claims directly to the U.S. Department of Education for payment. The U.S. Department of Education’s obligation to pay guarantee claims directly is dependent upon its determination that the guarantor is unable to meet its guarantee obligations. If the U.S. Department of Education delays in making this determination, you may suffer a delay in the payment of principal and interest on your notes. In addition, if the U.S. Department of Education determines that the FFELP guarantor is able to meet its guarantee obligations, the U.S. Department of Education will not make guarantee payments to the trust. The U.S. Department of Education may or may not make the necessary determination that the guarantor is unable to meet its guarantee obligations. If the U.S. Department of Education determines that the guarantor is unable to meet its guarantee obligations, it may or may not make this determination or the ultimate payment of the guarantee claims in a timely manner. This could result in delays or losses on your investment. Payment Offsets by FFELP Loan Guarantors or the U.S. Department of Education Could Prevent the Trust from Paying You the Full Amount of the Principal and Interest Due on Your Notes 22 The eligible lender trustee may use the same U.S. Department of Education lender identification number for FFELP loans in this trust as it uses for other FFELP loans it holds on behalf of other trusts established by the depositor. If it does, the billings submitted by the subservicer to the U.S. Department of Education (for items such as special allowance payments or interest subsidy payments) and the claims submitted to the guarantors will be consolidated with the billings and claims for payments for student loans held by other trusts using the same lender identification number. Payments on those billings by the U.S. Department of Education as well as claim payments by the applicable guarantors will be made to the eligible lender trustee, or to the master servicer on behalf of the eligible lender trustee, in a lump sum. Those payments must be allocated among the various issuing entities that reference the same lender identification number. If the U.S. Department of Education or a guarantor determines that the eligible lender trustee owes it a liability on any trust student loan, including loans it holds on behalf of this trust or other trusts established by the depositor, the U.S. Department of Education or the applicable guarantor may seek to collect that liability by offsetting it against payments due to the eligible lender trustee under the terms of the applicable trust. Any offsetting or shortfall of payments due to the eligible lender trustee could adversely affect the amount of available funds for any collection period and thus the trust’s ability to pay you principal and interest on your notes. The master servicing agreement for your notes and other servicing agreements of the depositor in respect of the other trusts established by the depositor will contain provisions for cross-indemnification concerning those payments and offsets. Such provisions require one entity to compensate the other or accept a lesser payment to the extent the latter has been assessed for the liability of the former. Even with cross-indemnification provisions, however, the amount of funds available to the trust from indemnification may not necessarily be adequate to compensate the trust and investors in the notes for any previous reduction in available funds. You May Be Unable to Reinvest Principal Payments at the Yield You Earn on the Notes 23 Asset-backed notes usually produce increased principal payments to investors when market interest rates fall below the interest rates on the collateral—student loans in this case— and decreased principal payments when market interest rates rise above the interest rates on the collateral. As a result, you are likely to receive more money to reinvest at a time when other investments generally are producing lower yields than the yield on the notes. Similarly, you are likely to receive less money to reinvest when other investments generally are producing higher yields than the yield on the notes. A Failure to Comply with Student Loan Origination and Servicing Procedures Could Jeopardize Guarantor, Interest Subsidy and Special Allowance Payments on the Trust Student Loans, Which May Result in Delays in Payment or Losses on Your Notes The rules under which the trust student loans were originated, including the Higher Education Act or the program rules, require lenders making and servicing student loans and the guarantors, if any, guaranteeing those loans to follow specified procedures, including due diligence procedures, to ensure that the trust student loans are properly originated, disbursed and serviced. Failure to follow these procedures may result in: • the U.S. Department of Education’s refusal to make reinsurance payments to the applicable guarantor or to make interest subsidy payments and special allowance payments on the trust student loans; or • the guarantors’ inability or refusal to make guarantee payments on the trust student loans. Loss of any loan program payments could adversely affect the amount of available funds and the trust’s ability to pay principal and interest on your notes. The Inability of the Depositor or the Master Servicer to Meet Its Repurchase Obligation May Result in Losses on Your Notes 24 Under some circumstances, the trust has the right to require the depositor or the master servicer to purchase a trust student loan or provide the trust with a substitute student loan. This right arises generally if a breach of the representations, warranties or covenants of the depositor or the master servicer, as applicable, has a material adverse effect on the trust, and is not cured within the applicable cure period. We cannot guarantee you, however, that the depositor or the master servicer will have the financial resources to make a purchase or that eligible student loans will be available for substitution. In this case, you will bear any resulting loss. See “—BANA’s Suspension of Origination of New FFELP Loans, the Future Termination of the FFELP Program and BANA’s Subsequent Inability to Meet its Substitution Obligation May Cause You to Bear Prepayment Risk” below. BANA’s Suspension of Origination of New FFELP Loans and BANA’s Subsequent Inability to Meet its Substitution Obligation May Cause You to Bear Prepayment Risk Effective December 5, 2009, BANA suspended the origination of loans through the FFELP; it continues to participate in the FFELP by making disbursements on loans originated pursuant to applications received prior to such date, and by managing its FFELP loan portfolio. To the extent BANA is required, in its capacity as master servicer, to substitute trust student loans pursuant to its obligations under the master servicing agreement, but there are no loans remaining in its student loan portfolio, BANA may be unable to fulfill this substitution obligation with respect to the trust and would be required to repurchase the affected trust student loans. The Notes May Be Repaid Early Due to an Exercise of the Purchase Option. If This Happens, Your Yield May Be Affected and You Will Bear Reinvestment Risk The notes may be repaid before you expect them to be if the master servicer or other applicable entity exercises its option to purchase all of the trust student loans. 25 Such purchase would result in the early retirement of the notes outstanding on that date. If this happens, your yield on the notes may be affected. You will bear the risk that you cannot reinvest the money you receive in comparable notes at an equal yield. FDIC Receivership or Conservatorship of BANA Could Result in Delays in Payments or Losses on Your Notes If BANA were to become insolvent, were to violate applicable regulations, or if other similar circumstances were to occur, the Federal Deposit Insurance Corporation (“FDIC”) could be appointed receiver or conservator of BANA. As receiver or conservator, the FDIC would have various powers under the Federal Deposit Insurance Act, including the repudiation and automatic stay powers described under “Certain Legal Aspects of the Trust Student Loans—Certain Matters Relating to Bankruptcy” in this offering memorandum. We have structured the transaction contemplated by this offering memorandum to comply with the FDIC’s interim rule relating to securitizations. Under that rule, the FDIC has stated that it will not use its repudiation power to reclaim, recover or recharacterize a bank’s transfer of financial assets in connection with a securitization completed on or prior to September 30, 2010 that complies with the interim rule’s conditions. Additionally, the FDIC has indicated that it does not believe the automatic stay applies to financial assets transferred in connection with a securitization. If the FDIC were to successfully assert that this transaction does not comply with the interim rule and that the transfer of trust student loans under the purchase agreement was not a legal true sale, then the depositor would be treated as having made a loan to BANA, secured by the transferred trust student 26 loans. If the FDIC repudiated that loan, the amount of compensation that the FDIC would be required to pay would be limited to “actual direct compensatory damages,” as discussed under “Certain Legal Aspects of the Trust Student Loans—Certain Matters Relating to Bankruptcy” in this offering memorandum. If the FDIC were appointed as conservator or receiver for BANA the FDIC could: • require the trust, as assignee of the depositor, to go through an administrative claims procedure to establish its rights to payments collected on the trust student loans; or • request a stay of proceedings to liquidate claims or otherwise enforce contractual and legal remedies against BANA; or • repudiate without compensation BANA’s ongoing servicing obligations under the master servicing agreement, such as its duty to collect and remit payments or otherwise service the trust student loans; or • argue that the automatic stay prevents the indenture trustee, the eligible lender trustee and the other transaction parties from exercising their rights, remedies and interests for up to 90 days. If the FDIC, as conservator or receiver for BANA, were to take any of the actions described above, distributions of principal and interest on the notes could be delayed or reduced. See “Certain Legal Aspects of the Trust Student 27 Loans—Certain Matters Relating to Bankruptcy” in this offering memorandum. A Master Servicer or Subservicer Default May Result in Additional Costs, Increased Servicing Fees by a Substitute Master Servicer or a Diminution in Servicing Performance, Any of Which May Have an Adverse Effect on Your Notes If a default occurs under the master servicing agreement, the indenture trustee or the noteholders may remove the master servicer without the consent of the eligible lender trustee. If a default occurs under the subservicing agreement, the master servicer, or the administrator on behalf of the trust, may remove the subservicer without the consent of the eligible lender trustee. In the event of the removal of the master servicer or the subservicer and the appointment of a successor master servicer or subservicer, we cannot predict: • the cost of the transfer of servicing to the successor master servicer or subservicer; • the ability of the master servicer to perform its obligations under the master servicing agreement and the ability of the master servicer to cause the subservicer to perform its obligations under the subservicing agreement; or • the servicing fees charged by the successor master servicer. In addition, the noteholders have the ability, with some exceptions, to waive defaults by the master servicer. Furthermore, the indenture trustee, the master servicer or the noteholders may experience difficulties in appointing a successor master servicer or subservicer, as applicable, and during any transition phase it is possible that normal servicing activities could be disrupted, resulting in increased 28 delinquencies and/or defaults on the trust student loans, or errors or delays in the collection and allocation of payments or in the enforcement of guarantee agreements. The Bankruptcy of the Subservicer Could Delay the Appointment of a Successor Subservicer or Reduce Payments on Your Notes In the event of a default by the subservicer resulting solely from certain events of insolvency or the bankruptcy of the subservicer, a court, conservator, receiver or liquidator may have the power to prevent the master servicer from appointing a subservicer, and delays in the collection of payments on the trust student loans may occur. Any delay in the collection of payments on the trust student loans may delay or reduce payments to noteholders. Timely Payments on Your Notes Depend in Part on the Servicing Ability of the Subservicer Although the master servicer is obligated to cause the trust student loans to be serviced in accordance with the terms of the transaction documents, the timing of payments on the trust student loans will be directly affected by the ability of the subservicer to adequately service the trust student loans. In addition, the value of the trust student loans is dependent on the subservicer’s compliance with federal regulations to ensure that the guarantors are obligated to maintain guaranteed payments and that any reinsurance by the U.S. Department of Education is maintained. If the subservicer defaults on its obligations and is terminated, or if the subservicing agreement is voluntarily terminated, the value of the trust student loans will depend on the ability of the master servicer to find an alternative subservicer to service the trust student loans, and you may suffer a delay in the timing of payments on your notes until any transfer of servicing is completed or effective. 29 The Trust’s Inclusion of Subserviced Trust Student Loans May Make It More Difficult to Find a Successor Master Servicer The master servicer or any successor master servicer may terminate the subservicer for cause or voluntarily by paying a deconversion fee. Moreover, the successor master servicer will be responsible for any breaches by the subservicer under the subservicing agreement. As a result, if necessary, it may be more difficult to find a successor master servicer due to the presence of subserviced trust student loans in the trust. Any delay in finding a successor master servicer may cause the market value and liquidity of your notes to decline and cause you to suffer a loss on your investment. The Indenture Trustee May Have Difficulty Liquidating Trust Student Loans After an Event of Default If an event of default occurs under the indenture, the indenture trustee may sell the trust student loans without the consent of the noteholders if (i) there has been a payment default on the notes or (ii) in all other cases, if the purchase price received from the sale of the trust student loans is sufficient to repay all noteholders in full. However, the indenture trustee may not be able to find a purchaser for the trust student loans in a timely manner or the market value of the trust student loans may not be high enough to make noteholders whole. The Enactment of the Health Care and Education Reconciliation Act of 2010 and Any Other Changes in Law May Adversely Affect the Trust Student Loans, the Guarantors, the Depositor and BANA and, Accordingly, Adversely Affect Your Notes On March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”) was enacted into law. Effective July 1, 2010, the Reconciliation Act eliminates the FFELP. The terms of existing FFELP loans are not materially affected by the Reconciliation Act. The Higher Education Act or other relevant federal or state laws, rules and regulations may be further amended or modified in the future in a manner, 30 including as part of any reauthorization of the Higher Education Act, that could adversely affect the federal student loan programs as well as the trust student loans made under these programs and the financial condition of the guarantors. Among other things, the level of guarantee payments may be adjusted from time to time. The elimination of the FFELP and any other future changes could affect the ability of BANA, the depositor or the master servicer to satisfy their obligations to substitute for trust student loans. The elimination of the FFELP and any other future changes could also have a material adverse effect on the revenues received by the guarantors that are available to pay claims on defaulted trust student loans in a timely manner. We cannot predict whether any other legal or regulatory changes will be adopted or, if adopted, what impact those changes would have on the trust, the trust student loans, the guarantors, the depositor, BANA or the notes. The Use of Master Promissory Notes May Compromise the Indenture Trustee’s Security Interest in the Trust Student Loans For loans disbursed on or after July 1, 1999, a master promissory note evidences any student loan made to a borrower under the FFELP. When a master promissory note is used, a borrower executes only one promissory note with each lender. Subsequent student loans from that lender are evidenced by a confirmation sent to the student. Therefore, if a lender originates multiple student loans to the same student, all of those trust student loans are evidenced by a single promissory note. Under the Higher Education Act, each student loan made under a master promissory note may be sold independently of any other student loan 31 made under that same master promissory note. Each student loan is separately enforceable on the basis of an original or copy of the master promissory note. Also, a security interest in these student loans may be perfected either through the secured party taking possession of the original or a copy of the master promissory note, or the filing of a financing statement. Prior to the master promissory note, each student loan made under the FFELP was evidenced by a separate note. Assignment of the original note was required to effect a transfer and possession of a copy did not perfect a security interest in the related student loan. It is possible that trust student loans may be originated under a master promissory note. If the master servicer were to deliver a copy of the master promissory note, in exchange for value, to a third party that did not have knowledge of the indenture trustee’s lien, that third party may also claim an interest in the trust student loan. It is possible that the third party’s interest could be prior to or on parity with the interest of the indenture trustee. The indenture permits certain amendments upon the indenture trustee’s receipt of a rating confirmation from each of S&P and Moody’s (to the extent S&P or Moody’s are then rating the notes) that the then-current ratings assigned by such rating agency will not be downgraded or withdrawn as a result of those actions. As a result, certain changes may be made to the indenture without the consent of the noteholders. See “Description of the Notes—The Indenture—Modification of Indenture” in this offering memorandum. Certain Actions Can Be Taken Without Noteholder Approval 32 This offering memorandum sets forth the minimum required ratings for the notes. A security rating is not a recommendation to buy, sell or hold securities. Similar ratings on different types of securities do not necessarily mean the same thing. Either S&P or Moody’s may revise or withdraw its rating at any time if it believes circumstances have changed. A subsequent downgrade in the rating on your notes is likely to decrease the price a subsequent purchaser will be willing to pay for your notes. Limitations of Ratings; Withdrawal or Downgrade of Initial Ratings May Decrease the Prices of Your Notes; Unsolicited Ratings Additionally, other credit rating agencies that we have not engaged to rate the notes may nevertheless issue unsolicited credit ratings on the notes. If any such unsolicited ratings are issued, we cannot assure you that they will not be different from those ratings assigned by S&P or Moody’s. Any downgrade, withdrawal or qualification of the ratings of your notes, as a result of a change of circumstances, deterioration in the performance of the trust student loans, errors in analysis or otherwise, may adversely affect the market value of your notes and/or limit your ability to resell your notes. Consumer Protection Laws May Affect Enforceability of the Trust Student Loans 33 Numerous federal and state consumer protection laws, including various state usury laws and related regulations, impose substantial requirements upon lenders and servicers involved in consumer finance. Some states impose finance charge ceilings and other restrictions on certain consumer transactions and require contract disclosures in addition to those required under federal law. These requirements impose specific statutory liability that could affect an assignee’s ability to enforce consumer finance contracts such as the trust student loans. In addition, the remedies available to the indenture trustee or the noteholders upon an event of default under the indenture may not be readily available or may be limited by applicable state and federal laws. The Servicemembers Civil Relief Act and similar state and local laws provide payment relief to borrowers who enter active military service and to borrowers in reserve status who are called to active duty after the origination of their trust student loans. Recent and ongoing military operations by the United States have increased the number of citizens who are in active military service, including persons in reserve status who have been called or may be called to active duty. The Trust May Be Affected by Delayed Payments From Borrowers Called to Active Military Service The Servicemembers Civil Relief Act also limits the ability of a lender in the FFELP to take legal action against a borrower during the borrower’s period of active duty and, in some cases, during an additional three-month period thereafter. We do not know how many trust student loans have been or may be affected by the application of these laws. As a result, there may be unanticipated delays in payment and losses on the trust student loans. 34 DEFINED TERMS In later sections, we use a few terms that we define in the Glossary at the end of this offering memorandum. These terms appear in bold face on their first use and in initial capital letters in all cases. In this offering memorandum, the use of the terms “we,” “us” and “our” refers to the depositor. FORMATION OF THE TRUST The Trust Bank of America Student Loan Trust 2010-1 is a statutory trust newly formed in accordance with Delaware law on April 22, 2010 under a short-form trust agreement dated as of April 22, 2010. The short-form trust agreement will be amended and restated on the closing date pursuant to an amended and restated trust agreement to be dated the closing date among the depositor, the eligible lender trustee, the Delaware trustee and the indenture trustee. We refer to the short-form trust agreement and the amended and restated trust agreement together as the “trust agreement.” After its formation, the trust will not engage in any activity other than: • acquiring, holding and managing the trust student loans and holding the other assets of the trust and related proceeds; • issuing the notes; • making payments on the notes; and • engaging in other activities that are necessary, suitable or convenient to accomplish, or are incidental to, the foregoing. Other than issuing the notes, the trust will not be permitted to borrow money or make loans to other persons. The fiscal year of the trust will be a calendar year. The permitted activities of the trust may be amended only with the consent of a majority of the noteholders; however, the trust agreement may be modified without noteholder consent if an opinion of counsel is provided to the effect that such proposed revisions would not adversely affect in any material respect the interests of any noteholder. The trust was initially capitalized with nominal equity of $10.00, excluding any amounts to be deposited by the trust into the collection account, the capitalized interest account and the reserve account. The depositor will use the net proceeds of the sale of the notes to pay to the trust the amounts to be deposited by the trust into the collection account, the capitalized interest account and the reserve account. 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 pay BANA the purchase price for the trust student loans acquired 35 from it under the purchase agreement to be dated the closing date among BANA, the depositor and Deutsche Bank Trust Company Americas, as interim eligible lender trustee. The property of the trust will consist of: • the pool of trust student loans, legal title to which is held by the eligible lender trustee on behalf of the trust; • all funds collected on trust student loans on or after the closing date, including any special allowance payments and interest subsidy payments; • all moneys and investments from time to time on deposit in the Trust Accounts; • its rights under the transfer and servicing agreements, including the right to require BANA, the depositor, the subservicer or the master servicer to repurchase trust student loans from it or to substitute student loans under certain conditions; and • its rights under the guarantee agreements with guarantors. The trust will not own any other assets. The sections “Transfer and Servicing Agreements,” “Servicing and Administration” and “Description of the Notes” in this offering memorandum contain descriptions of the material provisions of the transaction documents. The notes will represent indebtedness of the trust secured by its assets and the residual certificate will represent the beneficial ownership interest of the assets of the trust. The Trust Accounts will be established and maintained in the name of the indenture trustee for the benefit of the noteholders. To facilitate servicing and to minimize administrative burden and expense, the subservicer will act as custodian of the promissory notes representing the trust student loans and other related documents. The trust’s principal offices are in New York, New York, in care of Deutsche Bank Trust Company Americas, as eligible lender trustee, at its address shown below. Capitalization of the Trust The following table illustrates the capitalization of the trust as of the closing date, as if the issuance and sale of the notes had taken place on that date: Floating Rate Class A Student Loan-Backed Notes ................................................ Equity ....................................................................................................................... Total ......................................................................................................................... 36 $1,231,596,000 10 $1,231,596,010 Eligible Lender Trustee and Interim Eligible Lender Trustee The eligible lender trustee and interim eligible lender trustee is Deutsche Bank Trust Company Americas, a banking association organized under the laws of the State of New York. Its address is 60 Wall Street, 26th floor, New York, New York 10005, and its telephone number is (212) 250-4855. Deutsche Bank Trust Company Americas has been, and currently is, serving as eligible lender trustee for numerous securitization transactions and programs involving pools of student loan receivables. Deutsche Bank Trust Company Americas has provided the information in the prior paragraph. Other than the prior paragraph, Deutsche Bank Trust Company Americas has not participated in the preparation of, and is not responsible for, any other information contained in this offering memorandum. The interim eligible lender trustee will hold legal title to the trust student loans for the depositor under an interim trust agreement prior to the transfer of the trust student loans to the eligible lender trustee on behalf of the trust. The eligible lender trustee will acquire on behalf of the trust legal title to all the trust student loans purchased on the closing date. The eligible lender trustee, on behalf of the trust, has entered into separate guarantee agreements with the guaranty agencies described in this offering memorandum 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 “Annex C—Federal Family Education Loan Program—Eligible Lenders, Students and Educational Institutions” attached to this offering memorandum. The eligible lender trustee will act on behalf of the residual certificateholder and represent and exercise the rights and interests of the residual certificateholder under the trust agreement. Except as specifically delegated to the administrator in the administration agreement, the eligible lender trustee will also execute and deliver all agreements required to be entered into on behalf of the trust. The liability of the eligible lender trustee in connection with the issuance and sale of the notes will consist solely of the express obligations specified in the eligible lender trust agreement, the trust agreement and the sale agreement. The eligible lender trustee and the interim eligible lender trustee will not be personally liable for any actions or omissions that were not the result of its own bad faith, willful misconduct or gross negligence. The eligible lender trustee and the interim eligible lender trustee will be entitled to be indemnified by the administrator for any loss, liability or expense (including reasonable attorneys’ fees and expenses) incurred by it in connection with the performance of its duties under the eligible lender trust agreement or interim trust agreement, as applicable, and the other transaction documents, other than any loss, liability or expense resulting from the gross negligence or bad faith of the eligible lender 37 trustee or interim eligible lender trustee. 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. To the extent expenses incurred in connection with the replacement of the eligible lender trustee are not paid by the successor eligible lender trustee, the depositor will be responsible for the payment of such expenses. Indenture Trustee and Paying Agent The trust will issue the notes under an indenture to be dated as of the closing date. Under the indenture, Deutsche Bank Trust Company Americas will act as indenture trustee and paying agent for the notes. Deutsche Bank Trust Company Americas, a banking association organized under the laws of the State of New York, is the indenture trustee. Its address is 60 Wall Street, 26th floor, New York, New York 10005. Deutsche Bank Trust Company Americas has acted as trustee on numerous asset-backed securities transactions involving pools of student loans. Deutsche Bank Trust Company Americas has provided the information in the prior paragraph. Other than the above paragraph, Deutsche Bank Trust Company Americas has not participated in the preparation of, and is not responsible for, any other information contained in this offering memorandum. 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, subject to limitations set forth in the indenture. To the extent expenses incurred in connection with the replacement of an indenture trustee are not paid by another party, the depositor will be responsible for the payment of such expenses. The indenture trustee will not be personally liable for any actions or omissions that were not the result of its own bad faith, 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 and expenses) 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 38 entitled to receive all such amounts owed from cash flow on the trust student loans prior to any amounts being distributed to the noteholders. Delaware Trustee Wilmington Trust Company will be the Delaware trustee under the trust agreement. The Delaware trustee will act in the capacities required for a Delaware trust under the Delaware Statutory Trust Act. Wilmington Trust Company is a Delaware banking corporation with trust powers that was incorporated in 1903. Wilmington Trust Company’s principal place of business is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890. Wilmington Trust Company has served as Delaware trustee for 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 Delaware trustee. Wilmington Trust Company has provided the information in the prior two paragraphs. Other than the two prior paragraphs, Wilmington Trust Company has not participated in the preparation of, and is not responsible for, any other information contained in this offering memorandum. The liability of the Delaware trustee in connection with the issuance and sale of the notes will consist solely of the express obligations specified in the trust agreement. The Delaware trustee will not be personally liable for any actions or omissions that were not the result of its own willful misconduct or gross negligence. The Delaware trustee will be entitled to be indemnified by the administrator for any loss, liability or expense (including reasonable attorneys’ fees and expenses) incurred by it in connection with the performance of its duties under the trust agreement. See “Description of the Notes” in this offering memorandum. The depositor and its affiliates maintain customary banking relations on arm’s-length terms with the Delaware trustee and/or its affiliates. The Delaware trustee may resign at any time. The administrator may also remove the Delaware trustee if it becomes insolvent or ceases to be eligible to continue as Delaware trustee. In the event of such a resignation or removal, the administrator will appoint a successor. The resignation or removal of the Delaware trustee and the appointment of a successor will become effective only when a successor accepts its appointment. To the extent expenses incurred in connection with the replacement of the Delaware trustee are not paid by the successor Delaware trustee, the depositor will be responsible for the payment of such expenses. THE DEPOSITOR Bank of America Student Loan Securitization Corporation, which is a Delaware corporation and a wholly owned special purpose subsidiary of BANA, is the depositor. Its principal address is Bank of America Corporate Center, 100 N. Tryon Street, Mail 39 Code: NC1-007-06-82, Charlotte, North Carolina 28255, and the telephone number is (980) 387-6838. The depositor was formed to purchase, receive capital contributions of or otherwise acquire from time to time student loans of all types and related rights and assets, to own, hold, sell, assign, pledge or otherwise exercise ownership rights with respect to the student loans and related rights, to establish issuance trusts including the issuing entity, to sell securities of one or more issuance trusts, as well as to perform various related actions. THE SELLER, SPONSOR, MASTER SERVICER AND ADMINISTRATOR General Bank of America, National Association (“BANA”), which is a national banking association, acts as the seller, sponsor, master servicer and administrator of the Bank of America student loan securitization program. BANA is a national banking association organized under the laws of the United States, with its principal executive offices in Charlotte, North Carolina. BANA is an indirect, wholly owned subsidiary of Bank of America Corporation (the “Corporation”) and is engaged in general consumer banking, commercial banking, and trust business, offering a wide range of commercial, corporate, international, financial market, retail and fiduciary banking services. As of March 31, 2010, BANA had consolidated assets of $1.496 trillion, consolidated deposits of $1.001 trillion and stockholder’s equity of $168 billion based on regulatory accounting principles. BANA is a national banking association chartered by the Office of the Comptroller of the Currency (the “OCC”) and is subject to the regulation, supervision and examination of the OCC. The Corporation is a bank holding company and a financial holding company, with its principal executive offices located in Charlotte, North Carolina. Additional information regarding the Corporation is set forth in its annual report on Form 10-K for the fiscal year ended December 31, 2009, together with any subsequent periodic and current reports it filed with the SEC pursuant to the Exchange Act. Moody’s currently rates BANA’s long-term debt as “Aa3” and short-term debt as “P-1.” The outlook is stable. S&P currently rates BANA’s long-term debt as “A+” and short-term debt as “A-1.” The outlook is negative. Fitch currently rates BANA’s longterm debt as “A+” and short-term debt as “F1+.” The outlook is stable. Further information with respect to such ratings may be obtained from Moody’s, S&P and Fitch, respectively. No assurances can be given that the current ratings of BANA’s instruments will be maintained. BANA and its affiliates have been active in the securitization market since its inception. BANA has sponsored securitization transactions since 1977. BANA and its affiliates have been involved with the origination and securitization of auto loans, home equity loans, credit card receivables, manufactured housing contracts, residential mortgage loans, and commercial mortgage loans, as well as less traditional asset 40 classes. BANA and its affiliates have also participated in a variety of asset-backed commercial paper programs and other structured finance transactions. BANA and its affiliates have served as sponsors, issuers, dealers, trustees, servicers and in other roles in a wide array of securitization transactions. BANA serves as the sponsor in the depositor’s securitization program, in addition to being an affiliate of the depositor, BANA will perform certain administrative obligations on behalf of the issuing entity. BANA will have limited obligations and rights under the transaction documents, as described in this offering memorandum. BANA’s headquarters and its executive offices are located at Bank of America Corporate Center, 100 N. Tryon Street, Mail Code: NC1-007-06-82, Charlotte, North Carolina 28255, and the telephone number is (980) 387-8696. BANA will also act as administrator under the administration agreement. BANA’s Student Loan Financing Business General BANA or its predecessors have been in the student lending business for over 30 years and have played an active role in the origination and servicing of student loans under various federally sponsored programs. BANA has used a number of vendors to originate these FFELP loans and uses a number of vendors to service these FFELP loans in accordance with established U.S. Department of Education standards. The FFELP, under Title IV of the Higher Education Act, provides for loans to students who are enrolled in eligible institutions, or to parents of dependent students, to finance their educational costs. Payment of principal and interest on the student loans is guaranteed by a state or not-for-profit guaranty agency against: • default of the borrower; • the death, bankruptcy or permanent, total disability of the borrower; • closing of the borrower’s school prior to the end of the academic period; • false certification by the borrower’s school of his eligibility for the loan; and • an unpaid school refund. See “Annex C—Federal Family Education Loan Program” to this offering memorandum for a description of the FFELP. Loan Originations BANA or its subsidiaries and predecessors have originated both federally guaranteed student loans and private credit student loans which are not federally guaranteed. BANA owns approximately $10 billion in student loans as of March 31, 2010, 90% of which are FFELP loans. Since 2000, BANA has disbursed and/or 41 originated over $34 billion, and sold over $20 billion of student loans. BANA was very active in the sale of its FFELP and private loans through the third quarter of 2008. Subsequent to this period, BANA moved to a “Make and Hold” scenario as illiquidity in the capital markets, and changes in economic conditions, worsened and as market sale pricing became unprofitable. BANA has participated in the origination of the following types of FFELP loans, which are insured by guarantors and reinsured by the Department of Education: the subsidized Federal Stafford, unsubsidized Federal Stafford, Federal Parent Loans to Undergraduate Students (PLUS), Graduate PLUS and Federal Consolidation loans. Subsidized Federal Stafford loans are generally made to students who pass certain need criteria. Unsubsidized Federal Stafford loans are designed for students who do not qualify for subsidized Federal Stafford loans due to parental and/or student income and assets in excess of permitted amounts or whose need exceeds the basic Stafford limit. Federal PLUS loans are made to parents of students who are dependents. The Federal Consolidation loan program allows multiple federal loans, including those of both the FFELP and the Federal Direct Student Loan Program, to be combined into a single new guaranteed FFELP loan with a longer repayment term, fixed interest rate and a smaller monthly payment. Federal Consolidation Loans may include governmentguaranteed loans formerly held by other lenders. A Federal Consolidation loan is allowed an extended repayment term of up to 30 years, depending on the loan balance. A student must attend an eligible educational institution in order to obtain a FFELP loan. Eligible institutions can be divided into three categories: four-year colleges and universities, two-year institutions and proprietary (vocational) schools. In addition to other criteria, school eligibility is determined by the default rate on FFELP loans to its students. Under the Higher Education Act, eligible lenders, subject to certain restrictions, may choose not to make loans to students attending certain schools, defined by school type, geographic location or default experience. Effective December 5, 2009, BANA suspended the origination of student loans through the FFELP and no longer accepts applications for new FFELP loans. However, BANA continues to participate in the FFELP through disbursements on FFELP loans originated for the 2009-2010 academic year and through managing a substantial portfolio of FFELP loans. In addition to FFELP, which has statutory limits on annual and total borrowing, BANA has offered a variety of private credit student loan programs to bridge the gap between the cost of education and a student’s resources. Most of these private credit student loans were supplemental to FFELP Stafford loans, and were distributed primarily through the same school channels. In the second quarter of 2008, BANA ceased new private loan originations, and began to concentrate its efforts on its FFELP loan volume. BANA continues to manage approximately $900 million in private credit student loan volume and $9 billion in FFELP volume. 42 Origination Process The U.S. Department of Education and the various guarantors prescribe rules and regulations which govern the servicing of FFELP loans. Each loan applicant is evaluated individually using the appropriate U.S. Department of Education underwriting standards. Each student borrower seeking a Stafford loan or a Graduate PLUS loan, each parent borrower seeking a PLUS loan, and each student for whom a parent borrower is seeking a PLUS loan must meet certain eligibility requirements as described under “Annex C—Federal Family Education Loan Program” to this offering memorandum. With respect to loans made under the FFELP, the identity of the actual originator of any particular student loan is not material, as the requisite underwriting criteria, if any, are in each case prescribed by provisions of the Higher Education Act or the rules and regulations promulgated thereunder. The origination and servicing of the student loans is in accordance with the FFELP, the Higher Education Act, the related guaranty agency’s rules and other applicable requirements. Servicing The U.S. Department of Education and the various guarantors prescribe rules and regulations which govern the servicing of federally insured loans. These rules and regulations include specific procedures for contacting delinquent borrowers, locating borrowers who can no longer be contacted at their documented address or telephone number, and filing claims for reimbursement on loans in default. Payments under a guarantor’s guarantee agreement require strict adherence to these stated due diligence and collection procedures. BANA utilizes ACS, the subservicer, as a third-party servicing processor. Under the subservicing agreement, ACS, as subservicer, will agree to service all the trust student loans. The subservicer is required to perform all services and duties customary to the servicing of FFELP student loans, including all collection practices. It must use the same standard of care as it uses to service other similar student loans in compliance with the applicable guarantee agreements and all other applicable federal and state laws, including the Higher Education Act. Consolidation/Repayment Programs Repayment programs, including FFELP consolidations, made available by BANA to student loan borrowers will continue to be made available to borrowers with trust student loans. The transfer and servicing agreements permit originators of FFELP consolidation loans to purchase student loans from the trust to effect consolidations at the request of borrowers. We refer you to “Annex C—Federal Family Education Loan Program” of this offering memorandum. 43 Default Management Regulations require that collection efforts commence within ten days of any delinquency and continue for the period of delinquency until the FFELP loan is deemed to be in default status. During the delinquency period, the holder of the loan must diligently attempt to contact the borrower, in writing and by telephone, at specified intervals. Most FFELP loans are considered to be in default when they become 270 days delinquent. A guarantor may reject any claim for payment under a guarantee agreement if the specified due diligence and collection procedures required by its guarantee agreement have not been strictly followed and documented or if the claim is not timely filed. Minor errors in due diligence may result in the imposition of interest penalties, rather than a complete loss of the guarantee. In instances in which a claim for payment under a guarantee agreement is denied due to servicing or claim-filing errors, the guaranteed status of the affected student loans may be reinstated by following specified procedures, called “curing the defect.” Interest penalties are commonly incurred on loans that are cured. As master servicer, BANA’s internal procedures are designed to facilitate compliance with existing U.S. Department of Education and guarantor regulations and reporting requirements. BANA utilizes a computerized loan servicing system which monitors the student loans serviced by ACS and its loan servicing centers. The ACS servicing system identifies loans which require due diligence or other servicing procedures and disseminates the necessary loan information to initiate the servicing or collection process. ACS has represented that the ACS servicing system enables ACS to service a high volume of loans in a manner consistent with federal and industry requirements. BANA, while maintaining operating procedures which comply with applicable U.S. Department of Education and guarantor regulations and reporting requirements, performs periodic assessments of ACS’ policies, procedures and practices for compliance by ACS with the U.S. Department of Education’s guidance and guarantor regulations. ACS is required to remediate any and all material findings of noncompliance. Incentive Programs BANA or its predecessors have offered, and intend to continue to offer, various incentive programs to student loan borrowers and cosigners. Some of the programs that may apply to the trust student loans are: • Direct Repay/ACH Benefit plan. Under the Direct Repay/ACH Benefit plan, borrowers who make student loan payments electronically through automatic monthly deductions from a savings, or checking account receive a 0.25% to as much as a 2% effective interest rate reduction as long as loan payments continue to be successfully deducted from the borrower’s bank account. 44 • On Time Reward. Under the On Time Reward program, if a borrower makes the first 48 consecutive scheduled payments in a timely fashion, the effective interest rate is reduced permanently by 2%. • Bank of America Best. Under the Bank of America Best program, if a borrower makes the first 48 consecutive scheduled payments in a timely fashion, the effective interest rate is reduced permanently by 1%. • Bank of America Deposit Account Benefit. Under the Bank of America Deposit Account Benefit, if a borrower submitted his or her application for processing through a preferred processor of BANA and that borrower had a Bank of America deposit account open for at least 60 days between the time of loan disbursement and the date of the first scheduled payment, then shortly after the borrower’s first scheduled payment is made on time, the effective interest rate is reduced permanently by 0.25%. • Bank of America Consolidation Incentive. Under the Bank of America Consolidation Incentive, borrowers who make their first 36 scheduled payments on time receive a 1.0% interest rate reduction. • Tiered Rebate Incentive. Under the Tiered Rebate Incentive, if a borrower makes the first 12 consecutive scheduled payments in a timely fashion, the principal is reduced by 1%. If a borrower makes the next 12 consecutive scheduled payments in a timely fashion, the principal is reduced by 1%. If the borrower makes the next 12 consecutive scheduled payments in a timely fashion, the principal is reduced by an additional 1% for a maximum total of 3%. The effect on any trust student loan for which one of these programs is liable will be borne by the trust. BANA reserves the right to offer other incentive programs to borrowers in the future to the extent these programs are required or permitted by applicable law, provided however that BANA, as the master servicer or the depositor, will be required to compensate the trust in full for any resulting loss in yield on each applicable trust student loan. USE OF PROCEEDS The trust will use the net proceeds of the sale of the notes to make the initial deposits to the collection account, the capitalized interest account and the reserve 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 BANA the purchase price due to BANA for the trust student loans purchased by the depositor under the purchase agreement. 45 Expenses incurred in connection with the acquisition of the trust student loans, the establishment of the trust (including the expenses of accountants, the initial purchasers and the Rating Agencies) and the issuance of the notes are payable by BANA and/or the depositor rather than from the proceeds of the sale of the notes. Expenses to be paid by the depositor are estimated to be $2,700,000. THE TRUST STUDENT LOAN POOL General The depositor will purchase the trust student loans from BANA under the purchase agreement on the closing date. The eligible lender trustee, on behalf of the trust, will purchase the pool of trust student loans from the depositor 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. Eligible Trust Student Loans The pool of statistical trust student loans were selected from a portfolio of student loans owned by BANA by employing several criteria, including requirements, among others, that each trust student loan as of the statistical cutoff date: • is a FFELP loan that is guaranteed as to at least (1) 100% with respect to trust student loans with an initial date of disbursement prior to October 1, 1993, (2) 98% with respect to trust student loans with an initial date of disbursement on or after October 1, 1993 and prior to July 1, 2006 or (3) 97% with respect to trust student loans with an initial date of disbursement on or after July 1, 2006, of its principal and interest by a guaranty agency under a guarantee agreement and the guaranty agency is, in turn, reinsured by the U.S. Department of Education in accordance with the FFELP; • contains terms in accordance with those required by the FFELP, the guarantee agreements and other applicable requirements; • is not more than 210 days past due; • is fully disbursed; • does not have a borrower who is noted in the related records of the master servicer or the subservicer as being currently involved in a bankruptcy proceeding; and • has special allowance payments, if any, based on the three-month commercial paper rate or the 91-day treasury bill rate. No statistical trust student loan, as of the statistical cutoff date, was subject to any prior obligation to sell that loan to a third party. 46 FFELP Delinquencies, Defaults, Claims and Net Losses Information about delinquencies, defaults, guarantee claims and net losses on FFELP loans is available in the U.S. Department of Education’s Loan Programs Data Books, called DOE Data Books. The delinquency, default, claim and net loss experience on this pool of FFELP loans may not be comparable to this information. The following tables contain information concerning the delinquency, default, claim and net loss experience on BANA’s total FFELP loan portfolio as well as the portfolio on BANA’s FFELP loans serviced by ACS. BANA actively pursues the full balance on all guarantee-rejected FFELP loans. This expected recovery is taken into account in arriving at BANA’s periodic provision for loan loss expense. With respect to charge-offs, BANA’s methodology is to charge off the estimated loss of the rejected guarantee loan balance. Actual Recoveries are applied against the loan balance that was charged off. Although there is diversity in practice on how charge-offs are presented, this method is comparable to other financial institutions in how charge-offs and the related charge-off and allowance ratios are presented. 47 Bank of America, N.A. FFELP Loans Total Student Loan Portfolio Loan Status, Delinquency, and Loan Loss Experience (dollars in millions) Qtr ended March 31, Years ended December 31, 2010 2009 2008 2007 2006 2005 1 Total Outstandings In School In Grace In Repayment $10,167 $5,030 $861 $4,276 $9,791 $4,770 $755 $4,267 $7,439 $4,415 $738 $2,285 $4,095 $3,121 $199 $775 $3,707 $2,821 $238 $648 $3,450 $2,854 $152 $443 2 Total $ in Repayment Current Forbearance Deferment Delinquent $4,276 $2,119 $543 $1,102 $510 $4,267 $2,400 $478 $998 $391 $2,285 $1,361 $198 $586 $140 $775 $434 $44 $273 $25 $648 $310 $36 $292 $11 $443 $219 $12 $210 $3 3 Total 30+ Delinquency Dollars Loans delinquent 30-59 days Loans delinquent 60-89 days Loans delinquent 90 days or greater $510 $124 $108 $278 $391 $115 $67 $208 $140 $53 $22 $65 $25 $7 $2 $15 $11 $3 $2 $6 $3 $2 $0 $1 4 Total 30+ Delinquency Rate 11.94% 9.16% 6.13% 3.19% 1.66% 0.70% 5 Net Charge-Offs ($) Net Charge-Offs Annualized Rate (%) $(0.0) $0.1 $0.3 $0.1 $0.0 NM 0.00% 0.00% 0.02% 0.01% 0.01% NM 7 Total Non Credit Loss Expense $1.1 $1.2 $0.2 $0.0 NM NM 8 Total Charge-Off Expense ($) $1.0 $1.2 $0.5 $0.1 NM NM 9 Total Charge-Off Expense (%) 0.055% 0.066% 0.013% 6 1 2 3 4 5 6 7 8 9 0.024% NM NM Represents the total unpaid principal balance by loan status. Represents the total unpaid principal balance for loans in repayment. Represents the total unpaid principal balance for loans at least 30 days past due. Represents the total unpaid principal balance for loans at least 30 days past due divided by the total unpaid principal balance for loans in repayment. An amount equal to gross charge-offs minus repurchase payments received during the reporting period. Cumulative net charge-off $ divided by average $ in repayment for the period multiplied by 365 divided by number of days in the period. The loss exposure of the principal balance up to 3% realized on Government loan losses as these losses are non-collectable, per the FFELP guidelines. The net charge-off amount (line 5) plus the non credit loss expense (line 7). The total charge-off expense for end of period divided by the previous period ending dollars in repayment. 48 Bank of America, N.A. ACS Serviced Portfolio Total Student Loan Portfolio Loan Status, Delinquency, and Loan Loss Experience (dollars in millions) Qtr ended March 31, Years ended December 31, 2010 2009 2008 2007 2006 2005 1 Total Outstandings In School In Grace In Repayment $6,613 $3,157 $550 $2,906 $6,088 $2,930 $455 $2,703 $4,042 $2,266 $325 $1,451 $1,648 $985 $90 $573 $1,343 $820 $80 $443 $1,104 $833 $63 $208 2 Total $ in Repayment Current Forbearance Deferment Delinquent $2,906 $1,490 $378 $693 $344 $2,703 $1,555 $313 $610 $224 $1,451 $860 $117 $400 $75 $573 $284 $38 $229 $23 $443 $168 $31 $234 $9 $208 $55 $5 $146 $2 3 Total 30+ Delinquency Dollars Loans delinquent 30-59 days Loans delinquent 60-89 days Loans delinquent 90 days or greater $344 $81 $71 $192 $224 $63 $43 $119 $75 $22 $13 $39 $23 $6 $2 $15 $9 $2 $1 $5 $2 $1 $0 $1 4 Total 30+ Delinquency Rate 11.84% 8.30% 5.16% 3.98% 2.06% 0.78% 5 Net Charge-Offs ($) $(0.07) $0.0 $0.2 $0.1 $0.1 NM 6 Net Charge-Offs Annualized Rate (%) (0.01)% 0.00% 0.02% 0.02% 0.02% NM 7 Total Non Credit Loss Expense $0.6 $0.8 $0.2 $0.0 NM NM 8 Total Charge-Off Expense ($) $0.6 $0.8 $0.4 $0.1 NM NM 9 Total Charge-Off Expense (%) 0.021% 0.058% 0.068% 0.023% NM NM 1 2 3 4 5 6 7 8 9 Represents the total unpaid principal balance by loan status. Represents the total unpaid principal balance for loans in repayment. Represents the total unpaid principal balance for loans at least 30 days past due. Represents the total unpaid principal balance for loans at least 30 days past due divided by the total unpaid principal balance for loans in repayment. An amount equal to gross charge-offs minus repurchase payments received during the reporting period. Cumulative net charge-off $ divided by average $ in repayment for the period multiplied by 365 divided by number of days in the period. The loss exposure of the principal balance up to 3% realized on Government loan losses as these losses are non-collectable, per the FFELP guidelines. The net charge-off amount (line 5) plus the non credit loss expense (line 7). The total charge-off expense for end of period divided by the previous period ending dollars in repayment. Characteristics of the Statistical Trust Student Loans The tables contained in Annex A to this offering memorandum provide a description of specified characteristics of the statistical trust student loans as of the statistical cutoff date. The aggregate outstanding principal balance of the statistical trust student loans in each of the tables in Annex A includes the principal balance due from borrowers, plus accrued interest to be capitalized of $52,557,222.77 as of the statistical cutoff date. 49 Unless otherwise specified, all information with respect to the statistical trust student loans presented in this offering memorandum or in Annex A is as of June 1, 2010, which is the statistical cutoff date. The actual cutoff date for the pool of trust student loans sold to the trust will be the closing date. Insurance of Trust Student Loans; Guarantors of Trust Student Loans In general, disbursed student loans are guaranteed by the applicable guarantor, and reinsured against default by the U.S. Department of Education. The percentage of the guarantee is based upon the date of disbursement of the statistical trust student loans as follows: Disbursement Date Prior to October 1, 1993.................................................... On or after October 1, 1993 but before July 1, 2006 ........ On or after July 1, 2006..................................................... Percentage Guaranteed 100% 98% 97% The eligible lender trustee has entered into a separate guarantee agreement with each of the guaranty agencies listed on page A-13 in Annex A to this offering memorandum, under which each of the guarantors has agreed to guarantee certain of the trust student loans. Under the Higher Education Amendments of 1992, if the U.S. Department of Education has determined that a guaranty 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 guaranty 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 guaranty agency or, if that determination were made, whether that determination or the ultimate payment of guarantee claims would be made in a timely manner. See “Annex C—Federal Family Education Loan Program—Guaranty Agencies under the FFELP” attached to this offering memorandum. The table on page A-13 of Annex A to this offering memorandum provides information with respect to the applicable percentage by outstanding principal balance of the statistical trust student loans guaranteed by each guarantor. Some historical information about each guaranty agency that guarantee statistical trust student loans and will guarantee trust student loans comprising at least 10% of the initial Pool Balance is also provided beginning on page A-14 in Annex A attached to this offering memorandum. For purposes of the tables in Annex A, we refer to each of these guaranty agencies as a Significant Guarantor. The U.S. Department of Education is required to make reinsurance payments to guarantors with respect to FFELP loans in default. This requirement is subject to 50 specified reductions when the guarantor’s claims rate for a fiscal year equals or exceeds certain trigger percentages of the aggregate original principal amount of FFELP loans guaranteed by that guarantor that are in repayment on the last day of the prior fiscal year. See “Annex C—Federal Family Education Loan Program” attached to this offering memorandum. Each guaranty agency’s guarantee obligations with respect to any trust student loan is conditioned upon the satisfaction of all the conditions in the applicable guarantee agreement. These conditions include, but are not limited to, the following: • the origination and servicing of the trust student loan being performed in accordance with the FFELP, the Higher Education Act, the guaranty agency’s rules and other applicable requirements; • the timely payment to the guaranty agency of the guarantee fee payable on the trust student loan; and • the timely submission to the guaranty 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 guaranty 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. Prospective investors may consult the U.S. Department of Education Data Books for further information concerning the guarantors. Cure Period for Trust Student Loans BANA, the depositor, the master servicer or the subservicer, as applicable, will be obligated to purchase, or, in the case of BANA, the depositor or the master servicer, as applicable, to substitute qualified 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. With respect to the purchase and sale agreements, for purposes of representations and warranties related to the 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 master servicer’s or subservicer’s receipt of the guarantor reject transmittal form with respect to the trust student loan. The purchase or substitution, as applicable, 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. 51 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, the master servicer or the subservicer or for which the master servicer or the subservicer, as applicable, 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 master servicer or the depositor, as applicable, will be required to purchase, within 30 days of a written request by the indenture trustee, 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 master 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 “Transfer and Servicing Agreements—Purchase of Student Loans by the Depositor; Representations and Warranties of the Seller” and “—Sale of Student Loans to the Trust; Representations and Warranties of the Depositor” and “Servicing and Administration—Master Servicer Covenants” in this offering memorandum. 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 on a loan-by-loan basis among the various trusts using the same lender identification number. In addition, the sharing of the lender identification number with other trusts may result in the receipt of claim payments from guaranty 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 guaranty agencies resulting from the eligible lender trustee’s activities in the FFELP. As a result, if the U.S. Department of Education or a guaranty agency were to determine that the eligible lender trustee owes a liability to the U.S. Department of Education or a guaranty agency on any student loan included in a trust using the shared lender identification number, the U.S. Department of Education or that guaranty agency would be likely to collect that liability by offset against amounts 52 due the eligible lender trustee under the shared lender identification number, including amounts that would otherwise be available to the trust. In addition, other trusts using the shared lender identification number may in a given quarter incur consolidation origination fees, consolidation loan rebate fees or floor income rebates 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 master servicing agreement for the trust and the servicing agreements for any other trusts subsequently established by the depositor that share the lender identification number to be used by the trust will require any trust, to the extent of Available Funds, to indemnify the other trusts against a shortfall or an offset by the U.S. Department of Education or a guaranty agency arising from the trust student loans held by the eligible lender trustee on the trust’s behalf. Third-Party Originators of FFELP Loans With respect to FFELP loans, the identity of the actual originator of any particular student loan is not material, as the requisite underwriting criteria, if any, are in each case prescribed by provisions of the Higher Education Act or the rules and regulations promulgated thereunder. Termination of the Trust The trust will terminate upon the earliest of: • the maturity or other liquidation of the last trust student loan and the disposition of any amount received upon its liquidation; • the payment of all amounts required to be paid to the noteholders; and • the purchase, or the arrangement for the purchase, by the master servicer 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, as described under “Description of the Notes—Optional Purchase” in this offering memorandum. Upon termination of the trust, any remaining assets of the trust, after giving effect to final distributions to the noteholders, will be transferred to the reserve account and paid as provided herein under “Description of the Notes—Credit Enhancement— Reserve Account.” 53 TRANSFER AND SERVICING AGREEMENTS General The following is a summary of the material terms of the purchase agreement under which the depositor will acquire the trust student loans from BANA, the sale agreement under which the trust will purchase the trust student loans from the depositor, the master servicing agreement and the subservicing agreement that provide for the servicing of the trust student loans, and the administration agreement, which provides for the administration and management of the trust. We refer to the purchase agreement, the sale agreement, the master servicing agreement, the subservicing agreement and the administration agreement collectively as the “transfer and servicing agreements.” The summary does not cover every detail of these agreements, and it is subject to the provisions of the transfer and servicing agreements. Purchase of Student Loans by the Depositor; Representations and Warranties of the Seller On the closing date, BANA will sell to the depositor, without recourse, its entire interest in the trust student loans and all collections received on and after the closing date, which is the cutoff date for the pool of trust student loans. A schedule to the purchase agreement will list each trust student loan. The depositor will apply net proceeds from the sale of the notes to purchase the trust student loans from BANA. In the purchase agreement, BANA will make representations and warranties concerning the trust student loans being sold by it. These include, among other things, that: • each student loan is free and clear of all security interests and other encumbrances and no offsets, defenses or counterclaims have been asserted or threatened; • the information provided about the trust student loans is true and correct in all material respects as of the cutoff date; • each student loan complies in all material respects with applicable federal and state laws and applicable restrictions imposed by the FFELP or under any guarantee or insurance agreement; and • each student loan is guaranteed by the applicable guarantor and such guarantee is in full force and effect. Upon discovery of a breach of any representation or warranty that has a materially adverse effect on the depositor, BANA, as the seller, will repurchase the affected student loan unless the breach is cured within the applicable cure period. The purchase amount will be equal to the amount required to prepay in full that trust student loan including all accrued interest. Alternatively, rather than repurchasing the trust 54 student loan, BANA may, in its discretion, substitute qualified student loans for that loan. In addition, BANA will be obligated to reimburse the depositor for: • • the shortfall, if any, between: • the purchase amount of the qualified substitute student loans; and • the purchase amount of the trust student loans being replaced; and any accrued interest amounts not guaranteed by, or that are required to be refunded to, a guarantor and any interest subsidy payments or special allowance payments lost as a result of the breach. The repurchase or substitution and reimbursement obligations of BANA constitute the sole remedy available to the depositor for any uncured breach of BANA’s representations and warranties. BANA’s repurchase or substitution and reimbursement obligations are contractual obligations that the depositor or trust may enforce against BANA, but the breach of these obligations will not constitute an event of default under the indenture. In cases where the obligations the trust is seeking to enforce are based on a violation of the Higher Education Act, a finding by the U.S. Department of Education that the Higher Education Act was violated may be required prior to the trust or the depositor being able to enforce such obligations. Sale of Student Loans to the Trust; Representations and Warranties of the Depositor On the closing date, the depositor will sell to the eligible lender trustee on behalf of the trust, without recourse, its entire interest in the trust student loans acquired by the depositor from BANA, upon which time the eligible lender trustee shall become the legal owner of, and the trust shall become the beneficial owner of, all of the trust student loans. Each trust student loan will be listed in a schedule to the sale agreement. The trust concurrently with that sale will issue the notes. The eligible lender trustee on behalf of the trust will purchase the trust student loans from the depositor in exchange for the proceeds from the issuance of the notes and the issuance of the residual certificate to the depositor. In the sale agreement, the depositor will make representations and warranties concerning the trust student loans to the trust for the benefit of noteholders, including representations and warranties that are substantially the same as those made by BANA to the depositor in the purchase agreement. Upon discovery of a breach of any representation or warranty that has a materially adverse effect on the trust, the depositor will have repurchase or substitution and reimbursement obligations that are substantially the same as those of BANA in the purchase agreement. The repurchase or substitution and reimbursement obligations of the depositor will constitute the sole remedy available to the noteholders for any uncured breach. The 55 depositor’s repurchase or substitution and reimbursement obligations are contractual obligations that the trust may enforce against the depositor, but the breach of these obligations will not constitute an event of default under the indenture. In cases where the obligations the trust is seeking to enforce are based on a violation of the Higher Education Act, a finding by the U.S. Department of Education that the Higher Education Act was violated may be required prior to the trust being able to enforce such obligations. Custodian of Promissory Notes To assure uniform quality in servicing and to reduce administrative costs, the subservicer will act as custodian of the promissory notes, in physical or electronic form, representing the trust student loans and any other related documents. In acting as custodian, the subservicer may use its own facilities or those of sub-custodians. The depositor’s, the master servicer’s and the subservicer’s records will reflect the sale by BANA of the trust student loans to the depositor and their subsequent sale by the depositor to the trust. Amendments to Transfer and Servicing Agreements The parties to the transfer and servicing agreements may amend them without the consent of noteholders if, in the opinion of counsel to the trust, the amendment will not materially and adversely affect the interests of the noteholders. The parties may also amend the transfer and servicing agreements with the consent of a majority in interest of noteholders. However, such an amendment may not reduce the percentage of the notes required to consent to an amendment, without the consent of the holders of all of the outstanding notes. SERVICING AND ADMINISTRATION The following is a summary of the important terms of the servicing agreements under which the master servicer and the subservicer will service trust student loans and the administration agreement under which the administrator will undertake administrative duties for the trust and its trust student loans. This summary does not cover every detail of these agreements and it is subject to all provisions of the master servicing and subservicing agreements and the administration agreement. General BANA will act as master servicer pursuant to the master servicing agreement. The master servicer, subject to the limitations on its liability described below and set forth in the master servicing agreement, will provide for the servicing of the trust student loans in accordance with the specifications of the Higher Education Act, and as set forth in the master servicing agreement. The master servicer will be responsible for overseeing the performance of ACS, as subservicer under a subservicing agreement pursuant to which ACS will perform the servicing activities with respect to the trust student loans. 56 The Master Servicing Agreement and the Subservicing Agreement On the closing date, the trust will enter into a master servicing agreement with the master servicer. The master servicer will be obligated to perform its duties under the master servicing agreement unless and until: • the early termination after material default by the master servicer as provided for in the master servicing agreement; or • the resignation of the master servicer upon a determination that performance of the servicing duties is impermissible under applicable law. The master servicer will arrange for and oversee the performance of the subservicer with respect to the trust student loans. If the master servicer breaches any covenant under the master servicing agreement with respect to the trust student loans serviced thereunder, generally it will have to cure the breach, purchase that trust student loan, substitute that trust loan with a substantially similar loan, or reimburse the trust for losses resulting from the breach. The master servicer will be paid a master servicing fee as set forth under “Description of the Notes—Servicing Compensation” in this offering memorandum. The master servicer will not perform any of the servicing activities described in the master servicing agreement. Rather, the subservicer will be responsible for performance of such servicing duties. Notwithstanding the foregoing, BANA will remain obligated and be liable to the trust, the eligible lender trustee, the indenture trustee, the administrator and the noteholders to provide for the servicing of the trust student loans in accordance with the terms of the master servicing agreement without any decrease in its obligations and liability by virtue of the appointment of any subservicer and to the same extent and under the same conditions as if BANA alone were servicing the trust student loans. Furthermore, BANA is liable for its own as well as the subservicer’s negligence and willful misconduct in performing the servicing duties. The master servicing agreement will provide that the master servicer will indemnify the trust and the eligible lender trustee, and the subservicing agreement will provide that the subservicer will indemnify the master servicer for losses arising out of the subservicer’s willful misconduct or negligence with regard to the performance of its services or the breach of its obligations under the subservicing agreement. The subservicing agreement also will provide that the subservicer make reasonable efforts to claim, pursue and collect all guarantee payments with respect to any of the trust student loans. If any trust student loan is denied its guarantee by a guarantee agency, the subservicer will act upon the master servicer’s direction as to the disposition of the account. While the subservicer will not be liable for guarantees rejected due to any error or omission which occurred prior to the subservicer’s involvement, it will use best efforts to cure such rejections. 57 Servicing Procedures The master servicer will enter into a subservicing agreement dated as of the closing date, with ACS Education Services, Inc. Pursuant to this subservicing agreement, ACS will generally agree to provide all customary student loan servicing activities with respect to the trust student loans. Such services generally include maintaining custody of copies of promissory notes and related documentation, billing and processing payments from borrowers, undertaking certain required collection activities with respect to delinquent loans, submitting guarantee claims with respect to defaulted loans, establishing and maintaining records with respect to its servicing activities, and providing certain reports of its activities and the student loan portfolios serviced by it. ACS will agree to service the trust student loans in compliance with the Higher Education Act, the guidelines of the applicable guarantors, and all applicable federal and state laws and regulations. The duties of the subservicer, among others, include the following: • collecting and depositing into the collection account all payments on the trust student loans, including claiming and obtaining any FFELP payments; • responding to inquiries from borrowers; • attempting to collect delinquent payments; and • sending out statements and payment coupons to borrowers. In addition, the subservicer will keep ongoing records on the loans and its collection activities in compliance with the applicable guarantee agreements and all other applicable federal and state laws, including, if applicable, the Higher Education Act. It will also furnish periodic reports to the administrator, the eligible lender trustee and the master servicer. In addition, the calculation agent on behalf of the administrator will furnish statements to the indenture trustee and the eligible lender trustee. See “—Statements to Indenture Trustee and Trust” below. The initial term of the subservicing agreement is 10 years; however, such term will automatically extend for an additional year annually on July 9, 2020 unless either party provides 90 days written notice of termination prior to the end of any such extension of the term. The master servicer may terminate the subservicing agreement if a material breach has occurred by ACS and such breach has not been cured within thirty (30) days after written notice thereof has been received by ACS, provided, however, that other than with respect to non-payment of amounts due to the master servicer, such thirty (30)-day period shall be extended for up to an additional sixty (60) days if ACS diligently undertakes to cure such breach. ACS may terminate the subservicing agreement if a material breach has not been cured by the master servicer (i) within 30 days following written notice thereof if the breach is non-payment of ACS’s fees, and (ii) within 30 days for any other material breach, which thirty (30)-day period 58 shall be extend up to an additional sixty (60) days if the master servicer diligently undertakes to cure such breach. The master servicer may also terminate the subservicing agreement without cause at any time upon at least ninety (90) days’ prior written notice to ACS and payment of a deconversion fee. ACS may amend the subservicing agreement if, in ACS’s reasonable determination, changes in any current or future law, regulation or other requirement applicable to the loans it services under the subservicing agreement expose ACS to a materially increased risk of liability to certain parties, impose materially increased duties or obligations upon ACS, cause ACS to incur additional material expenses or materially restrict or derogate from ACS’s indemnification rights or limits of liability and ACS may terminate the subservicing agreement if ACS and the Master Servicer fail to reach an agreement with respect to such proposed amendment. Additionally, the master servicer may terminate the subservicing agreement if ACS announces or actually commences a wind-down of its servicing activities. The master servicer will pay ACS a monthly fee for the servicing of trust student loans according to schedules set forth in the subservicing agreement which fee is subject to periodic adjustment. Pursuant to the subservicing agreement, ACS is entitled to cure any errors or omissions in the performance of its duties under the subservicing agreement by reperformance of such duties to the extent such reperformance will reasonably eliminate or mitigate losses to the master servicer and the trust. The subservicing agreement further provides that ACS shall not be liable in the performance of services except for willful misconduct or gross negligence and then only to the extent of (i) principal and interest on rejected claims if ACS’s conduct causes a loan to be uncollectible or a guarantee to be rejected, or (ii) an amount not to exceed ACS’s aggregate revenue from monthly servicing revenues during the first 12 months. Under the subservicing agreement, ACS is not liable for its failure to comply with any law, rule, regulation or other requirement applicable to any trust student loans which was not articulated in writing and actually made known to ACS, which is inconsistent with industry practice or prior guarantor conduct or during any period in which the U.S. Department of Education and/or any guarantor shall have indicated that it will not enforce such requirement. ACS is not liable for any incidental, indirect, special, punitive or consequential damages or for failure to provide services because of reasons beyond its control. ACS is not liable for any violation of the subservicing agreement where ACS’s action or inaction was not negligent, for any losses, liabilities or expenses arising from or relating to guarantor error, for any losses, liabilities or expenses arising from electronic data interchange failure not directly related to ACS’s negligence or willful misconduct, or for the uncollectibility or non-payment with respect to accounts serviced under the subservicing agreement or the failure of a guarantor to pay any claim except where such uncollectibility or failure is a direct result of ACS’s negligence or willful misconduct. 59 In certain circumstances the master servicer is required to indemnify ACS for all claims made or threatened by third parties, including all related damages, losses, liabilities and reasonable expenses, to the extent such claims and damages arise out of or relate to the master servicer’s negligence or willful misconduct. In certain circumstances, ACS is required to indemnify the master servicer for all claims made or threatened by third parties, including all related damages, losses, liabilities and reasonable expenses, to the extent such claims and damages arise out of or relate to ACS’s negligence or willful misconduct. Payments on Trust Student Loans The subservicer will generally deposit all payments on the trust student loans and proceeds that it collects during each collection period into the collection account within two business days of receipt. The master servicer will deposit all interest subsidy payments and all special allowance payments on the trust student loans that it receives for each collection period into the collection account within two business days of receipt. A business day for this purpose is any day other than a Saturday, a Sunday, or a day on which banking institutions or trust companies in the City of New York are authorized or obligated by law, regulation or executive order to remain closed. The depositor and the master servicer will pay the aggregate purchase amount of trust student loans repurchased by the depositor or purchased by the master servicer or the subservicer to the indenture trustee, and the indenture trustee will deposit these amounts into the collection account on or before the business day preceding each distribution date. The servicing agreements will not require the master servicer or the subservicer to make advances to the trust and no such advances have been made by the master servicer or the subservicer with respect to any trust student loans. Master Servicer Covenants The master servicer will agree to cause the subservicer, among others: • to satisfy all of its obligations relating to the trust student loans, maintain in effect all qualifications required in order to service the loans and comply in all material respects with all requirements of law; • not to permit any rescission or cancellation of a trust student loan except as ordered by a court of competent jurisdiction or governmental authority or as otherwise consented to by the eligible lender trustee or the indenture trustee; • to do nothing to impair the rights of the noteholders in the trust student loans; and 60 • not to reschedule, revise, defer or otherwise compromise payments due on any trust student loan except during any applicable interest only, deferment or forbearance periods or otherwise in accordance with the same standards and practices that are customary for the servicing of other FFELP loans serviced by ACS. Upon the discovery of a breach of any covenant that has a materially adverse effect on the interest of the trust, the master servicer will purchase the related trust student loan unless the breach is cured within the applicable cure period specified herein. See “Transfer and Servicing Agreements—Servicing Procedures” in this offering memorandum. However, any breach that relates to compliance with the requirements of the Higher Education Act or the applicable guarantor but that does not affect that guarantor’s obligation to guarantee payment of a trust student loan will not be considered to have a material adverse effect. In addition, a finding by the U.S. Department of Education that the Higher Education Act was violated or that a loan is no longer insured because of a violation of the Higher Education Act may be required prior to the trust being able to enforce the agreement. The purchase price paid by the master servicer will equal the unpaid principal amount of the related trust student loan plus any accrued interest. The purchase price will also be calculated using the applicable percentage that would have been insured pursuant to Section 428(b)(1)(G) of the Higher Education Act plus any interest subsidy payments or special allowance payments not paid by, or required to be refunded to, the U.S. Department of Education for that trust student loan as a result of a breach of any covenant of the master servicer. The trust’s interest in that purchased trust student loan will be assigned to the master servicer, the subservicer or its designee, as applicable. Alternatively, rather than purchase the trust student loan, the master servicer may, in its sole discretion, substitute qualified student loans. In addition, the master servicer will be obligated to reimburse the trust for: • • the shortfall, if any, between: • the purchase amount of the qualified substitute trust student loans; and • the purchase amount of the trust student loans being replaced; and any accrued interest amounts not guaranteed by, or that are required to be refunded to, a guarantor and any interest subsidy payments or special allowance payments lost as a result of a breach. The purchase or substitution and/or reimbursement obligations of the master servicer or subservicer, as applicable, will constitute the sole remedy available to the trust for any uncured breach of a covenant that has a materially adverse effect on the interest of the trust. The master servicer’s purchase or substitution and reimbursement 61 obligations are contractual obligations that the trust may enforce, but the breach of these obligations will not constitute an event of default under the indenture. Servicing Compensation The master servicer will receive a servicing fee as described below under “Description of the Notes—Servicing Compensation.” The servicing fee, including any unpaid amounts from prior distribution dates, will have a payment priority over the notes. Evidence as to Compliance The master servicing agreement will require the master servicer and every subservicer to engage a firm of independent public accountants to furnish to the trust, the indenture trustee, the eligible lender trustee and the administrator an annual report attesting to the certification by the master servicer or subservicer, as applicable, as to the compliance assessments described in the master servicing agreement. The accounting firm will base its report on its examination of various documents and records and on appropriate accounting and auditing procedures. The master servicing agreement will require the master servicer and each subservicer to deliver to the trust, indenture trustee and eligible lender trustee, concurrently with the compliance report, a certificate signed by an authorized officer of such servicer stating that, to his knowledge, such servicer has fulfilled its obligations under the applicable servicing agreement. If there has been a material default, the officer’s certificate for that period will describe the default. The master servicer has agreed to give the indenture trustee or eligible lender trustee, as applicable, notice of servicer defaults under the master servicing agreement or the subservicing agreement. Noteholders may obtain copies of these reports and certificates by a request in writing to the indenture trustee. Matters Regarding the Master Servicer The master servicing agreement will provide that the master servicer is an independent contractor and that, except for the services to be performed under the master servicing agreement, the master servicer does not hold itself out as an agent of the trust. The master servicing agreement will provide that the master servicer may not resign from its obligations and duties as master servicer unless its performance of these duties is no longer legally permissible. No resignation will become effective until the indenture trustee or a successor master servicer has assumed the master servicer’s duties. The master servicing agreement will provide, however, that the master servicer may assign its obligations under the master servicing agreement to any entity into which the master servicer may be merged or consolidated, or any entity resulting from any merger or consolidation to which the administrator is a party, or any entity succeeding to the business of the administrator, and in each case shall provide notice of such assignment to the rating agencies then rating the notes. 62 All expenses related to the resignation or removal for cause of any master servicer will be paid solely by the master servicer being replaced. The master servicing agreement will further provide that neither the master servicer nor any of its directors, officers, employees or agents will be under any liability to the trust or to noteholders for taking or not taking any action under the master servicing agreement, or for errors in judgment. However, the master servicer will not be protected against: • its obligation to purchase trust student loans from the trust as required in the master servicing agreement or to pay to the trust the amount of any program payment which a guarantor or the U.S. Department of Education refuses to pay, or requires the trust to refund, as a result of the master servicer’s actions; or • any liability that would otherwise be imposed by reason of willful misconduct or gross negligence in the performance of the master servicer’s duties. In addition, the master servicing agreement will provide that the master servicer is under no obligation to appear in, prosecute or defend any legal action where it is not named as a party. Servicer Default A servicer default under the master servicing agreement will consist of: • any failure to make or cause the subservicer to make deposits into the Trust Accounts of any required payment that continues for five business days after the master servicer receives written notice of such failure from the indenture trustee, the eligible lender trustee or the administrator; • any failure in the observance or performance in any material respect of any other term, covenant or agreement in the master servicing agreement that materially and adversely affects the rights of noteholders and continues for 60 days after written notice of such failure is given (1) to the master servicer by the indenture trustee or eligible lender trustee or (2) to the master servicer, the indenture trustee and the eligible lender trustee by holders of not less than 50% of the outstanding principal amount of the notes; • the occurrence of an insolvency event involving the master servicer; • any failure to comply with any requirements under the Higher Education Act resulting in a loss of eligibility as a third-party servicer; and 63 • any failure by the master servicer or the subservicer to deliver any information, report or notice as required under the master servicing agreement which continues unremedied for 15 calendar days after the date on which such information, report or notice was required to be delivered. An insolvency event is a voluntary or involuntary bankruptcy filing, the ordering of a winding-up or liquidation of the debtor’s affairs, the appointment or selection of a receiver or similar individual to assign the debtor’s property for the benefit of creditors, or the inability of the debtor to pay its obligations. A master servicer default does not include any failure by the subservicer to service a trust student loan in accordance with the Higher Education Act so long as the master servicer is in compliance with its obligations under the master servicing agreement to purchase any adversely affected trust student loans and to cause to be paid to the trust the amount of any program payments lost as a result of such failure. Rights Upon Master Servicer Default As long as a master servicer default remains unremedied, the indenture trustee or holders of not less than 50% of the outstanding principal amount of the notes may terminate all the rights and obligations of the master servicer. Only the indenture trustee or the noteholders and not the eligible lender trustee will have the ability to remove the master servicer if a default occurs while the notes are outstanding. Following a termination, a successor master servicer appointed by the indenture trustee or the indenture trustee itself will succeed to all the responsibilities, duties and liabilities of the master servicer under the master servicing agreement and will be entitled to similar compensation arrangements. The compensation may not be greater than the servicing compensation to the master servicer under the master servicing agreement, unless the compensation arrangements will not result in a downgrading or withdrawal of the ratings then applicable to the notes. If the indenture trustee is unwilling or unable to act, it may appoint, or petition a court for the appointment of, a successor whose regular business includes the servicing of student loans. If, however, a bankruptcy trustee or similar official has been appointed for the master servicer, and no servicer default other than that appointment has occurred, the trustee may have the power to prevent the indenture trustee or the noteholders from effecting the transfer. Waiver of Past Defaults The holders of not less than 50% of the outstanding principal amount of the notes in the case of any servicer default which does not adversely affect the indenture trustee or the noteholders may, on behalf of all noteholders, waive any master servicer default, except a default in making any required deposits to or payments from any of the trust accounts. Therefore, the noteholders have the ability, except as noted, to waive defaults by the master servicer which could materially and adversely affect the holder of the residual certificate. No waiver will impair the noteholders’ rights as to subsequent defaults. 64 Custody of the Student Loan Promissory Notes ACS will act as custodian of the trust student loans. ACS agrees to store, protect and retain promissory notes and other collateral documents for serviced trust student loans in a locked, secure place on its premises. Original promissory notes will be released to the indenture trustee on written instruction (or at the written direction of the trust, with the consent of the indenture trustee). Description of Subservicer ACS will act as a subservicer for the trust. ACS is a for-profit corporation and a wholly-owned subsidiary of Xerox Corporation (“Xerox”). Headquartered in Norwalk, Connecticut, Xerox is a Fortune 500 company providing document technology, services, software and supplies for production and office environments, as well as business process and technology outsourcing solutions to world-class commercial and government clients. Xerox’s common stock trades on the New York Stock Exchange under the symbol “XRX”. ACS has its headquarters at One World Trade Center, Suite 2200, Long Beach, California 90831, and has regional processing centers in Long Beach and Bakersfield, California; Utica, New York; Lombard, Illinois; Canyon, Texas; and Aberdeen, South Dakota. ACS’s Guaranteed Loan Servicing Group is operated as an independent, third party education loan servicer with approximately 1,000 employees, providing full service loan origination and servicing for the Federal Stafford, PLUS and Consolidation education loan programs and many alternative/private loan programs. ACS and its predecessors have over 42 years of experience providing outsourcing services to higher education. As of May 2010, the Guaranteed Loan Servicing Group of ACS currently services approximately 4.1 million education loan accounts with loans valued at approximately $56 billion. The preceding two paragraphs have been furnished by ACS for use in this offering memorandum. ACS does not guarantee or make any representation as to the accuracy or completeness thereof or as to the absence of any material adverse change in such information or in the condition of ACS subsequent to the date hereof. The Administration Agreement and the Calculation Agent Agreement Bank of America, National Association, as administrator, will enter into an administration agreement with the trust, the depositor, the master servicer, the eligible lender trustee and the indenture trustee. Under the administration agreement, the administrator will agree to provide various notices and to perform other administrative obligations required by the indenture, trust agreement and sale agreement, which services include, among other things: • causing the calculation agent to direct the indenture trustee to make the required distributions from the Trust Accounts on each monthly servicer payment date and each distribution date; 65 • causing the calculation agent to prepare, based on periodic data received from the subservicer, and provide quarterly distribution statements to the eligible lender trustee and the indenture trustee; and • providing the notices and performing other administrative obligations required by the indenture, the trust agreement and the sale agreement. The administrator will enter into a calculation agent agreement, dated as of the closing date, with ACS-AMG, as calculation agent, the trust, the depositor and the master servicer, pursuant to which ACS-AMG, in its capacity as calculation agent, will assume responsibility for calculating the deposits into the various Trust Accounts and calculating the deposits and distributions described under “Description of the Notes— Distributions—Quarterly Distributions from the Collection Account” in this offering memorandum. The administrator may terminate the calculation agent agreement at any time upon ninety (90) days prior written notice. The calculation agent may terminate the agreement upon a material breach by the administrator that is not cured within thirty (30) to sixty (60) days after written notice, or non-payment of amounts owed to the calculation agent that continues more than thirty (30) days after written notice. As compensation, the administrator and the calculation agent will each receive the administration fee specified below under “Description of the Notes—Administration Fee.” The administration agreement will provide that the administrator may not resign from its obligations and duties as administrator unless its performance of these duties is no longer legally permissible. Such resignation shall not be effective until the appointment and acceptance of a successor administrator. Upon receiving such notice of resignation, the trust must promptly appoint a successor administrator. If at any time the administrator (i) fails to duly perform or observe in any material respect any of its covenants or agreements under the administration agreement or breaches a representation or warranty in the transaction documents, in each case which failure materially and adversely affects the rights of the issuing entity and the noteholders and continues unremedied for ninety (90) days or (ii) is adjudged bankrupt or insolvent, then the issuing entity may remove the administrator. The administration agreement will provide that the administrator may not assign its obligations under the administration agreement, except to an entity into which the master servicer may be merged or consolidated, or an entity resulting from any merger or consolidation to which the administrator is a party, or an entity succeeding to the business of the administrator, and in each case shall provide notice of such assignment to the rating agencies then rating the notes. All expenses related to the resignation or removal for cause of any administrator will be paid solely by the administrator being replaced. 66 Administrator Default An administrator default under the administration agreement will consist of: • any failure by the administrator to deliver to the indenture trustee for deposit any required payment by the business day preceding any monthly servicer payment date or distribution date, if the failure continues for five business days after the earlier of notice or discovery; • any failure by the administrator to direct or cause the calculation agent to direct the indenture trustee to make any required distributions from any of the Trust Accounts on any monthly servicer payment date or any distribution date, if the failure continues for five business days after the earlier of notice or discovery; and • any failure by the administrator to observe or perform in any material respect any other term, covenant or agreement in an administration agreement that materially and adversely affects the rights of noteholders and continues for 60 days after written notice of the failure is given: (1) to the administrator by the indenture trustee or the eligible lender trustee, or (2) to the administrator, the indenture trustee or the eligible lender trustee, by holders of no less than 50% of the outstanding principal amount of the notes; and the occurrence of an insolvency event involving the administrator. Rights Upon Administrator Default As long as any administrator default has not been remedied, the indenture trustee or holders of not less than 50% of the outstanding principal amount of the notes, may terminate all the rights and obligations of the administrator. Only the indenture trustee or the noteholders and not the eligible lender trustee may remove the administrator if an administrator default occurs while the notes are outstanding. Following the termination of the administrator, a successor administrator appointed by the indenture trustee or the indenture trustee itself will succeed to all the responsibilities, duties and liabilities of the administrator under the administration agreement. The successor will be entitled to a similar compensation arrangement as the administrator. If, however, a bankruptcy trustee or similar official has been appointed for the administrator, and no other administrator default other than that appointment has occurred, that trustee or official may have the power to prevent the indenture trustee or the noteholders from removing the administrator and appointing a successor administrator. If the indenture trustee is unwilling or unable to act, it may appoint, or petition a court for the appointment of, a successor whose regular business includes the servicing or administration of trust student loans. The indenture trustee may make 67 arrangements for compensation to be paid, which cannot be greater than the compensation to the administrator, unless the compensation arrangements will not result in a downgrading or withdrawal of the ratings then applicable to the notes. Statements to Indenture Trustee and Trust Before each distribution date, the administrator will prepare and provide a statement to the indenture trustee and the eligible lender trustee as of the end of the preceding collection period. The statement will include, in general: • any material modifications, extensions or waivers to the terms of the trust student loans, fees, penalties or payments during the related collection period or that cumulatively become material over time; and • any material breaches of representations and warranties regarding the trust student loans or if any applicable triggers or asset tests are then in effect. The administrator will also cause the calculation agent to prepare and provide, before each distribution date, a statement to the indenture trustee and the eligible lender trustee as of the end of the preceding collection period. The statement will include, in general: • the Principal Distribution Amount for the notes; • the Interest Distribution Amount for the notes and the applicable interest rate; • the Pool Balance at the beginning and at the end of the preceding collection period; • the outstanding principal amount and the note pool factor for the notes for that distribution date; • the primary servicing fee and the administration fee for that collection period; • the interest rate, if available, for the next period for the notes or the website where that rate may be found; • the amount of any aggregate Realized Losses for that collection period; • the amount of any Note Interest Shortfall and note principal shortfall, if applicable, for the notes, and any changes in these amounts from the preceding statement; • the amount of any carryover servicing fee for that collection period; 68 • the amount of any Note Interest Shortfall carried over from the previous collection period, if applicable, for the notes, and any change in this amount from the preceding statement; • the aggregate purchase amounts for any trust student loans repurchased by the depositor, the master servicer or the seller from the trust in that collection period; • the balance of trust student loans that are delinquent in each delinquency period as of the end of that collection period; • the balance of the reserve account and the capitalized interest account, after giving effect to changes in such balances on that distribution date; and • amounts distributed to the holders of the residual certificate and the uses of Available Funds to the extent not otherwise set forth above. Evidence as to Compliance The administration agreement will provide that a firm of independent public accountants will furnish to the trust, the eligible lender trustee and the indenture trustee an annual report attesting to the administrator’s compliance with the terms of the administration agreement, including all statutory provisions incorporated in the agreement. The accounting firm will base this report on its examination of various documents and records and on accounting and auditing procedures considered appropriate under the circumstances. The administration agreement will require the administrator to deliver to the trust, the eligible lender trustee and the indenture trustee, concurrently with each compliance report, a certificate signed by an authorized officer of the administrator stating that, to his knowledge, the administrator has fulfilled its obligations under the administration agreement. If there has been a material default the officer’s certificate will describe the default. The administrator will agree to give the indenture trustee and eligible lender trustee notice of administrator defaults under the administration agreement. You may obtain copies of these reports and certificates by a request in writing to the administrator. Description of Calculation Agent ACS Asset Management Group, Inc. (“ACS-AMG”), an Oregon corporation and a wholly-owned subsidiary of ACS Education Services, Inc., provides master servicing, servicing administration and administration services for student loans in a variety of financing transactions. As of April 2010, ACS-AMG acts as successor or backup master servicer, servicing administrator or administrator for transactions involving loan 69 portfolios of approximately $5.1 billion. ACS-AMG has its headquarters at One World Trade Center, Suite 2200, Long Beach, California 90831. DESCRIPTION OF THE NOTES The Indenture The notes will be issued and secured under an indenture entered into by the trust, the indenture trustee and the eligible lender trustee. The following summary describes the important terms of the notes and the indenture. It does not cover every detail of the notes or the indenture and is subject to all of the provisions of the notes, the indenture and the trust agreement. Modification of Indenture. With the consent of the holders of a majority of the affected notes, the indenture trustee and the eligible lender trustee may execute a supplemental indenture to add, change or eliminate any provisions of the indenture or to modify the rights of such noteholders. However, without the consent of the holder of each affected note, no supplemental indenture will: • change the due date of any installment of principal of or interest on any note or reduce any note’s principal amount or interest rate; • change the provisions of the indenture relating to the application of collections on, or the proceeds of the sale of, the trust student loans to payment of principal of or interest on the notes; • change the place of payment or the payment currency for any note; • impair the right to institute suit for the enforcement of provisions of the indenture regarding payment; • reduce the percentage of outstanding notes whose holders must consent to any supplemental indenture; • reduce the percentage of outstanding notes whose holders must consent to a sale or liquidation of the trust student loans if the proceeds of the sale would be insufficient to pay the principal amount and accrued interest on the notes; • modify the provisions of the indenture which specify the applicable percentages of the outstanding principal amount of notes necessary to take specified actions except to increase these percentages or to specify additional provisions; • modify any of the provisions of the indenture to affect the calculation of interest or principal due on any note on any distribution date; or 70 • permit the creation of any lien ranking prior or equal to the lien of the indenture on any of the collateral for that series or, except as otherwise permitted or contemplated in that indenture, terminate the lien of the indenture on any collateral or deprive the holder of any note of the security afforded by that lien. The trust and the indenture trustee may also enter into supplemental indentures, without the consent of noteholders, for the purpose of adding, changing or eliminating any provisions of the indenture or of modifying the rights of noteholders, so long as such action will not, in the opinion of counsel to the trust, adversely affect in any material respect the interest of any noteholder. Events of Default; Rights Upon Event of Default. An “event of default” under the indenture will consist of the following: • a default for five business days or more in the payment of any interest on any note after it is due; • a default in the payment of the principal of any note at maturity; • a default in the performance of any covenant or agreement of the trust in the indenture, or a material breach of any representation or warranty made by the trust in the indenture or in any certificate, if the default or breach has a material adverse effect on the holders of the notes and is not cured within 30 days after notice by the indenture trustee or by holders of at least 25% in principal amount of the outstanding notes; or • the occurrence of an insolvency event involving the trust. The amount of principal required to be distributed to holders of the notes on any distribution date will generally be limited to amounts available after payment of interest and all other prior obligations of the trust. Therefore, the failure to pay principal on the notes generally will not result in the occurrence of any event of default until the final scheduled distribution date for the notes. If an event of default occurs and is continuing, the indenture trustee or holders of a majority of the outstanding principal amount of the notes may declare the principal of all of the notes to be immediately due and payable. This declaration may, under certain circumstances, be rescinded by the holders of a majority of the outstanding principal amount of the notes. If the notes have been declared to be due and payable following an event of default, the indenture trustee may, in its discretion, • exercise remedies as a secured party against the trust student loans and other assets of the trust that are subject to the lien of the indenture; 71 • sell the trust student loans and other assets of the trust; provided, that none of BANA, the depositor or any of their respective affiliates may bid an amount greater than the fair value of such assets; or • elect to have the eligible lender trustee maintain ownership of the trust student loans and continue to apply collections on them as if there had been no declaration of acceleration of the maturity of the notes. However, the indenture trustee may not sell the trust student loans and other properties following an event of default, other than a default in the payment of any principal at maturity or a default for five days or more in the payment of any interest, unless: • the holders of all of the outstanding notes consent to the sale; • the proceeds of the sale are sufficient to pay in full the principal and accrued interest on the outstanding notes at the date of the sale; or • the indenture trustee determines that the collections would not be sufficient on an ongoing basis to make all payments on the notes as the payments would have become due if the notes had not been declared due and payable, and the indenture trustee obtains the consent of the holders of 66 2/3% of the outstanding principal amount of the notes. Subject to the provisions of the indenture relating to the duties of the indenture trustee, if an event of default occurs and is continuing, the indenture trustee will be under no obligation to exercise any of its rights or powers at the request or direction of any of the holders of the notes, if the indenture trustee reasonably believes it will not be adequately indemnified against the costs, expenses and liabilities which it might incur in complying with their request. Subject to the provisions for indemnification and limitations contained in the indenture, the holders of a majority of the outstanding principal amount of the notes will have the right to direct the time, method and place of conducting any proceeding or any remedy available to the indenture trustee and may, in certain cases, waive any default, except a default in the payment of principal or interest or a default under a covenant or provision of the indenture that cannot be modified without the waiver or consent of all the holders of the outstanding notes. No holder of the notes will have the right to institute any proceeding with respect to the indenture, unless: • the holder previously has given to the indenture trustee written notice of a continuing event of default; • the holders of not less than 25% of the outstanding principal amount of the notes, have requested in writing that the indenture trustee institute a proceeding in its own name as indenture trustee; 72 • the holder or holders have offered the indenture trustee reasonable indemnity; • the indenture trustee has for 60 days after receipt of notice failed to institute the proceeding; and • no direction inconsistent with the written request has been given to the indenture trustee during the 60-day period by the holders of a majority of the outstanding principal amount of the notes. In addition, the indenture trustee and the noteholders will covenant that they will not at any time institute against the trust any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law. The indenture trustee, BANA, the depositor, the administrator, the master servicer, the eligible lender trustee, the noteholders and their owners, beneficiaries, agents, officers, directors, employees, successors and assigns will not be liable for the payment of the principal of or interest on the notes or for the agreements of the trust contained in the indenture. Certain Covenants. The indenture will provide that the trust may not consolidate with or merge into any other entity, unless: • the entity formed by or surviving the consolidation or merger is organized under the laws of the United States, any state or the District of Columbia; • the surviving entity expressly assumes the trust’s obligation to make due and punctual payments on the notes and the performance or observance of every agreement and covenant of the trust under the indenture; • no default will occur and be continuing immediately after the merger or consolidation; • the trust has been advised that the ratings then applicable to the notes would not be reduced or withdrawn as a result of the merger or consolidation; and • the trust has received opinions of federal and Delaware tax counsel that the consolidation or merger would have no material adverse U.S. federal or Delaware state tax consequences to the trust or to any holder of the notes. The trust will not: • except as expressly permitted by the indenture, the transfer and servicing agreements or other related documents, sell, transfer, exchange or otherwise dispose of any of the assets of the trust; 73 • claim any credit on or make any deduction from the principal and interest payable on the notes, other than amounts withheld under the Code or applicable state law, or assert any claim against any present or former holder of notes because of the payment of taxes levied or assessed upon the trust; • except as contemplated by the indenture and the related documents, dissolve or liquidate in whole or in part; • permit the validity or effectiveness of the indenture to be impaired or permit any person to be released from any covenants or obligations under the indenture, except as expressly permitted by the indenture; or • permit any lien, charge or other encumbrance to be created on the assets of the trust, except as expressly permitted by the indenture and the related documents. The trust may not engage in any activity other than as specified under “Formation of the Trust—The Trust” above in this offering memorandum. In addition, the trust will not incur, assume or guarantee any indebtedness other than indebtedness evidenced by the notes and the indenture, except as permitted by the indenture and the related documents. Indenture Trustee’s Annual Report. The indenture trustee will be required to mail all noteholders a brief annual report relating to, among other things, any changes in its eligibility and qualification to continue as the indenture trustee under the indenture, any amounts advanced by it under the indenture, the amount, interest rate and maturity date of indebtedness owing by the trust to the indenture trustee in its individual capacity, the property and funds physically held by the indenture trustee as such and any action taken by it that materially affects the notes and that has not been previously reported. Satisfaction and Discharge of Indenture. The indenture will be satisfied and discharged when the indenture trustee has received for cancellation all of the notes or, with certain limitations, when the indenture trustee receives funds sufficient for the payment in full of all of the notes. Insolvency Events The trust agreement will provide that the eligible lender trustee may commence a voluntary bankruptcy proceeding relating to the trust only with the unanimous prior approval of all noteholders of the outstanding notes. In order to commence a voluntary bankruptcy, all noteholders must deliver to the eligible lender trustee a certificate certifying that they reasonably believe the trust is insolvent. 74 Form and Denomination of the Notes Book-Entry Registration Initially, the notes will be issued in book-entry format in minimum denominations of $100,000 and $1,000 in excess thereof. Notes offered and sold to a QIB pursuant to Rule 144A will be represented by one or more Rule 144A Global Notes. Notes offered and sold in reliance on Regulation S will be represented by one or more Regulation S Global Notes. Rule 144A Global Notes and Regulation S Global Notes are collectively referred to in this offering memorandum as “Global Notes.” The Global Notes will be deposited upon issuance with a custodian for DTC, in New York, New York and will be registered in the name of Cede & Co., as nominee for DTC, in each case for credit to an account of a direct or indirect participant of DTC as described below. Beneficial interests in Rule 144A Global Notes may not be exchanged for interests in Regulation S Global Notes at any time except in the limited circumstances described below. See “—Exchanges Between Regulation S Global Notes and Rule 144A Global Notes” below. The Global Notes, and interests or participations therein, will be subject to certain restrictions on transfer and will bear a restrictive legend as described under “—Transfer Restrictions” below. In addition, transfer of beneficial interests in the Global Notes will be subject to the applicable rules and procedures of DTC and its direct and indirect participants (including, if applicable, those of Clearstream, Luxembourg and Euroclear), which may change from time to time. While the notes are represented by Global Notes, all references to actions by the noteholders will refer to actions taken by DTC upon instructions from its participating organizations and all references in this offering memorandum to distributions, notices, reports and statements to noteholders will refer to distributions, notices, reports and statements to DTC or its nominee, as the registered noteholder, for distribution to owners of the notes in accordance with DTC’s procedures. Investors in the Rule 144A Global Notes may hold their interests therein directly through DTC, if they are DTC participants, or indirectly through organizations which are participants in such system, including Clearstream, Luxembourg and Euroclear. Clearstream, Luxembourg and Euroclear will hold omnibus positions on behalf of their respective participants, through customer’s securities accounts in Clearstream, Luxembourg and Euroclear’s names on the books of their respective depositaries. The depositaries in turn will hold the positions in customer’s securities accounts in the depositaries’ names on the books of DTC. According to information provided by DTC, DTC is: • a limited-purpose trust company organized under the New York Banking Law; 75 • a “banking organization” within the meaning of the New York Banking Law; • a member of the Federal Reserve System; • a “clearing corporation” within the meaning of the New York Uniform Commercial Code; and • a “clearing agency” registered under the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities for its participants and facilitates the clearance and settlement among its participants of securities transactions, including transfers and pledges, in deposited securities through electronic book-entry changes in its participants’ accounts. This eliminates the need for physical movement of securities. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations and other organizations. Indirect access to the DTC system is also available to others including securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. The rules applicable to DTC and its participants are on file with the SEC. Transfers between participants on the DTC system will occur in accordance with DTC rules. Transfers between participants on the Clearstream, Luxembourg system and participants on Euroclear will occur in accordance with their respective rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream, Luxembourg participants or Euroclear participants, on the other, will be effected by DTC in accordance with DTC rules on behalf of the relevant European Clearing System by that system’s depositary. However, these cross-market transactions will require delivery of instructions to the relevant European Clearing System by the counterparty in that system in accordance with its rules and procedures and within its established deadlines, European time. The relevant European Clearing System will, if the transaction meets its settlement requirements, deliver instructions to its depositary to take action to effect final settlement on its behalf by delivering or receiving securities through DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream, Luxembourg participants and Euroclear participants may not deliver instructions directly to their system’s depositary. Because of time-zone differences, credits of securities in Clearstream, Luxembourg or Euroclear as a result of a transaction with a DTC participant will be made during the subsequent securities settlement processing and dated the business day following the DTC settlement date. The credits for any transactions in these securities settled during this processing will be reported to the relevant Clearstream, 76 Luxembourg participant or Euroclear participant on that business day. Cash received in Clearstream, Luxembourg or Euroclear as a result of sales of securities by or through a Clearstream, Luxembourg participant or a Euroclear participant to a DTC participant will be received and available on the DTC settlement date. However, such cash will not be available in the relevant Clearstream, Luxembourg or Euroclear cash account until the business day following the DTC settlement date. Purchases of Global Notes held through the DTC system must be made by or through DTC participants, which will receive a credit for the Global Notes on DTC’s records. The ownership interest of each actual noteholder is in turn to be recorded on the DTC participants’ and indirect participants’ records. Noteholders will not receive written confirmation from DTC of their purchase. However, noteholders are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the DTC participant or indirect participant through which the noteholder entered into the transaction. Transfers of ownership interests in the Global Notes are to be accomplished by entries made on the books of DTC participants acting on behalf of the noteholders. Noteholders will not receive notes representing their ownership interest in offered Global Notes unless use of the bookentry system for the Global Notes is discontinued. To facilitate subsequent transfers, all securities deposited by DTC participants with DTC are registered in the name of DTC’s nominee, Cede & Co. The deposit of securities with DTC and their registration in the name of Cede & Co. effects no change in beneficial ownership. DTC has no knowledge of the actual holders of the Global Notes; DTC’s records reflect only the identity of the DTC participants to whose accounts the Global Notes are credited, which may or may not be the actual beneficial owners of the Global Notes. The DTC participant will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to DTC participants, by DTC participants to indirect participants, and by DTC participants and indirect participants to global noteholders will be governed by arrangements among them and by any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. will consent or vote on behalf of the Global Notes. Under its usual procedures, DTC mails an omnibus proxy to the indenture trustee as soon as possible after the record date, which assigns Cede & Co.’s consenting or voting rights to those DTC participants to whose accounts the Global Notes are credited on the record date, identified in a listing attached to the proxy. Principal and interest payments on the notes will be made to DTC. DTC’s practice is to credit its participants’ accounts on the applicable distribution date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on that distribution date. Standing instructions, customary practices, and any statutory or regulatory requirements as may be in effect from time to time will govern payments by DTC participants to noteholders. These payments will be the responsibility of the DTC participant and not of DTC, the 77 indenture trustee, the eligible lender trustee, or the paying agent. Payment of principal and interest to DTC is the responsibility of the indenture trustee, disbursement of the payments to DTC participants is the responsibility of DTC, and disbursement of the payments to noteholders is the responsibility of DTC participants and indirect participants. DTC may discontinue providing its services as a securities depository for the Global Notes at any time by giving reasonable notice to the indenture trustee and paying agent. Under these circumstances, if a successor securities depository is not obtained, Definitive Notes are required to be printed and delivered. According to DTC, the foregoing information about DTC has been provided for informational purposes only and is not intended to serve as a representation, warranty, or contract modification of any kind. Clearstream, Luxembourg is a company with limited liability incorporated under the laws of Luxembourg. Clearstream, Luxembourg holds securities for its participating organizations and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg participants through electronic book-entry changes in accounts of Clearstream, Luxembourg participants, thereby eliminating the need for physical movement of notes. Transactions may be settled by Clearstream, Luxembourg in multiple currencies, including U.S. dollars. Clearstream, Luxembourg participants are financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, and clearing corporations. Indirect access to Clearstream, Luxembourg is also available to others, including banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream, Luxembourg participant, either directly or indirectly. Euroclear was created in 1968 to hold securities for its participants and to clear and settle transactions between Euroclear participants through simultaneous electronic book-entry delivery against payment. This eliminates the need for physical movement of notes. Transactions may be settled in multiple currencies, including U.S. dollars. Euroclear is owned by Euroclear Clearance System Public Limited Company and operated through a license agreement by Euroclear. Euroclear is regulated and examined by the Belgian Banking and Finance Commission and the National Bank of Belgium. Euroclear participants include banks, including central banks, securities brokers and dealers and other professional financial intermediaries. Indirect access to Euroclear is also available to other firms that maintain a custodial relationship with a Euroclear participant, either directly or indirectly. Securities clearance accounts and cash accounts with Euroclear are governed by the terms and conditions governing use of Euroclear and the related operating procedures of Euroclear. These terms and conditions govern transfers of securities and 78 cash within Euroclear, withdrawal of securities and cash from Euroclear, and receipts of payments for securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific notes to specific securities clearance accounts. Euroclear acts under these terms and conditions only on behalf of Euroclear participants and has no record of or relationship with persons holding through Euroclear participants. Clearstream, Luxembourg and Euroclear have established an electronic bridge between their two systems across which their respective participants may settle trades with each other. Distributions on the Global Notes held through Clearstream, Luxembourg or Euroclear will be credited to the cash accounts of Clearstream, Luxembourg participants or Euroclear participants in accordance with the relevant system’s rules and procedures, to the extent received by its depositary. These distributions must be reported for tax purposes in accordance with U.S. tax laws and regulations. Clearstream, Luxembourg or Euroclear, as the case may be, will take any other action permitted to be taken by a noteholder on behalf of a Clearstream, Luxembourg participant or Euroclear participant only in accordance with its rules and procedures, and depending on its depositary’s ability to effect these actions on its behalf through DTC. Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of interests in Global Notes among participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no obligation to perform or continue to perform these procedures and these procedures may be discontinued at any time. Exchanges Between Regulation S Global Notes and Rule 144A Global Notes Beneficial interests in a Regulation S Global Note may be transferred to a person who takes delivery in the form of an interest in a Rule 144A Global Note only if such exchange occurs in connection with a transfer of the notes pursuant to Rule 144A and, prior to the expiration of the Distribution Compliance Period, the transferring owner of the beneficial interest in the applicable Global Note first delivers to the indenture trustee a written certificate in the form specified in the indenture to the effect that the transfer is being made to a person that the transferor reasonably believes is a QIB, purchasing for its own account or the account of a QIB in a transaction meeting the requirements of Rule 144A and in accordance with all applicable securities laws of the states of the U.S. and other jurisdictions. Beneficial interests in a Rule 144A Global Note may be transferred to a person who takes delivery in the form of an interest in a Regulation S Global Note, whether before or after the Distribution Compliance Period, only if the transferring owner of the beneficial interest in the applicable Global Note first delivers to the indenture trustee a written certificate in the form specified in the indenture to the effect that such transfer is 79 being made in compliance with the transfer restrictions applicable to the notes and pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S. Transfers involving an exchange of a beneficial interest in a Regulation S Global Note for a beneficial interest in a Rule 144A Global Note or vice versa will be effected in DTC by means of an instruction originated by the indenture trustee through the DTC Deposit/Withdrawal Custodian system. Any beneficial interest in a Rule 144A Global Note that is transferred to a person who takes delivery in the form of an interest in a Regulation S Global Note or vice versa will, upon transfer, cease to be an interest in the former Global Note and will become an interest in the latter Global Note and, accordingly, will be subject to all transfer restrictions and other procedures applicable to a beneficial interest in such other Global Note for so long as it remains such an interest. Definitive Notes Notes will be issued as Definitive Notes, rather than in book-entry form to DTC or its nominee, only if one of the following events occurs: • the indenture trustee advises the administrator in writing, that DTC is no longer willing or able to discharge properly its responsibilities as depository for the notes, and the administrator is not able to locate a qualified successor; or • after the occurrence of an event of default, the indenture trustee, at the written direction of noteholders holding a majority of the outstanding principal amount of the notes, advises the paying agent and the administrator, that the continuation of a book-entry system is no longer in the best interests of the beneficial owners of the Global Notes. If either of these events occurs, DTC is required to notify all of its participants of the availability of Definitive Notes. Global Notes will be serially numbered if issued in definitive form. No noteholder will be entitled to receive a Definitive Note representing its interest, except as described in the preceding paragraphs. Definitive Notes will be transferable and exchangeable at the transfer office of the note registrar, which is initially located at DB Services Tennessee, Inc., Nashville Transfer Trust and Securities Services, 648 Grassmere Park Road, 1st Floor, Nashville, Tennessee 37211. The note registrar must at all times have specified offices in New York, which address currently is 60 Wall Street, 26th Floor, New York, New York 10005. The note registrar will not impose a service charge for any registration of transfer or exchange, but may require payment of an amount sufficient to cover any tax or other governmental charge. The note registrar will not be required to register the transfer or exchange of Definitive Notes within the 30 days preceding a distribution date for the Definitive Notes. 80 The Notes Distributions of Interest. Interest will accrue on the outstanding principal balance of the notes at the interest rate described below. Interest will accrue during each accrual period and will be payable to the 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 Note Interest Shortfall in the Glossary. Interest payments on the notes for any applicable distribution date will generally be funded from Available Funds and the other sources of funds for payment described in this offering memorandum (subject to all prior required distributions). See “—Distributions” and “—Credit Enhancement” in this offering memorandum. If these sources are insufficient to pay the Interest Distribution Amount for that distribution date, the shortfall will be allocated pro rata among the noteholders. Interest will be payable on the notes on each distribution date. The notes will bear an annual interest rate equal to the sum of three-month LIBOR (except for the first accrual period) and 0.80%. LIBOR for the first accrual period will be determined by the following formula: x + [13/28 * (y-x)] where: x = three-month LIBOR, and y = four-month LIBOR. The indenture trustee 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 Indices—LIBOR” below in this offering memorandum. The first accrual period for the notes will consist of 108 days. Distributions of Principal. Principal payments will be made to the noteholders on each distribution date in an amount generally equal to the Principal Distribution Amount for that distribution date, until the principal balance of the notes is reduced to zero. Principal payments on the notes will generally be derived from Available Funds and the other sources of funds available for payment on the notes described in this offering memorandum (subject to all prior required distributions). See “—Distributions” and “—Credit Enhancement” in this offering memorandum. Amounts on deposit in the reserve account, other than amounts in excess of the Specified Reserve Account Balance, will only be available to make principal payments on the notes at maturity of the notes or on the final distribution upon termination of the trust. The outstanding principal balance of the notes will be due and payable in full on their maturity date. The actual date on which the outstanding principal and accrued interest of the notes is paid may be earlier than their maturity date, based on a variety of factors as described in “Risk Factors—You Will Bear Prepayment and Extension Risk 81 Due to Actions Taken by Individual Borrowers and Other Variables Beyond Our Control” in this offering memorandum. In addition, on each distribution date, the amount of Available Funds remaining after the payments described in items (1) through (7) under “—Distributions—Quarterly Distributions from the Collection Account” below will be distributed to the noteholders as accelerated payments of principal. Pool Factors The pool factor for the notes will be a seven-digit decimal computed by the administrator before each distribution date. The pool factor will indicate the remaining outstanding balance of the notes, after giving effect to distributions to be made on that distribution date, as a fraction of the initial outstanding balance of the notes. The pool factor will initially be 1.0000000. Thereafter, it will decline to reflect reductions in the outstanding balance of the notes. Your portion of the aggregate outstanding balance of the notes will be the product of: • the original denomination of your note; and • the applicable pool factor. Noteholders will receive reports on or about each distribution date concerning various matters, including the payments the trust has received on the related trust student loans, the Pool Balance, the pool factor and various other items of information. See “Reports to Noteholders” in this offering memorandum. Notice of Interest Rate Information concerning the past and current LIBOR rate and the interest rate applicable to the notes will be available on the indenture trustee’s website at https://tss.sfs.db.com/investpublic or by telephoning the indenture trustee at (212) 250-4855 between the hours of 9 a.m. and 4 p.m. Eastern time on any business day and will also be available through the Reuters LIBOR01 Page or Bloomberg L.P. If the notes are admitted to the official list of the Irish Stock Exchange and trading on its regulated market, the administrator will cause the Irish Stock Exchange to be notified, of the current interest rate for the notes listed on the exchange prior to the first day of each accrual period. Determination of Indices Day-Count Basis; Interest Rate Change Dates; Interest Rate Determination Dates. Interest due for any accrual period generally will be determined on the basis of an “Actual/360” which means that interest or any other relevant factor is calculated on the basis of the actual number of days elapsed in a year of 360 days. The interest rate determination date for the notes will be the LIBOR Determination Date, as described under “—LIBOR” below. 82 LIBOR. “LIBOR,” for any accrual period, will be the rate for deposits in U.S. dollars having the specified maturity commencing on the first day of the accrual period, which appears on the Reuters LIBOR01 Page or on such comparable service as is customarily used to quote LIBOR as of 11:00 a.m., London time, on the related LIBOR Determination Date. If this rate does not appear on the Reuters LIBOR01 Page or on such comparable service as is customarily used to quote LIBOR, the rate for that LIBOR Determination Date will be determined on the basis of the rates at which deposits in U.S. dollars, having the specified maturity, are offered by the Reference Banks at approximately 11:00 a.m., London time, on that LIBOR Determination Date to prime banks in the London interbank market. The indenture trustee will request the principal London office of each Reference Bank to provide a quotation of its rate. If at least two quotations are provided, the rate for that LIBOR Determination Date will be the arithmetic mean of the quotations. If fewer than two quotations are provided, the rate for that LIBOR Determination Date will be the arithmetic mean of the rates quoted by major banks in New York City, selected by the indenture trustee, at approximately 11:00 a.m., New York City time, on that LIBOR Determination Date for loans in U.S. dollars to leading European banks having the specified maturity. 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 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 be determined on an Actual/360 basis. For this purpose: • “LIBOR Determination Date” means, for each accrual period, the second business day before the beginning of that accrual period. • “Reference Banks” means four major banks in the London interbank market selected by the indenture trustee. • “Reuters LIBOR01 Page” means the display page so designated on the Reuters Monitor Money Rates Service, or such other page that may replace that page on that service, or such other service as may be nominated as the information vendor for the purposes of displaying comparable rates or prices. Successor Service. When an interest rate or interest rate index is determined by reference to any display page provided by an information vendor, such as Reuters or Bloomberg, such page shall mean the display page so designated on the information vendor’s service or any successor service. A successor service shall mean the successor display page, other published source, information vendor or provider that has been selected by the indenture trustee and published on the indenture trustee’s website or if the indenture trustee has not selected and published a successor service, the successor display page, other published source, information vendor or provider that has been officially designated by the sponsor of the original page or service. 83 Trust Accounts and Eligible Investments The indenture trustee will establish and maintain in the name of the indenture trustee the collection account, the capitalized interest account, the rebate account and the reserve account for the benefit of the noteholders. Funds in the Trust Accounts will be invested in “eligible investments” which are book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form which evidence: • direct obligations of, and obligations fully guaranteed as to timely payment by, the United States of America, GNMA, Freddie Mac, Fannie Mae or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America; provided that obligations of, or guaranteed by, GNMA, Freddie Mac or Fannie Mae shall be eligible investments only if, at the time of investment, they meet the criteria of each of the Rating Agencies for collateral for securities having ratings equivalent to the ratings of the notes in effect at the closing date; • demand deposits, time deposits or certificates of deposit of any depository institution or trust company incorporated under the laws of the United States of America or any State (or any domestic branch of a foreign bank) and subject to supervision and examination by federal or state banking or depository institution authorities (including depository receipts issued by any such institution or trust company as custodian with respect to any obligation referred to in the first bullet point above or portion of such obligation for the benefit of the holders of such depository receipts); provided that at the time of the investment or contractual commitment to invest therein (which shall be deemed to be made again each time funds are reinvested following each distribution date), the commercial paper or other short-term senior unsecured debt obligations (other than such obligations the rating of which is based on the credit of a person other than such depository institution or trust company) thereof shall have a credit rating from each of the Rating Agencies in the highest investment category granted thereby; • commercial paper having, at the time of the investment, a rating from each of the Rating Agencies in the highest investment category granted thereby; • investments in money market funds having a rating from each of the Rating Agencies in the highest investment category granted thereby (including funds for which the indenture trustee or the eligible lender trustee, or any of their respective affiliates is investment manager or advisor); and 84 • bankers’ acceptances issued by any depository institution or trust company referred to in the second bullet point above. Notwithstanding the foregoing, the indenture trustee shall not be obligated to make a selection with respect to such Eligible Investments in the absence of direction from the administrator on behalf of the trust. The calculation agent on behalf of the administrator will prepare a monthly account statement; however, there will be no independent verification of the accounts or the transaction activity therein by either the indenture trustee or the eligible lender trustee. Distributions Deposits into the Collection Account. On the closing date, the trust will make an initial deposit into the collection account of cash or eligible investments equal to approximately $6,280,000, plus the excess, if any, of the Pool Balance as of the statistical cutoff date over the Pool Balance as of the closing date. On or before the business day immediately prior to each distribution date, the master servicer and the administrator will provide the indenture trustee with certain information as to the preceding collection period, including the amount of Available Funds received from the trust student loans and the aggregate purchase amount of the trust student loans to be purchased from the trust by BANA, the depositor or the master servicer, if applicable. The master servicer will cause all payments on the trust student loans and all proceeds of trust student loans collected during each collection period to be deposited into the collection account within two business days of receipt. The eligible lender trustee will deposit all interest subsidy payments and all special allowance payments on the trust student loans that it receives for each collection period into the collection account within two business days of receipt. See “Servicing and Administration— Payments on Trust Student Loans” in this offering memorandum. Monthly Distributions from the Collection Account. On each monthly servicer payment date that is not a distribution date, the administrator will instruct the indenture trustee to pay the master servicer the primary servicing fee due for the period from and including the preceding monthly servicer payment date from amounts on deposit in the collection account. Quarterly Distributions from the Collection Account. On or before each distribution date, the administrator will cause the calculation agent to instruct the indenture trustee, in writing, to make the deposits and distributions set forth below, in the amounts and in the order of priority shown below, except as otherwise provided below under “—Priority of Payments Following Certain Events of Default Under the Indenture.” These deposits and distributions will be made to the extent of Available Funds for that distribution date, plus funds (A) deposited into the collection account from the 85 capitalized interest account, if any, for payment of items (1) through (3) and (B) deposited into the collection account from the reserve account, if any, for payment of items (1) through (3) and at final maturity, item (4) to the extent necessary to reduce the outstanding principal balance of the notes to zero, and, in the case of the final distribution upon termination of the trust, for payment of items (1) through (9): (1) to the master servicer, the primary servicing fee due on that distribution date; (2) to the administrator and the calculation agent, the administration fees due on that distribution date and all prior unpaid administration fees; (3) to the noteholders, the Interest Distribution Amount; (4) to the noteholders, the Principal Distribution Amount, until the outstanding principal balance of the notes has been reduced to zero; (5) to the reserve account, the amount required to reinstate the amount in the reserve account up to the Specified Reserve Account Balance; (6) to the indenture trustee, the eligible lender trustee and the Delaware trustee, any unpaid fees and expenses, including without limitation any indemnity amounts, to the extent such amounts have not been paid by the administrator; (7) to the master servicer, the aggregate unpaid amount of the carryover servicing fee, if any; (8) to the noteholders, any remaining amounts after application of the preceding clauses, until the outstanding principal balance of the notes has been reduced to zero; and (9) to the residual certificateholder, any remaining amounts after application of the preceding clauses. Notwithstanding the foregoing, the indenture trustee shall pay and reimburse itself, the eligible lender trustee and the Delaware trustee for any fees and expenses (including without limitation any indemnity amounts) owed to such parties under the indenture or the trust agreement, as applicable, prior to making any payments under clauses (1) through (8) above, to the extent such parties’ full amount of fees and expenses (including without limitation any indemnity amounts) are not reimbursed by the administrator. Distributions to the indenture trustee, the eligible lender trustee and the Delaware trustee paid from the trust prior to other distributions of Available Funds shall be paid pro rata among the indenture trustee, the eligible lender trustee and the Delaware trustee and shall not exceed $150,000 per annum in the absence of an event 86 of default under the indenture. However, in the event that there is an event of default under the indenture (with no acceleration of the maturity of the notes by declaration of noteholders holding a majority of the outstanding principal balance of the notes) as a result of an uncured default in the observance or performance by the trust of any covenant or agreement, then such payments shall not exceed $150,000 per annum until either an acceleration of the maturity of the notes (by declaration of noteholders holding a majority of the outstanding principal balance of the notes) has occurred in connection with such event of default or another event of default under the indenture has occurred, in which case the $150,000 per annum cap will not be applicable. Priority of Payments Following Certain Events of Default Under the Indenture After any of the following: • an event of default under the indenture relating to the payment of principal on the notes at their maturity date which has resulted in an acceleration of the maturity of the notes; • an event of default under the indenture relating to an insolvency event or a bankruptcy with respect to the trust which has resulted in an acceleration of the maturity of the notes; or • a liquidation of the trust assets following any event of default under the indenture, the priority of payments changes. In particular, payments on the notes on each distribution date following the acceleration of the maturity of the notes as provided above will be made in the following order of priority: (1) pro rata, to the indenture trustee, for annual fees and any other amounts due and owing to it under the indenture, and to the eligible lender trustee and Delaware trustee, if applicable, for annual fees and any other amounts due and owing to them under the trust agreement (but, in each case, only to the extent not paid by the administrator or the depositor); (2) to the master servicer, the primary servicing fee due on that distribution date; (3) to the administrator and the calculation agent, the administration fees due on that distribution date and all prior unpaid administration fees; (4) to the noteholders, the Interest Distribution Amount; (5) to the noteholders, an amount sufficient to reduce the principal balance of the notes to zero; 87 (6) to the master servicer, all carryover servicing fees, if any; and (7) to the residual certificateholder, any remaining funds. Voting Rights and Remedies Noteholders will have the voting rights and remedies set forth in this offering memorandum under “Description of the Notes—The Indenture—Events of Default; Rights Upon Event of Default.” Capitalized Interest Account The capitalized interest account will be created with an initial deposit by the trust on the closing date of cash or eligible investments in an amount equal to $42,000,000. Amounts on deposit into the capitalized interest account will not be replenished. Amounts held from time to time in the capitalized interest account will be held for the benefit of the noteholders. Funds will be withdrawn from the capitalized interest account on any distribution date through the April 2012 distribution date to the extent that the amount of Available Funds on the distribution date is insufficient to pay items (1) through (3) under “—Distributions—Quarterly Distributions from the Collection Account” above. Any amount remaining on deposit in the capitalized interest account on the April 2012 distribution date will be released to the collection account and treated as Available Funds. The capitalized interest account is intended to enhance the likelihood of timely distributions of interest to the noteholders through the April 2012 distribution date. Amounts on deposit in the capitalized interest account may also be utilized to cover shortages, if any, with respect to amounts required to be remitted to the Department of Education from the rebate account. Credit Enhancement Reserve Account. The reserve account will be created with an initial deposit by the trust on the closing date of cash or eligible investments in an amount equal to $3,222,794.42. 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 of the items specified in clauses (1) through (4) under “—Distributions—Quarterly Distributions from the Collection Account” above. If the market value of cash and eligible investments in the reserve account on any distribution date is sufficient, when taken together with amounts on deposit in the collection account, to pay the remaining principal balance of and accrued interest on the notes and any servicing and administration fees, amounts on deposit in the reserve account will be so applied on that distribution date. 88 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, subject to certain limitations, the administrator will instruct the indenture trustee in writing to deposit the amount of the excess into the collection account to be included as part of Available Funds 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 amounts on deposit in the reserve account on any distribution date or, in the case of the payment of any primary servicing fee, on any monthly servicer 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 servicer payment date is insufficient to pay any of the items specified in clauses (1) through (3) under “—Distributions—Quarterly Distributions from the Collection Account” above. These funds also will be withdrawn at final maturity of the 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 the items specified in clause (4) and, in the case of the final distribution upon termination of the trust, clauses (1) through (9) under “—Distributions—Quarterly Distributions from the Collection Account” above. The reserve account is intended to enhance the likelihood of timely distributions of interest to the noteholders and the payment in full of the notes at their maturity date. In some circumstances, however, amounts on deposit in the reserve account could be reduced to zero. Overcollateralization. On the closing date, the sum of the initial Pool Balance of the trust and the initial deposits into the capitalized interest account and the reserve account will be approximately 108.34% of the aggregate principal balance of the notes. Overcollateralization is intended to provide credit enhancement for the notes. In general, the amount of overcollateralization is intended to equal the product of (a) the Overcollateralization Percentage minus 100% and (b) the then current aggregate principal balance of the notes. The amount of overcollateralization will vary from time to time depending on the rate and timing of principal payments on the trust student loans, capitalization of interest, certain borrower fees and the incurrence of losses on the trust student loans. Administration Fees As compensation for the performance of the administrator’s and the calculation agent’s obligations under the administration agreement and as reimbursement for its related expenses, the administrator and the calculation agent will be entitled to an administration fee in an amount equal to $20,000 and $57,500, respectively, per collection period payable proportionately in arrears on each distribution date. 89 Servicing Compensation The master servicer will be entitled to receive the master servicing fee in an amount equal to the primary servicing fee and the carryover servicing fee as compensation for performing the functions as master servicer for the trust. The primary servicing fee for any month will equal 1/12 of 0.90% of the Pool Balance, calculated as of the closing date or the first day of the preceding calendar month, as the case may be. The primary servicing fee will be payable in arrears out of Available Funds and amounts on deposit in the collection account, the capitalized interest account and the reserve account on each monthly servicer payment date or distribution date, as applicable, beginning in August 2010. Primary servicing fees due and payable to the master servicer will include amounts from any prior monthly servicer payment dates or distribution dates, as applicable, that remain unpaid. The carryover servicing fee is the sum of: • the amount of specified increases in the costs incurred by the master servicer; • the amount of specified conversion, transfer and removal fees; • any amounts described in the first two bullets that remain unpaid from prior distribution dates; • the amount of specified increases in the fees payable by the master servicer pursuant to the subservicing agreement that exceed its primary servicing fee; and • interest on any unpaid amounts. The carryover servicing fee, including interest on any unpaid amounts computed at the 91-day treasury bill rate, will be payable to the master servicer on each distribution date out of Available Funds after payment on that distribution date of the items specified in clauses (1) through (6) under “—Distributions—Quarterly Distributions from the Collection Account.” The carryover servicing fee will be subject to increases agreed to by the administrator, the eligible lender trustee and the master servicer, to the extent that a demonstrable and significant increase occurs in the costs incurred by the master servicer in providing services under the master servicing agreement, such as those due to changes in applicable governmental regulations or postal rates. All amounts due and owed to the subservicer under the subservicing agreement will be paid by the master servicer and will not be obligations of the trust. Trust Fees The table below sets forth the fees payable by or on behalf of the trust. 90 Party Amount Master Servicer(1) ............ To be paid as described in “—Servicing Compensation” above. The master servicer will pay the fees of the subservicer as set forth in the subservicing agreement.(2) The subservicer’s fees will not be obligations of the trust. Indenture Trustee(3) ......... To be paid as set forth in the fee agreement dated February 2, 2010. (4) Delaware Trustee ......... (5) Administrator ................ (5) Calculation Agent ......... $4,000 per annum, payable in advance. $20,000 per quarter, payable in arrears. $57,500 per quarter, payable in arrears. (1) To be paid as described in “—Servicing Compensation” above. (2) The master servicer, pursuant to the subservicing agreement, will pay the subservicer a monthly subservicing fee, ranging up to $3.66 per trust student loan, based on such factors as the borrower payment status (i.e., in school, grace, repayment), type of loan (i.e., Stafford, PLUS) and date of origination. (3) To be paid by the administrator pursuant to a separate agreement with the indenture trustee, and may be paid by the trust if there is an event of default under the indenture, and such amount has not previously been paid. (4) To be paid by the administrator pursuant to a separate agreement with the Delaware trustee, and may be paid by the trust if there is an event of default under the indenture, and such amount has not previously been paid. (5) To be paid before any amounts are distributed to the noteholders. Transfer Restrictions The following information relates to the form, transfer and delivery of the notes. Because of the following restrictions, purchasers of the notes are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of the notes. The notes are being offered and sold by the initial purchasers only to QIBs in transactions meeting the requirements of Rule 144A or to non-U.S. Persons outside the United States pursuant to the requirements of Regulation S. Any ownership interest represented by a beneficial interest in a Rule 144A Global Note may be transferred to another entity who wishes to hold notes in the form of an interest in a Rule 144A Global Note; provided, that, the applicable transferor and transferee are deemed to have represented and warranted that such transfer is being made to a transferee that (i) the transferor reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A; (ii) is acquiring such notes in reliance on an exemption from registration under the Securities Act other than Rule 144A; or (iii) is acquiring such notes pursuant to an effective registration statement under the Securities Act. After the related Distribution Compliance Period, any ownership interest represented by a beneficial interest in the Regulation S Global Note may be transferred to a person who wishes to hold notes in the form of an interest in the Regulation S Global Note; provided, that, the applicable transferee is deemed to have represented and warranted that it is not a U.S. Person and such transfer is being made in accordance with Rule 903 or Rule 904 of Regulation S and all other applicable securities laws. 91 After the related Distribution Compliance Period, such deemed representations and warranties will no longer apply to transfers of notes where the related beneficial interest is held through the Regulation S Global Note, but all such transfers will continue to be subject to the transfer restrictions contained in the legend appearing on the face of such Global Note, as described below. Transfers of interests from a Regulation S Global Note for an interest in a Rule 144A Global Note, and vice versa, may be made at any time, but only if the intended transferor and transferee can be deemed to represent and warrant that such transferee fulfills the conditions set forth above to hold a beneficial interest in the applicable Global Note. Any interest in the notes represented by an interest in a Rule 144A Global Note that is transferred to a person who takes delivery in the form of an interest in a Regulation S Global Note, and vice versa, will, upon transfer, cease to be an interest in such original Rule 144A Global Note or Regulation S Global Note, as the case may be, and become an interest in a Regulation S Global Note or a Rule 144A Global Note, as applicable, and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to an interest in the applicable form of Global Note. Each purchaser of notes that represent a beneficial interest in a Global Note will be deemed to have represented and agreed, and each purchaser of a Definitive Note will be required to certify in writing, among other things to be set forth in the indenture, that: (a) (1) the purchaser is a QIB and is acquiring such notes for its own account or as a fiduciary or agent for others (which others also must be QIBs) for investment purposes and not for distribution in violation of the Securities Act, and it is able to bear the economic risk of an investment in the notes and has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of purchasing the notes, or (2) the purchaser is a non-U.S. Person outside the United States, acquiring the notes pursuant to an exemption from registration in accordance with Rule 903 or Rule 904 of Regulation S; (b) the purchaser understands that the notes are being offered only in a transaction that does not require registration under the Securities Act and, if such purchaser decides to resell or otherwise transfer such notes, then it agrees that it will resell or transfer such notes only (1) so long as such notes are eligible for resale pursuant to Rule 144A, to a person whom the seller reasonably believes is a QIB acquiring the notes for its own account or as a fiduciary or agent for others (which others must also be QIBs) to whom notice is given that the resale or other transfer is being made in reliance on Rule 144A, (2) pursuant to an effective registration statement under the Securities Act, (3) pursuant to an exemption from registration under the Securities Act other than Rule 144A, or, if applicable, (4) to a purchaser who is a nonU.S. Person outside the United States, acquiring the notes pursuant to an exemption from registration under the Securities Act in accordance with Rule 903 or Rule 904 of Regulation S or, in each case in accordance with any applicable United States state securities or “Blue Sky” laws or any securities laws of any other jurisdiction; 92 (c) unless the relevant legend set out below has been removed from the relevant notes, the purchaser shall notify each transferee of the notes that (1) such notes have not been registered under the Securities Act, (2) the holder of such notes is subject to the restrictions on the resale or other transfer thereof described in paragraph (b) above, and (3) such transferee shall be deemed to have represented (i) as to its status as a QIB or as a non-U.S. Person outside the United States acquiring the notes pursuant to an exemption from registration under the Securities Act in accordance with Rule 903 or Rule 904 of Regulation S, as the case may be, (ii) if such transferee is a QIB, that such transferee is acquiring the notes for its own account or as a fiduciary or agent for others (which others also must be QIBs) (or that is acquiring such notes in reliance on an exemption under the Securities Act other than Rule 144A or pursuant to an effective registration statement under the Securities Act), and (iii) that such transferee shall be deemed to have agreed to notify its subsequent transferees as to the foregoing; (d) if the purchaser is acquiring its interest in any note by, for or with the assets of, a benefit plan, such acquisition or holding of the note will not constitute or otherwise result in: (1) in the case of a benefit plan subject to Title I of ERISA and/or Section 4975 of the Code, a non-exempt 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 and (2) in the case of a benefit plan subject to a substantially similar federal, state, local or foreign law, a non-exempt violation of such substantially similar law. Any transfer found to have been made in violation of such deemed representation shall be null and void and of no effect; and (e) (1) the purchaser understands that each Rule 144A Global Note and any Rule 144A Definitive Note (collectively, the “Rule 144A Certificates”) will bear the following legend unless determined otherwise in accordance with applicable law: “THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), ANY UNITED STATES STATE SECURITIES OR “BLUE SKY” LAWS OR ANY SECURITIES LAWS OF ANY OTHER JURISDICTION, AND THE ISSUING ENTITY HAS NOT BEEN REGISTERED AS AN INVESTMENT COMPANY UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940, AND, AS A MATTER OF U.S. LAW, THIS NOTE MAY NOT BE OFFERED OR SOLD IN VIOLATION OF THE ACT OR SUCH OTHER LAWS. THIS NOTE MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $100,000 AND $1,000 INCREMENTS IN EXCESS THEREOF. THE HOLDER HEREOF, BY PURCHASING OR ACCEPTING THIS NOTE IS HEREBY DEEMED TO HAVE AGREED FOR THE BENEFIT OF THE TRUST AND THE INITIAL PURCHASERS THAT IT WILL RESELL, PLEDGE OR OTHERWISE TRANSFER THIS NOTE, AS A MATTER OF U.S. LAW, ONLY (A) (1) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE, PURSUANT TO RULE 144A PROMULGATED UNDER THE ACT (“RULE 144A”), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A (A “QUALIFIED INSTITUTIONAL BUYER”), THAT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS 93 MUST ALSO BE QUALIFIED INSTITUTIONAL BUYERS) TO WHOM NOTICE IS GIVEN THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT OTHER THAN RULE 144A, (3) TO A PERSON WHO IS NOT A “U.S. PERSON” (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT (“REGULATION S”)) OUTSIDE THE UNITED STATES ACQUIRING THIS NOTE IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S PROMULGATED UNDER THE ACT OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, IN EACH CASE IN ACCORDANCE WITH ANY UNITED STATES STATE SECURITIES OR “BLUE SKY” LAWS OR ANY SECURITIES LAWS OF ANY OTHER JURISDICTION. UPON ACQUISITION OR TRANSFER OF A NOTE OR A BENEFICIAL INTEREST IN A NOTE, AS THE CASE MAY BE, BY, FOR OR WITH THE ASSETS OF, (1) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (“ERISA”)), WHETHER OR NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (2) A PLAN DESCRIBED IN SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), WHETHER OR NOT SUBJECT TO SECTION 4975 OF THE CODE OR (3) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN’S INVESTMENT IN THE ENTITY (A “BENEFIT PLAN”), SUCH NOTEHOLDER SHALL BE DEEMED TO HAVE REPRESENTED THAT SUCH ACQUISITION OR HOLDING OF THIS NOTE WILL NOT CONSTITUTE OR OTHERWISE RESULT IN: (I) IN THE CASE OF A BENEFIT PLAN SUBJECT TO TITLE I OF ERISA AND/OR SECTION 4975 OF THE CODE, A NON-EXEMPT PROHIBITED TRANSACTION IN VIOLATION OF SECTION 406 OF ERISA AND/OR SECTION 4975 OF THE CODE WHICH IS NOT COVERED BY A CLASS OR OTHER APPLICABLE EXEMPTION AND (II) IN THE CASE OF A BENEFIT PLAN SUBJECT TO A SUBSTANTIALLY SIMILAR FEDERAL, STATE, LOCAL OR FOREIGN LAW, A NON-EXEMPT VIOLATION OF SUCH SUBSTANTIALLY SIMILAR LAW. ANY TRANSFER FOUND TO HAVE BEEN MADE IN VIOLATION OF SUCH DEEMED REPRESENTATION SHALL BE NULL AND VOID AND OF NO EFFECT. THIS NOTE AND RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES UNDERTAKEN OR REPRESENTED BY THE HOLDER, FOR RESALES AND OTHER TRANSFERS OF THIS NOTE, TO REFLECT ANY CHANGE IN APPLICABLE LAWS OR REGULATIONS (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO RESALES OR OTHER TRANSFERS OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE AND ANY BENEFICIAL OWNER OF ANY INTEREST THEREIN SHALL BE DEEMED, BY ITS ACCEPTANCE OR PURCHASE HEREOF OR THEREOF, TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT (EACH OF WHICH SHALL BE CONCLUSIVE AND BINDING ON THE HOLDER HEREOF AND ALL FUTURE HOLDERS OF THIS NOTE AND ANY NOTES ISSUED IN EXCHANGE OR SUBSTITUTION HEREFOR, WHETHER OR NOT ANY NOTATION THEREOF IS MADE HEREON) AND AGREES TO TRANSFER THIS NOTE ONLY IN ACCORDANCE WITH ANY SUCH AMENDMENT OR SUPPLEMENT IN 94 ACCORDANCE WITH APPLICABLE LAW IN EFFECT AT THE DATE OF SUCH TRANSFER”; or (2) The purchaser understands that each Regulation S Global Note and any Regulation S Definitive Note (collectively, the “Regulation S Certificates”) will bear the following legend unless determined otherwise in accordance with applicable law: “THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), ANY UNITED STATES STATE SECURITIES OR “BLUE SKY” LAWS OR ANY SECURITIES LAWS OF ANY OTHER JURISDICTION, AND, AS A MATTER OF U.S. LAW, PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING OF THE NOTES AND THE CLOSING OF THE OFFERING OF THE NOTES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A “U.S. PERSON” (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, IN EACH CASE IN ACCORDANCE WITH ANY UNITED STATES STATE SECURITIES OR “BLUE SKY” LAWS OR ANY SECURITIES LAWS OF ANY OTHER JURISDICTION. THIS NOTE MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $100,000 AND $1,000 INCREMENTS IN EXCESS THEREOF. UPON ACQUISITION OR TRANSFER OF A NOTE OR A BENEFICIAL INTEREST IN A NOTE, AS THE CASE MAY BE, BY, FOR OR WITH THE ASSETS OF, (1) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (“ERISA”)), WHETHER OR NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (2) A PLAN DESCRIBED IN SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), WHETHER OR NOT SUBJECT TO SECTION 4975 OF THE CODE OR (3) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN’S INVESTMENT IN THE ENTITY (A “BENEFIT PLAN”), SUCH NOTEHOLDER SHALL BE DEEMED TO HAVE REPRESENTED THAT SUCH ACQUISITION OR HOLDING OF THIS NOTE WILL NOT CONSTITUTE OR OTHERWISE RESULT IN: (I) IN THE CASE OF A BENEFIT PLAN SUBJECT TO TITLE I OF ERISA AND/OR SECTION 4975 OF THE CODE, A NON-EXEMPT PROHIBITED TRANSACTION IN VIOLATION OF SECTION 406 OF ERISA AND/OR SECTION 4975 OF THE CODE WHICH IS NOT COVERED BY A CLASS OR OTHER APPLICABLE EXEMPTION AND (II) IN THE CASE OF A BENEFIT PLAN SUBJECT TO A SUBSTANTIALLY SIMILAR FEDERAL, STATE, LOCAL OR FOREIGN LAW, A NON-EXEMPT VIOLATION OF SUCH SUBSTANTIALLY SIMILAR LAW. ANY TRANSFER FOUND TO HAVE BEEN MADE IN VIOLATION OF SUCH DEEMED REPRESENTATION SHALL BE NULL AND VOID AND OF NO EFFECT.” Upon the transfer, exchange or replacement of a Rule 144A Certificate or a Regulation S Certificate bearing the applicable legends set forth above, or upon specific request for removal of the legends, the trust, the indenture trustee or the note registrar 95 will deliver only replacement Rule 144A Certificates or Regulation S Certificates, as the case may be, that bear such applicable legends, or will refuse to remove such applicable legends, unless there is delivered to the trust, the indenture trustee and the note registrar such satisfactory evidence (which may include a legal opinion) as may reasonably be required by the trust, the note registrar and the indenture trustee that neither the applicable legends nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. Transfers of interests in the notes represented by Global Notes within the European Clearing Systems will be in accordance with the usual rules and operating procedures of the relevant European Clearing System, which are generally the same as those set forth in Annex D to this offering memorandum. The laws of some states of the United States of America require that certain persons receive individual certificates in respect of their holding of notes. Consequently, the ability to transfer interests in a Global Note to such persons will be limited. Because the European Clearing Systems only act on behalf of participants, who in turn act on behalf of indirect participants, the ability of a person having an interest in a Global Note to pledge such interest to persons or entities which do not participate in the relevant European Clearing System, or otherwise take actions in respect of such interest, may be affected by the lack of a Definitive Note representing such interest. Although each of the European Clearing Systems has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Notes among participants and account holders of Clearstream, Luxembourg and Euroclear, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the trust, the registrar, the indenture trustee, any authentication agent, any transfer agent or any paying agent will have any responsibility for the performance by any European Clearing System or their respective direct or indirect participants or account holders of their respective obligations under the rules and procedures governing their respective operations. Optional Purchase The master 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 and unpaid interest, the remaining trust student loans as of the end of the preceding collection period, but not less than a prescribed minimum purchase amount. 96 This prescribed minimum purchase amount is the amount that would be sufficient to: • pay to noteholders the interest payable on the related distribution date; and • reduce the outstanding principal amount of the notes then outstanding on the related distribution date to zero. See “The Trust Student Loan Pool—Termination of the Trust” in this offering memorandum. PREPAYMENTS, EXTENSIONS, WEIGHTED AVERAGE LIVES AND EXPECTED MATURITIES OF THE NOTES The rate of principal payments on 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 of 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 such 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 master servicer is obligated to purchase or cause the subservicer to purchase any trust student loan pursuant to the master servicing agreement or the subservicing agreement, as applicable, as a result of a breach of certain covenants with respect to such trust student loan, in each case where such 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 and Servicing Agreements—Purchase of Student Loans by the Depositor; Representations and Warranties of the Seller” and “Servicing and Administration—Master Servicer Covenants” in this offering memorandum. See also “Description of the Notes—Optional Purchase” in this offering memorandum regarding the master servicer’s option to purchase the trust student loans when the Pool Balance is 10% or less of the initial Pool Balance. 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, 97 grace periods, deferral periods, forbearance periods, or repayment term or monthly payment amount modifications agreed to by the master servicer and required or permitted by the Higher Education Act in accordance with its customary servicing procedures. 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 principal payments on 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 the 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 such interest rates and such spreads would otherwise have been if such prepayments had not been made or had such prepayments been made at a different time. Annex B “Prepayments, Extensions, Weighted Average Lives and Expected Maturities of the Notes,” attached to this offering memorandum, shows for the notes, the weighted average lives, expected maturity dates and percentages of the original principal balances remaining at certain distribution dates based on various assumptions. CERTAIN LEGAL ASPECTS OF THE TRUST STUDENT LOANS Transfer of Trust Student Loans BANA intends that the transfer of the trust student loans by it to the depositor will constitute a valid sale and assignment of those loans. We intend that the transfer of the trust student loans by us to the eligible lender trustee on behalf of the trust will also constitute a valid sale and assignment of those loans. Nevertheless, if the transfer of the trust student loans by BANA to the depositor, or the transfer of those loans by us to the eligible lender trustee, is deemed to be an assignment of collateral as security, then a security interest in the trust student loans may be perfected by either taking possession of the promissory notes or a copy of the master promissory notes evidencing the loans, if available, or by the filing of a notice of the security interest in the manner provided by the applicable Uniform Commercial Code, or the UCC as it is commonly known, for perfection of security interests in accounts. Accordingly: • a financing statement or statements covering the trust student loans naming BANA, as debtor, will be filed under the UCC to protect the 98 interest of the depositor in the event that the transfer by BANA is deemed to be an assignment of collateral as security; and • a financing statement or statements covering the trust student loans naming the depositor, as debtor, will also be filed under the UCC to protect the interest of the eligible lender trustee in the event that the transfer by the depositor is deemed to be an assignment of collateral as security. If the transfer of the trust student loans is deemed to be an assignment as security for the benefit of the depositor or the trust, there are limited circumstances under the UCC in which prior or subsequent transferees of the trust student loans could have an interest in the trust student loans with priority over the eligible lender trustee’s interest. A tax or other government lien on property of BANA or the depositor arising before the time a trust student loan comes into existence may also have priority over the interest of the depositor or the eligible lender trustee in the trust student loan. Under the purchase agreement and sale agreement, however, BANA or the depositor, as applicable, will warrant that it has transferred the trust student loans to the depositor or the eligible lender trustee free and clear of the lien of any third party. In addition, BANA and the depositor each will covenant that it will not sell, pledge, assign, transfer or grant any lien on any trust student loan held by the trust or any interest in that loan other than to the depositor or the eligible lender trustee. The administrator will be required to maintain the perfected security interest status by filing all requisite continuation statements. Under the subservicing agreement, the subservicer as custodian will have custody of the promissory notes evidencing the trust student loans. Although the records of BANA, the depositor and the subservicer will be marked to indicate the sale, and although BANA and the depositor will cause UCC financing statements to be filed with the appropriate authorities, the trust student loans will not be physically segregated, stamped or otherwise marked to indicate that the trust student loans have been sold to the depositor and to the eligible lender trustee, as applicable. If, through inadvertence or otherwise, any of the trust student loans were sold to another party that: • purchased the trust student loans in the ordinary course of its business; • took possession of the trust student loans; and • acquired the trust student loans for new value and without actual knowledge of the eligible lender trustee’s interest; as the case may be, then that purchaser might acquire an interest in the trust student loans superior to the interest of the depositor and the eligible lender trustee. 99 Consumer Protection Laws Numerous federal and state consumer protection laws and related regulations impose substantial requirements upon lenders and servicers involved in consumer finance. Also, some state laws impose finance charge ceilings and other restrictions on consumer transactions and require contract disclosures in addition to those required under federal law. These requirements impose specific statutory liabilities upon lenders who fail to comply with their provisions. The requirements generally do not apply to federally sponsored trust student loans. The depositor or the trust, however, may be liable for violations of consumer protection laws that apply to the trust student loans, either as assignee from BANA or the depositor or as the party directly responsible for obligations arising after the transfer. For a discussion of the trust’s rights if the trust student loans were not originated or serviced in compliance in all material respects with applicable laws, see “Transfer and Servicing Agreements—Sale of Student Loans to the Trust; Representations and Warranties of the Depositor” and “Servicing and Administration—Master Servicer Covenants” above in this offering memorandum. Loan Origination and Servicing Procedures Applicable to Trust Student Loans The Higher Education Act, including the implementing regulations, imposes specific requirements, guidelines and procedures for originating and servicing federally sponsored student loans. Generally, those procedures require that (1) completed loan applications be processed, (2) a determination of whether an applicant is an eligible borrower under applicable standards be made, including a review of a financial need analysis, (3) the borrower’s responsibilities under the loan be explained to him or her, (4) the promissory note evidencing the loan be executed by the borrower and (5) the loan proceeds be disbursed in a specified manner by the lender. After the loan is made, the lender must establish repayment terms with the borrower, properly administer deferments and forbearances and credit the borrower for payments made on the loan. If a borrower becomes delinquent in repaying a loan, a lender or its servicing agent must perform collection procedures, primarily telephone calls and demand letters, which vary depending upon the length of time a loan is delinquent. The master servicer will cause ACS to perform collection and servicing procedures on behalf of the trust. In performing these functions, the subservicer will be required to service and collect on the trust student loans in compliance with the Higher Education Act, the guidelines of the applicable guarantor, and all applicable federal and state laws and regulations. Failure of the subservicer to follow these procedures or failure of the originator of the loan to follow procedures relating to the origination of the trust student loans could result in adverse consequences. Any failure could result in the U.S. Department of Education’s refusal to make reinsurance payments to the guarantors or to make interest subsidy payments or special allowance payments to the eligible lender trustee. 100 Certain Matters Relating to Bankruptcy If BANA were to become insolvent, were to violate applicable regulations, or if other similar circumstances were to occur, the Federal Deposit Insurance Corporation (the “FDIC”) could be appointed receiver or conservator of Bank of America. As receiver or conservator, the FDIC would have various powers under the Federal Deposit Insurance Act, including the power to repudiate any contract to which BANA was a party, if the FDIC determined that performance of the contract was burdensome and that repudiation would promote the orderly administration of BANA’s affairs. Among the contracts that might be repudiated are the purchase agreement between BANA, as seller and the depositor, the master servicing agreement and the administration agreement relating to your notes. Also, none of the parties to those contracts could exercise any right or power to terminate, accelerate, or declare a default under those contracts, or otherwise affect BANA’s rights under those contracts without the FDIC’s consent, for 90 days after the receiver is appointed or 45 days after the conservator is appointed, as applicable. During the same period, the FDIC’s consent would also be needed for any attempt to obtain possession of or exercise control over any property of BANA. The requirement to obtain the FDIC’s consent before taking these actions relating to a bank’s contracts or property is sometimes referred to as an “automatic stay.” The FDIC’s repudiation power would enable the FDIC to repudiate BANA’s obligations as master servicer or administrator and any ongoing repurchase or indemnity obligations under the purchase agreement between BANA and the depositor and the master servicing agreement but generally would not empower the FDIC to repudiate transfers of trust student loans made under such purchase agreement prior to the appointment of the receiver or conservator. However, if those transfers were not respected as legal true sales, then the depositor would be treated as having made a loan to BANA, secured by the transferred trust student loans. The FDIC ordinarily has the power to repudiate secured loans and then recover the collateral after paying damages (as described further below) to the lenders. The FDIC has adopted an interim rule that enables investors in asset-backed securities like the notes to avoid the risk of indirect recovery of trust student loans described above. Under the interim rule, the FDIC has stated that it will not use its repudiation power to reclaim, recover or recharacterize a bank’s transfer of financial assets in connection with a securitization completed on or prior to September 30, 2010, so long as the transfer complies with specified conditions. Also, the FDIC has proposed a rule that would provide similar, though not identical, assurances for securitizations completed after September 30, 2010. For this transaction, we have structured the transfers of the trust student loans under the purchase agreement between BANA and the depositor with the intent that they would be characterized as legal true sales. If the transfers are so characterized, then the FDIC should not be able to recover the trust student loans using its repudiation power even if this transaction does not satisfy the terms of the FDIC rule. However, 101 complying with the FDIC rule would provide additional assurance that the FDIC would not seek to recover the trust student loans using its repudiation power, as well as providing additional assurance that the automatic stay would not interfere with normal servicing and contractual payments relating to your notes. If the FDIC were to successfully assert that this transaction does not comply with FDIC rule and that the transfer of the trust student loans under the purchase agreement was not a legal true sale, then the depositor would be treated as having made a loan to BANA, secured by the trust student loans. If the FDIC repudiated that loan, the amount of compensation that the FDIC would be required to pay would be limited to “actual direct compensatory damages” determined as of the date of the FDIC’s appointment as conservator or receiver. There is no statutory definition of “actual direct compensatory damages,” but the term does not include damages for lost profits or opportunity. The staff of the FDIC takes the position that upon repudiation these damages would not include interest accrued to the date of actual repudiation, so the trust would receive interest only through the date of the appointment of the FDIC as conservator or receiver. Since the FDIC may delay repudiation for up to 180 days following that appointment, the issuing entity may not have a claim for interest accrued during this 180 day period. In addition, in one case involving the repudiation by the Resolution Trust Corporation, formerly a sister agency of the FDIC, of certain secured zero-coupon bonds issued by a savings association, a United States federal district court held that “actual direct compensatory damages” in the case of a marketable security meant the market value of the repudiated bonds as of the date of repudiation. If that court’s view were applied to determine the “actual direct compensatory damages” in the circumstances described above, the amount of damages could, depending upon circumstances existing on the date of the repudiation, be less than the principal amount of the related securities and the interest accrued thereon to the date of payment. Regardless of whether the applicable FDIC rule applies or the transfers under the purchase agreement are respected as legal true sales, as conservator or receiver for BANA the FDIC could: • require the trust, as assignee of the depositor, to go through an administrative claims procedure to establish its rights to payments collected on the trust student loans; or • request a stay of proceedings to liquidate claims or otherwise enforce contractual and legal remedies against BANA; or • repudiate BANA’s ongoing servicing obligations under the master servicing agreement, such as its duty to collect and remit payments or otherwise service the trust student loans; or • prior to any such repudiation of the master servicing agreement, prevent any of the indenture trustee, the eligible lender trustee, the administrator 102 or the noteholders from appointing a successor master servicer based on the commencement of the receivership or conservatorship proceeding; or • argue that the automatic stay prevents the indenture trustee, the eligible lender trustee, the administrator and other transaction parties from exercising their rights, remedies and interests for up to 90 days. There are also statutory prohibitions on (1) any attachment or execution being issued by any court upon assets in the possession of the FDIC, as conservator or receiver (2) any property in the possession of the FDIC, as conservator or receiver, being subject to levy, attachment, garnishment, foreclosure or sale without the consent of the FDIC, and (3) the issuance of any injunction with respect to assets in the possession of the FDIC as conservator or receiver. If the FDIC, as conservator or receiver for BANA, were to take any of the actions described above, distributions of principal and interest on the notes issued by the trust could be delayed or reduced. See “Risk Factors—FDIC Receivership or Conservatorship of BANA Could Result in Delays in Payments or Losses on Your Notes” in this offering memorandum. Student Loans Generally Not Subject to Discharge in Bankruptcy FFELP loans made for qualified education expenses are generally not dischargeable by a borrower in bankruptcy under the U.S. Bankruptcy Code, unless excepting this debt from discharge will impose an undue hardship on the debtor and the debtor’s dependents. U.S. FEDERAL INCOME TAX CONSEQUENCES The discussion of tax issues set forth in this offering memorandum was written to support the promotion and marketing of the transactions described in this offering memorandum. Such discussion was not intended or written to be used, and it cannot be used, by any person for the purpose of avoiding any federal, state or local tax penalties that may be imposed on such person. Each investor should seek advice based on its particular circumstances from an independent tax advisor. The following discussion summarizes certain U.S. federal income tax consequences to a holder who purchases the notes for cash in this offering at a price equal to their “issue price” within the meaning of section 1273 of the Code. The notes are expected to be issued either at their stated principal amount or with no more than a statutorily defined de minimis amount of discount from their stated principal amount. This discussion is limited to certain tax accounting issues and should be read in conjunction with the section entitled “Annex D—Global Clearance, Settlement and Tax Documentation Procedures” attached to this offering memorandum. The following are the material U.S. federal income tax consequences of the purchase, ownership and disposition of the notes. This discussion is general in nature and does not address issues that may be relevant to a particular holder subject to 103 special treatment under U.S. federal income tax laws (such as tax-exempt organizations, partnerships or pass-through entities, persons holding notes as part of a hedging, integrated, conversion or constructive sale transaction or a straddle, financial institutions, brokers, dealers in notes or currencies and traders that elect to mark-tomarket their notes). In addition, this discussion does not consider the effect of any alternative minimum taxes or foreign, state, local or other tax laws, or any U.S. tax considerations (e.g., estate or gift tax), other than U.S. federal income tax considerations, that may be applicable to particular holders. Furthermore, this discussion assumes that holders hold notes as “capital assets” (generally, property held for investment) within the meaning of section 1221 of the Code. This discussion also assumes that, with respect to notes reflected on the books of a qualified business unit of a holder, such qualified business unit is a U.S. resident. This discussion is based on the Code and applicable Treasury regulations, rulings, administrative pronouncements and judicial decisions thereunder as of the date hereof, all of which are subject to change or differing interpretations at any time with possible retroactive effect. There are no rulings or cases on similar transactions. Moreover, the administrator does not intend to request rulings with respect to the U.S. federal income tax treatment of the notes. Thus, there can be no assurance that the U.S. federal income tax consequences of the notes described below will be sustained if the relevant transactions are examined by the Internal Revenue Service (the “IRS”) or by a court if the IRS proposes to disallow such treatment. The trust will be provided with an opinion of federal tax counsel regarding certain U.S. federal income tax matters discussed below. An opinion of federal tax counsel, however, is not binding on the IRS or the courts. Unless otherwise indicated herein, it is assumed that any holder is a U.S. tax person, and, except as set forth below, this discussion does not address the tax consequences of holding a note to any holder who is not a U.S. tax person. As used herein, “U.S. tax person” means a person that is for U.S. federal income tax purposes: • a citizen or individual resident of the United States; • a corporation, including an entity treated as such, organized in or under the laws of the United States or any state thereof or the District of Columbia; • an estate the income of which is includible in gross income for U.S. federal income tax purposes, regardless of its source; or • a trust whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. tax persons who have the authority to control all substantial decisions of the trust. The U.S. federal income tax treatment of a partner in a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) that holds a note will depend, among other things, upon whether or not the partner is a U.S. tax person. 104 Partners and partnerships should consult their own tax advisors as to the particular federal income tax consequences applicable to them. To the extent provided in Treasury regulations, some trusts in existence on August 20, 1996, and treated as U.S. tax persons prior to that date, that elect to continue to be treated as U.S. tax persons, will be U.S. tax persons and not foreign persons. Tax Characterization of the Trust Cadwalader, Wickersham & Taft LLP, federal tax counsel to the trust and the depositor, will deliver its opinion to the trust that the trust will not be an association or a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. This opinion will be based on the assumption that the terms of the trust agreement and related documents will be complied with. Tax Consequences to Holders of Notes in General Treatment of the Notes as Indebtedness. Cadwalader, Wickersham & Taft LLP, federal tax counsel to the trust and the depositor, will deliver an opinion that, while the determination of the characterization of a transfer of receivables as a sale of those receivables or as indebtedness secured by those receivables is based on a number of factors, no one of which is controlling, and there is no authority directly on point, the notes will qualify as debt for U.S. federal income tax purposes. The depositor will agree, and the noteholders will agree by their purchase of the notes, to treat the notes as debt for U.S. federal income tax purposes. The consequences of the notes being treated as debt for U.S. federal income tax purposes are described below. Treatment of the notes as equity interests could have adverse tax consequences to certain holders. For example, all or a portion of the income accrued by tax-exempt entities, including pension funds, might be “unrelated business taxable income,” income to foreign holders might be subject to U.S. federal income tax and U.S. federal income tax return filing and withholding requirements, and individual holders might be subject to limitations on their ability to deduct their shares of trust expenses, including losses. Noteholders are strongly encouraged to consult with their own tax advisors regarding the possibility that the notes could be treated as equity interests. Stated Interest. Stated interest on the notes will be taxable as ordinary income for federal income tax purposes when received or accrued in accordance with the method of tax accounting of the holder of the notes. Original Issue Discount. Stated interest other than qualified stated interest must be accrued under the rules applicable to original issue discount (“OID”). Qualified stated interest must be unconditionally payable at least annually. The interest formula for the notes meets the requirements for “qualified stated interest” under Treasury regulations relating to OID, except as described below. A note will be treated as issued with OID if the excess of the note’s “stated redemption price at maturity” over its issue price equals or exceeds a de minimis 105 amount equal to one-fourth of 1 percent of the note’s stated redemption price at maturity multiplied by the number of years to its maturity, based on the anticipated weighted average life of the notes, calculated using the “prepayment assumption” used in pricing the notes and weighing each payment by reference to the number of full years elapsed from the closing date prior to the anticipated date of such payment. Generally, the issue price of a note should be the first price at which a substantial amount of the notes is sold to persons other than placement agents, underwriters, brokers or wholesalers. The stated redemption price at maturity of a note is generally equal to all payments on the note other than payments of “qualified stated interest.” Because the interest on the notes is qualified stated interest, the stated redemption price of a note is generally expected to equal the principal amount of the note. Any de minimis OID must be included in income as capital gain as principal payments are received on the notes in the proportion that each such payment bears to the original principal balance of the note. The treatment of the resulting gain is subject to the general rules discussed under “—Sale or Other Disposition” below. If the notes are treated as issued with OID, a holder will be required to include OID in income before the receipt of cash attributable to such income using a constant yield method. The amount of OID generally includible in income is the sum of the daily portions of OID with respect to a note for each day during the taxable year or portion of the taxable year in which the holder holds the note. Special provisions apply to debt instruments on which payments may be accelerated due to prepayments of other obligations securing those debt instruments. Under these provisions, the computation of OID on such debt instruments must be determined by taking into account both the prepayment assumption, if any, used in pricing the debt instrument and the actual prepayment experience. As a result of these special provisions, the amount of OID on the notes issued with OID that will accrue in any given accrual period may either increase or decrease depending upon the actual prepayment rate. Holders of the notes are strongly encouraged to consult with their own tax advisors regarding the impact of the OID rules in the event that notes are issued with OID. Acquisition Premium. In the event a holder purchases a note issued with OID at an acquisition premium—that is, at a price in excess of its “adjusted issue price” but less than its stated redemption price—the amount includible in income in each taxable year as OID is reduced by that portion of the excess properly allocable to such year. The adjusted issue price of a note is the sum of its issue price plus prior accruals of OID, reduced by the total payments made with respect to the note in all prior periods, other than “qualified stated interest” payments. Acquisition premium is allocated on a pro rata basis to each accrual of OID, so that the holder is allowed to reduce each accrual of OID by a constant fraction. Market Discount. The notes, whether or not issued with OID, may be subject to the “market discount rules” of Section 1276 of the Code. In general, these rules apply if the holder purchases the note at a market discount—that is, a discount from its stated redemption price at maturity or, if the notes were issued with OID, adjusted issue price—that exceeds a de minimis amount specified in the Code. If the holder acquires the note at a market discount and (a) recognizes gain upon a disposition, or (b) receives 106 payments that do not constitute qualified stated interest, the lesser of (1) such gain or payment or (2) the accrued market discount that has not previously been included in income, will be taxed as ordinary interest income. Generally, market discount accrues in the ratio of stated interest allocable to the relevant period to the sum of the interest for such period plus the remaining interest as of the end of such period, computed taking into account the prepayment assumption, if any, or in the case of a note issued with OID, in the ratio of OID accrued for the relevant period to the sum of the OID accrued for that period plus the remaining OID as of the end of such period. A holder may elect, however, to determine accrued market discount under the constant yield method, computed taking into account the prepayment assumption, if any. The treatment of the resulting gain is subject to the general rules discussed under “—Sale or Other Disposition” below. Limitations imposed by the Code which are intended to match deductions with the taxation of income may defer deductions for interest on indebtedness incurred or continued, or short-sale expenses incurred, to purchase or carry a note with accrued market discount. A holder may elect to include market discount in gross income as it accrues. If it makes this election, the holder will not be required to defer deductions. Any such election will apply to all debt instruments acquired by the holder on or after the first day of the first taxable year to which such election applies. The adjusted basis of a note subject to such election will be increased to reflect market discount included in gross income, thereby reducing any gain or increasing any loss on a sale or taxable disposition. Amortizable Bond Premium. In general, if a holder purchases a note at a premium—that is, an amount in excess of the principal amount payable at maturity—the holder will be considered to have purchased the note with “amortizable bond premium” equal to the amount of such excess. A holder may elect to amortize such bond premium as an offset to interest income and not as a separate deduction item as it accrues under a constant yield method, or one of the other methods described above under “—Market Discount” over the remaining term of the note, using the prepayment assumption, if any. A holder’s tax basis in the note will be reduced by the amount of the amortized bond premium. Any such election shall apply to all debt instruments, other than instruments the interest on which is excludible from gross income, held by the holder at the beginning of the first taxable year for which the election applies or thereafter acquired and is irrevocable without the consent of the IRS. Bond premium on a note held by a holder who does not elect to amortize the premium will decrease the gain or increase the loss otherwise recognized on the disposition of the note. Election to Treat all Interest as OID. A holder may elect to include in gross income all interest with respect to the notes, including stated interest, OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium, using the constant yield method described under “—Original Issue Discount” (the “accrual method election”). This election will generally apply only to the specific note for which it was made. The accrual method election, however, could trigger other deemed elections as described below. 107 An accrual method election for a note with market discount held by a holder that has not made an election under Section 1278(b) of the Code to include market discount in income on a current basis will result in a deemed election under Section 1278(b) of the Code. Such a deemed election will apply to all debt instruments with market discount acquired by the holder during the current taxable year and all subsequent years. Similarly, if a holder has not made an election under Section 171(c)(2) of the Code to amortize bond premium, and the notes were determined to have amortizable bond premium, an accrual method election will result in a deemed election under Section 171(c)(2) of the Code for all of the holder’s debt instruments with amortizable bond premium held at the beginning of the taxable year and acquired thereafter. Neither the market discount election under Section 1278(b) of the Code nor the bond premium election under Section 171(c)(2) of the Code may be revoked (including where either such election is deemed made as a result of the accrual method election) without the permission of the IRS. Holders are strongly encouraged to consult with their own tax advisors before making this election. Sale or Other Disposition. If a holder of a note sells the note, the holder will recognize gain or loss in an amount equal to the difference between the amount realized on the sale and the holder’s adjusted tax basis in the note. The adjusted tax basis will equal the holder’s cost for the note, increased by any market discount, OID and gain previously included by the holder in income with respect to the note, and decreased by the amount of any bond premium previously amortized and by the amount of principal payments previously received by the noteholder with respect to the note. Any such gain or loss will be capital gain or loss if the note was held as a capital asset, except for gain representing accrued interest and accrued market discount not previously included in income. Capital gains or losses will be long-term capital gains or losses if the note was held for more than one year. Capital losses generally may be used only to offset capital gains. Tax Consequences to Foreign Investors. The following information describes the material U.S. federal income tax treatment of investors in the notes that are foreign persons. The term “foreign person” means any person other than a U.S. tax person, as defined above. The IRS has issued regulations that set forth procedures to be followed by a foreign person in establishing foreign status for certain purposes. Prospective investors are strongly encouraged to consult with their own tax advisors concerning the requirements imposed by the regulations and their effect on the holding of the notes. Interest (including OID) paid or accrued to a foreign person that is not effectively connected with the conduct of a trade or business within the United States by the foreign person will generally be considered “portfolio interest” and generally will not be subject to U.S. federal income tax and withholding tax, as long as the foreign person: • is not actually or constructively a “10 percent shareholder” of BANA or a “controlled foreign corporation” with respect to which BANA is a “related person” within the meaning of the Code, and 108 • provides an appropriate statement, signed under penalties of perjury, certifying that the holder is a foreign person and providing that foreign person’s name and address. For beneficial owners that are individuals or entities treated as corporations, this certification may be made on IRS Form W-8BEN. If the information provided in this statement changes, the foreign person must report that change within 30 days of such change. The statement generally must be provided in the year a payment occurs or in any of the three preceding years. If this interest were not portfolio interest, then it would be subject to U.S. federal income and withholding tax at a current rate of 30% unless reduced or eliminated pursuant to an applicable income tax treaty. For a description of certain documentation requirements pertaining to such withholding tax, see “Annex D—Global Clearance, Settlement and Tax Documentation Procedures—U.S. Federal Income Tax Documentation Requirements” attached to this offering memorandum. Any capital gain realized on the sale or other taxable disposition of a note by a foreign person will be exempt from U.S. federal income and withholding tax, provided that: • the gain is not effectively connected with the conduct of a trade or business in the United States by the foreign person; and • in the case of an individual foreign person, the foreign person is not present in the United States for 183 days or more in the taxable year and certain other requirements are met. If the interest, gain or income on a note held by a foreign person is effectively connected with the conduct of a trade or business in the United States by the foreign person, the holder—although exempt from the withholding tax previously discussed if a duly executed IRS Form W-8ECI is furnished—generally will be subject to U.S. federal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the foreign person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its “effectively connected earnings and profits” within the meaning of the Code for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty. Information Reporting and Backup Withholding. The indenture trustee will be required to report annually to the IRS, and to each noteholder, the amount of interest paid on, OID accrued on, or the proceeds from the sale or other disposition of, the notes and the amount withheld for federal income taxes, if any, for each calendar year, except as to exempt recipients—generally, corporations, tax-exempt organizations, qualified pension and profit-sharing trusts, individual retirement accounts, or nonresident aliens who provide certification as to their status. Each noteholder other than one who is not subject to the reporting requirements will be required to provide, under penalties of perjury, a certificate containing its name, address, correct federal taxpayer identification number (which includes a U.S. social security number), and a statement that the holder 109 is not subject to backup withholding. Should a non-exempt noteholder fail to provide the required certification or should the IRS notify the indenture trustee or the trust that the holder has provided an incorrect federal taxpayer identification number or is otherwise subject to backup withholding, the indenture trustee or the trust will be required to withhold at a prescribed rate from the interest otherwise payable to the noteholder, or the proceeds from the sale or other disposition of the notes, and remit the withheld amounts to the IRS as a credit against the holder’s federal income tax liability. STATE TAX CONSEQUENCES The above discussion does not address the tax treatment of the trust, the notes, or the holders of the notes under any state or local tax laws. In the opinion of Delaware tax counsel for the trust, the same characterizations of the notes and the trust would apply for Delaware state income tax purposes as for federal income tax purposes and noteholders who are not otherwise subject to Delaware taxation on income will not become subject to Delaware tax solely as a result of their ownership of notes. Except with respect to the discussion on Delaware tax in the preceding sentence, prospective investors are urged to consult with their own tax advisors regarding the state and local tax treatment of the trust as well as any state and local tax consequences to them of purchasing, owning and disposing of the notes. *** The federal and state tax discussions described above may not be applicable depending upon each holder’s particular tax situation. Prospective purchasers are strongly encouraged to consult with their own tax advisors as to the tax consequences to them of purchasing, owning or disposing of notes, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in federal or other tax laws. ERISA CONSIDERATIONS ERISA and Section 4975 of the Code impose certain restrictions on: • employee benefit plans as defined in Section 3(3) of ERISA; • certain other retirement plans and arrangements described in Section 4975 of the Code, including: 1. individual retirement accounts and annuities, 2. Keogh plans, 3. collective investment funds and separate accounts and, as applicable, insurance company general accounts in which those plans, accounts or arrangements are invested that are subject to the fiduciary responsibility provisions of ERISA and Section 4975 of the Code, and 110 4. • any other entity whose assets are deemed to be “plan assets” as a result of any of the above plans, arrangements, funds or accounts investing in such entity; and persons who are fiduciaries with respect to plans in connection with the investment of plan assets. The term “Plans” includes the plans and arrangements listed in the first two bullet points above. Some employee benefit plans, such as governmental plans described in Section 3(32) of ERISA, and certain church plans described in Section 3(33) of ERISA, are not subject to the prohibited transaction provisions of ERISA and Section 4975 of the Code. However, these plans may be subject to the provisions of any other applicable federal or state law, materially similar to the provisions of ERISA and Section 4975 of the Code described in this offering memorandum. Moreover, if a plan is not subject to ERISA requirements but is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code, the prohibited transaction rules in Section 503 of the Code will apply. ERISA generally imposes on Plan fiduciaries certain general fiduciary requirements, including those of investment prudence and diversification and the requirement that the Plan’s investments be made in accordance with the documents governing the Plan. In addition, Section 406 of ERISA and Section 4975 of the Code prohibit a broad range of transactions involving assets of a Plan and persons who are called “Parties in Interest” under ERISA and “Disqualified Persons” under the Code (“Parties in Interest”) who have certain specified relationships to the Plan unless a statutory, regulatory or administrative exemption is available. The trust, the depositor, the initial purchasers, the eligible lender trustee, the indenture trustee, the master servicer, the administrator, or any of their affiliates may be considered to be or may become Parties in Interest with respect to certain Plans. Some Parties in Interest that participate in a prohibited transaction may be subject to an excise tax imposed under Section 4975 of the Code or a penalty imposed under Section 502(i) of ERISA, unless a statutory or administrative exemption is available. These prohibited transactions generally are set forth in Section 406 of ERISA and Section 4975 of the Code. In addition, because these parties may receive certain benefits from the sales of the notes, the purchase of the notes using Plan assets over which any of them has investment authority should not be made if it could be deemed a violation of the prohibited transaction rules of ERISA and the Code for which no exemption is available. Under regulations issued by the Department of Labor called the “Plan Asset Regulations,” if a Plan makes an “equity” investment in an entity, the underlying assets and properties of that entity will be deemed for purposes of ERISA to be assets of the investing Plan unless exceptions in the regulation apply. The Plan Asset Regulations define an “equity interest” as any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and which has no substantial equity features. If the notes are treated as debt for purposes of the Plan Asset Regulations, 111 the trust student loans and the other assets of the trust should not be deemed to be assets of an investing Plan. If, however, the notes were treated as “equity” for purposes of the Plan Asset Regulations, a Plan purchasing the notes could be treated as holding the trust student loans and the other assets of the trust. The notes should be treated as debt and not as equity interests for purposes of the Plan Asset Regulations. However, without regard to this characterization of the notes, prohibited transactions under Section 406 of ERISA and Section 4975 of the Code may arise if a note is acquired by a Plan with respect to which any of the trust, the master servicer, the administrator, the depositor, the initial purchasers, the eligible lender trustee, the indenture trustee or certain of their affiliates is a Party in Interest unless the transactions are subject to one or more statutory or administrative exemptions. Included among the administrative exemptions are the following exemptions: • Prohibited Transaction Class Exemption (“PTCE”) 96-23, which exempts certain transactions effected on behalf of a Plan by an “in-house asset manager”; • PTCE 90-1, which exempts certain transactions between insurance company separate accounts and Parties in Interest; • PTCE 91-38, which exempts certain transactions between bank collective investment funds and Parties in Interest; • PTCE 95-60, which exempts certain transactions between insurance company general accounts and Parties in Interest; or • PTCE 84-14, which exempts certain transactions effected on behalf of a Plan by a “qualified professional asset manager.” There is also a statutory exemption that may be available under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code to a party in interest that is a service provider to a Plan investing in the notes for adequate consideration, provided such service provider is not (i) the fiduciary with respect to the Plan’s assets used to acquire the notes or an affiliate of such fiduciary or (ii) an affiliate of the employer sponsoring the Plan. Adequate consideration means fair market as determined in good faith by the Plan fiduciary pursuant to regulations to be promulgated by the Department of Labor. These administrative and statutory exemptions may not apply with respect to any particular Plan’s investment in notes and, even if an exemption were deemed to apply, it might not apply to all prohibited transactions that may occur in connection with the investment. Accordingly, before making an investment in the notes, investing Plans should determine whether the trust, the depositor, the initial purchasers, the eligible lender trustee, the indenture trustee, the master servicer, the administrator or any of 112 their affiliates is a Party in Interest for that Plan and, if so, whether the transaction is eligible for one or more statutory, regulatory or administrative exemptions. *** A Plan fiduciary considering the purchase of the notes is strongly encouraged to consult with its tax and/or legal advisors regarding whether the assets of the trust would be considered Plan assets, the possibility of exemptive relief from the prohibited transaction rules and other related issues and their potential consequences. Each Plan fiduciary also should determine whether, under the fiduciary standards of investment prudence and diversification, an investment in the notes is appropriate for the Plan, also considering the overall investment policy of the Plan and the composition of the Plan’s investment portfolio, as well as whether the investment is permitted under the Plan’s governing instruments. ACCOUNTING CONSIDERATIONS Various factors may influence the accounting treatment applicable to an investor’s acquisition and holding of asset-backed securities. Accounting standards, and the application and interpretation of such standards, are subject to change from time to time. Before making an investment in the notes, potential investors are strongly encouraged to consult their own accountants for advice as to the appropriate accounting treatment for their notes. REPORTS TO NOTEHOLDERS On each distribution date, the calculation agent on behalf of the administrator will provide to noteholders of record as of the record date a statement containing substantially the same information as is required to be provided on the periodic report to the indenture trustee, the eligible lender trustee and the trust described under “Servicing and Administration—Statements to Indenture Trustee and Trust” in this offering memorandum. The statements provided to noteholders will not constitute financial statements prepared in accordance with generally accepted accounting principles and will not be audited. Within the prescribed period of time for tax reporting purposes after the end of each calendar year, the indenture trustee will mail to each person, who at any time during that calendar year was a noteholder and who received a payment from that trust, a statement containing certain information to enable it to prepare its federal income tax return. See “U.S. Federal Income Tax Consequences” in this offering memorandum. The first of these quarterly distribution reports is expected to be available not later than October 25, 2010. 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 “Description of the Notes—Form and 113 Denomination of the Notes—Book-Entry Registration” above in this offering memorandum. Neither the calculation agent nor the administrator will send reports directly to the beneficial holders of the notes. However, these reports may be viewed at the indenture trustee’s website at https://tss.sfs.db.com/investpublic. The reports will not be audited nor will they constitute financial statements prepared in accordance with generally accepted accounting principles. NOTICE TO CANADIAN RESIDENTS Resale Restrictions The distribution of the notes in Canada is being made only on a private placement basis exempt from the requirement that we prepare and file a offering memorandum with the securities regulatory authorities in each province where trades of notes are made. Any resale of the notes in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the notes. Representations of Purchasers By purchasing notes in Canada and accepting a purchase confirmation a purchaser is representing to us and the dealer from whom the purchase confirmation is received that: • the purchaser is entitled under applicable provincial securities laws to purchase the notes without the benefit of an offering memorandum qualified under those securities laws; • where required by law, the purchaser is purchasing as principal and not as agent; • the purchaser has reviewed the text above under “—Resale Restrictions;” and • the purchaser acknowledges and consents to the provision of specified information concerning its purchase of the notes to the regulatory authority that by law is entitled to collect the information. Further details concerning the legal authority for this information is available on request. 114 Rights of Action—Ontario Purchasers Only Under Ontario securities legislation, certain purchasers who purchase notes offered by this offering memorandum during the period of distribution will have a statutory right of action for damages, or while still the owner of the notes, for rescission against us in the event that this offering memorandum contains a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the notes. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the notes. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us. In no case will the amount recoverable in any action exceed the price at which the notes were offered to the purchaser and if the purchaser is shown to have purchased the notes with knowledge of the misrepresentation, we will have no liability. In the case of an action for damages, we will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the notes as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions. Enforcement of Legal Rights All of our directors and officers as well as any experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada. Taxation and Eligibility for Investment Canadian purchasers of notes should consult their own legal and tax advisors with respect to the tax consequences of an investment in the notes in their particular circumstances and about the eligibility of the notes for investment by the purchaser under relevant Canadian legislation. NOTICE TO INVESTORS Each initial purchaser will represent and agree that: • (i) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (ii) it has not offered or sold and will not offer 115 or sell the notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the notes would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act 2000 (the “FSMA”); • 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 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 trust; and • 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 initial purchasers that would permit a public offering of the notes in any country or jurisdiction, where action for that purpose is required. Accordingly, the notes may not be offered or sold, directly or indirectly, and neither this offering memorandum nor any circular, supplement, 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 this offering memorandum come are required by the depositor and the initial purchasers to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, sell or deliver notes or have in their possession or distribute this offering memorandum, 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. LISTING INFORMATION Application has been made to the Irish Stock Exchange for the notes to be admitted to the official list and trading on its regulated market. We cannot assure you that this application will be granted. For so long as the notes are listed on the Irish Stock Exchange, copies of the indenture, the trust agreement, the forms of the notes, the administration agreement, the master servicing agreement, the sale agreement and the purchase agreement will be available in electronic and physical form at the offices of the indenture trustee. So long as the notes are listed on the Irish Stock Exchange, and 116 its rules so require, the administrator will cause notices relating to the notes, including if the notes are delisted, to be published on the Irish Stock Exchange’s website at http://www.ise.ie. The Irish Stock Exchange will also be advised if the notes are delisted. The notes, the indenture 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 notes have been accepted for clearing and settlement through Clearstream, Luxembourg and Euroclear. Except as outlined herein, the trust has not commenced trading and no financial statements have been produced. The issuance of the notes has been authorized by a resolution of the board of directors of the depositor. It is expected that the total expenses relating to the application for admission of the notes to the official list of the Irish Stock Exchange and trading on its regulated market will be approximately €15,000. The address of Euroclear is 1 Boulevard Du Roi Albert II, 1210 Brussels, Belgium and the address of Clearstream, Luxembourg is 42 Avenue J.F. Kennedy, 1855 Luxembourg, Luxembourg. The address of DTC is 55 Water Street, 50th Floor, New York, New York 10041-0099, USA. The trust is not and has not been involved in any governmental, legal or arbitration proceedings (including any proceedings which are pending or threatened of which the depositor is aware) which may have or have had in the 12 months preceding the date of the trust’s formation a significant effect on the financial position of the trust. As of the date of this offering memorandum, none of the trust, the eligible lender trustee nor the indenture trustee is involved in any litigation or arbitration proceeding relating to the issuance of the notes. The depositor is not aware of any proceedings relating to the issuance of the notes, whether pending or threatened. The depositor has taken all reasonable care to confirm that the information contained in this offering memorandum is true and accurate in all material respects. In relation to the depositor, the trust, BANA or the notes, the depositor accepts full responsibility for the accuracy of the information contained in this offering memorandum. 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 offering memorandum. The depositor confirms that there has been no material adverse change in the pool of loans that constitute the trust student loans since June 1, 2010, which is the statistical cutoff date, and the date of the information with respect to the assets of the trust set forth in this offering memorandum. 117 Reference in this offering memorandum to any website address will not be deemed to constitute a part of this offering memorandum prepared in connection with the listing of the notes. PLAN OF DISTRIBUTION Subject to the terms and conditions of a note purchase agreement to be dated as of the closing date (the “Note Purchase Agreement”), the notes will be purchased by the initial purchasers listed below: Initial Purchaser Banc of America Securities LLC Barclays Capital Inc. Credit Suisse Securities (USA) LLC J.P. Morgan Securities Inc. RBS Securities Inc. Total Class A Notes $1,034,540,000 $ 49,264,000 $ 49,264,000 $ 49,264,000 $ 49,264,000 $1,231,596,000 The proceeds to the depositor from the sale of the notes are expected to be approximately $1,231,596,000 before deducting expenses payable by the depositor estimated to be approximately $2,700,000, which will yield net proceeds to the depositor of approximately $1,228,896,000. The notes will be offered by the initial purchasers, from time to time, only to QIBs under Rule 144A or to non-U.S. Persons pursuant to Regulation S. Until the end of any Distribution Compliance Period, an offer or sale of the notes within the United States of America by any dealer may violate the registration requirements of the Securities Act if such offer or sale is made other than pursuant to Rule 144A. The initial purchasers have agreed that, except as permitted by the Note Purchase Agreement, they will not offer, sell or deliver the notes (1) as part of its distribution at any time or (2) prior to the end of each Distribution Compliance Period, within the United States of America or to, or for the account or benefit of, U.S. Persons, and they will have sent to each affiliate to which they sell notes during the Distribution Compliance Period a confirmation or other notice setting forth the restrictions on offers and sales of the notes within the United States of America or to, or for the account or benefit of, U.S. Persons. The Note Purchase Agreement provides that the depositor and BANA will indemnify the initial purchasers against certain civil liabilities, including liabilities under the Securities Act and contribute to payments the initial purchasers may be required to make in respect thereof. RATINGS OF THE NOTES It is a condition to the issuance and sale of the notes that they be rated at issuance in the highest investment rating category by S&P and Moody’s. 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. 118 Other credit rating agencies that we have not engaged to rate the notes may nevertheless issue unsolicited credit ratings on the notes. If any such unsolicited ratings are issued, we cannot assure you that they will not be different from those ratings assigned by S&P or Moody’s. A rating addresses only the likelihood of the timely payment of stated interest and the payment of principal at final maturity, and does not address the timing or likelihood of principal distributions prior to final maturity. LEGAL MATTERS Cadwalader, Wickersham & Taft LLP, as special counsel to the seller, the trust, the administrator, the master servicer, the sponsor and the depositor, will give opinions on specified legal matters for the seller, the trust, the administrator, the master servicer, the sponsor and the depositor. Cadwalader, Wickersham & Taft LLP will give opinions on specified federal income tax matters for the trust. Richards, Layton & Finger, P.A., as Delaware counsel for the trust and the Delaware trustee, will give opinions on specified legal matters for the trust, including specified Delaware state income tax matters. Bingham McCutchen LLP will give opinions on specified legal matters for the initial purchasers. 119 GLOSSARY FOR OFFERING MEMORANDUM “Adjusted Pool Balance” means, for any quarterly distribution date: • if the Pool Balance as of the last day of the related collection period is greater than 40% of the initial Pool Balance, then the Adjusted Pool Balance shall be the sum of the Pool Balance, Capitalized Interest and the Specified Reserve Account Balance for that quarterly distribution date; or • 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, then the Adjusted Pool Balance shall be the sum of the Pool Balance and Capitalized Interest. “Available Funds” means, as to each distribution date or any related monthly servicer payment date, as applicable, the sum of the following amounts with respect to the related collection period or, in the case of a monthly servicer payment date, the applicable portion of these amounts: • all collections on the trust student loans, including any guarantee payments received on the trust student loans, but net of: (1) 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; (2) all 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, including floor income rebate fees; and (3) amounts deposited into the rebate account during the related collection period; • any interest subsidy payments and special allowance payments with respect to the trust student loans during that collection period; • all proceeds of the liquidation of defaulted trust student loans which were liquidated during that collection period in accordance with the master servicer’s or the subservicer’s customary servicing procedures, net of expenses incurred by the master servicer or the subservicer 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; 120 • the aggregate purchase amounts received during that collection period for those trust student loans repurchased by the depositor or purchased by the master servicer or for trust student loans sold to another eligible lender pursuant to the master servicing agreement; • the aggregate purchase amounts received during that collection period for those trust student loans repurchased by the seller; • the aggregate amounts, if any, received from the seller, the depositor, the master servicer or the subservicer, as the case may be, as reimbursement of nonguaranteed interest amounts, or lost interest subsidy payments and special allowance payments, on the trust student loans pursuant to the sale agreement or the master servicing agreement; • amounts received by the trust pursuant to the master servicing agreement during that collection period as to yield or principal adjustments; • any interest remitted by the indenture trustee to the collection account prior to that distribution date or monthly servicer payment date; • investment earnings for that distribution date earned on amounts on deposit in each Trust Account; • amounts transferred from the reserve account in excess of the Specified Reserve Account Balance as of that distribution date; • amounts on deposit in the rebate account that were deposited into such account during the collection period preceding that collection period; • on the closing date, the initial deposit into the collection account; and • on the April 2012 distribution date, all funds then on deposit in the capitalized interest account that are transferred into the collection account on 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), (b), (c) and (d) under “Description of the Notes—Distributions— Quarterly Distributions from the Collection Account” in this offering memorandum, then Available Funds for that distribution date will include, in addition to Available Funds as defined above, amounts on deposit in the collection account, or amounts held by the indenture trustee, or which the administrator at the direction of the calculation agent reasonably estimates to be held by the indenture trustee, 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 Available Funds for the succeeding distribution date will be adjusted accordingly. 121 “Capitalized Interest” means, for any distribution date through and including the April 2012 distribution date, the amount on deposit in the capitalized interest account on the distribution date following those distributions with respect to clauses (1), (2) and (3) under “Description of the Notes—Distributions—Quarterly Distributions from the Collection Account” in this offering memorandum. “Charged-Off Loan” means a trust student loan which is written-off in accordance with the master servicer’s policies and procedures, which as of the date hereof generally occurs on the earlier of (i) 270 days after the claim on the trust student loan is filed or (ii) the Final Reject Date for such trust student loan. “Clearstream, Luxembourg” means Clearstream Banking, sociéte anonyme, or any successor thereto. “Code” means The Internal Revenue Code of 1986, as amended. “Definitive Note” means the Rule 144A Definitive Note or the Regulation S Definitive Note. “Distribution Compliance Period” has the meaning assigned to the term “distribution compliance period” in Regulation S. “DTC” means The Depository Trust Company, or any successor thereto. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. “Euroclear” means the Euroclear System in Europe, or any successor thereto. “European Clearing Systems” means, collectively, Clearstream, Luxembourg and Euroclear. “Fannie Mae” means the Federal National Mortgage Association. “Freddie Mac” means the Federal Home Loan Mortgage Corporation. “FFELP” means the Federal Family Education Loan Program. “Final Reject Date” means the date of receipt of the final notice with respect to a claim for payment on a trust student loan that is rejected by the related guarantor. “Fitch” means Fitch, Inc., also known as Fitch Ratings, or any successor rating agency. “Global Note” means the Rule 144A Global Note or the Regulation S Global Note. “GNMA” means the Government National Mortgage Association. 122 “Interest Distribution Amount” means, for any distribution date, the sum of: (a) the amount of interest accrued at the interest rate for the related accrual period on the outstanding balance of the notes on the applicable immediately preceding distribution date (or in the case of the initial distribution date, the closing date) after giving effect to all principal distributions to noteholders on preceding distribution dates, and (b) the Note Interest Shortfall for that distribution date. “Irish Financial Regulator” means the Irish Financial Services Regulatory Authority. “Irish Stock Exchange” means the Irish Stock Exchange Limited. “Moody’s” means Moody’s Investors Service, Inc., or any successor rating agency. “New York City Banking Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York are authorized or obligated by law, regulation or executive order to remain closed. “Note Interest Shortfall” means, for any distribution date, the sum for all of the notes of the excess of: (a) the amount of interest that was payable on the preceding distribution date to the notes, over (b) the amount of interest actually distributed with respect to the notes on that preceding distribution date, plus interest on the amount of such excess, if any, to the extent permitted by law, at the interest rate on the notes from that preceding distribution date to the current distribution date. “Overcollateralization Percentage” means approximately 108.34%, calculated to equal the sum of the initial Pool Balance and the initial deposits into the capitalized interest account and the reserve account, each as of the closing date, divided by the aggregate outstanding principal balance of the notes as of the closing date. “Pool Balance” means, for any date, the aggregate principal balance of the trust student loans on that date, including accrued interest that is expected to be capitalized, as such balance has been reduced through such date by: • all payments received by the trust through that date from borrowers, the guaranty agencies and the U.S. Department of Education; 123 • all amounts received by the trust through that date from repurchases of the trust student loans by the seller, the depositor or the master servicer; • all liquidation proceeds and Realized Losses on the trust student loans liquidated through that date; • the amount of any adjustments to balances of the trust student loans made pursuant to the master servicing agreement through that date; and • the amount by which guarantor reimbursements of principal on defaulted trust student loans through that date are reduced from 100% to such other applicable percentages as are required by the risk sharing provisions of the Higher Education Act. “Principal Distribution Amount” means as to each distribution date, the amount by which (a) the aggregate outstanding principal balance of the notes immediately prior to such distribution date exceeds (b) the Adjusted Pool Balance for that distribution date divided by the Overcollateralization Percentage. “QIB” means Qualified Institutional Buyer, as defined under Rule 144A. “Rating Agency” means each of S&P and Moody’s, to the extent such rating agency has assigned the notes a then-current rating. For the avoidance of doubt, the definition of “Rating Agency” shall specifically exclude any other rating agency not engaged to rate the notes that otherwise issues an unsolicited rating on the notes. “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. “Recoveries” means, as of any date of determination, all amounts received by the trust in respect of a Charged-Off Loan after such trust student loan became a Charged-Off Loan. “Regulation S” means Regulation S under the Securities Act. “Regulation S Certificate” means each Regulation S Global Note and any Regulation S Definitive Note. “Regulation S Definitive Note” means Notes offered and sold in reliance on Regulation S and represented by one or more notes in fully registered, definitive form. “Regulation S Global Note” means Notes offered and sold in reliance on Regulation S and represented by one or more notes in fully registered, global form. “Rule 144A” means Rule 144A under the Securities Act. 124 “Rule 144A Certificate” means each Rule 144A Global Note and any Rule 144A Definitive Note. “Rule 144A Definitive Note” means Notes offered and sold to a QIB, pursuant to Rule 144A, which will be represented by one or more notes in fully registered, definitive form. “Rule 144A Global Note” means Notes offered and sold to a QIB, pursuant to Rule 144A, which will be represented by one or more notes in fully registered, global form. “S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, or any successor rating agency. “SEC” means the United States Securities and Exchange Commission. “Securities Act” means the United States Securities Act of 1933, as amended. “Significant Guarantor” means any guaranty agency that guarantees trust student loans comprising at least 10% of the initial Pool Balance of the trust student loans as of the statistical cutoff date. “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) $1,289,117.77; provided that in no event will that balance exceed the sum of the aggregate outstanding principal balance of the notes. “Trust Accounts” means, collectively, the collection account, the capitalized interest account, the rebate account and the reserve account. “U.S. Person” has the meaning assigned to the term “U.S. person” in Regulation S. 125 ANNEX A CHARACTERISTICS OF THE STATISTICAL TRUST STUDENT LOAN POOL The information concerning the trust student loans presented throughout the offering memorandum is based on the trust student loans in the statistical pool described as of the statistical cutoff date. The statistical trust student loans consist of a portion of the trust student loans owned by BANA that met the criteria below as of the statistical cutoff date. The weighted average characteristics of the trust student loans sold to the issuing entity on the closing date will be selected from the statistical trust student loan pool. The weighted average characteristics of the trust student loans sold to the issuing entity on the closing date may not be identical to, but will not materially differ from, the weighted average characteristics of the statistical trust student loans in the statistical pool illustrated in the tables below, which is presented as of the statistical cutoff date. The trust student loans were selected from a portfolio of student loans owned by BANA by employing several criteria, including requirements that each trust student loan as of the statistical cutoff date: • is a FFELP loan that is guaranteed as to at least (1) 98% with respect to trust student loans with an initial date of disbursement prior to July 1, 2006 and on or after October 1, 1993 or (2) 97% with respect to trust student loans with an initial date of disbursement on or after July 1, 2006, of its principal and interest by a guaranty agency under a guarantee agreement and the guaranty agency is, in turn, reinsured by the U.S. Department of Education in accordance with the FFELP; • contains terms in accordance with those required by the FFELP, the guarantee agreements and other applicable requirements; • is not more than 210 days past due; • is fully disbursed; • does not have a borrower who is noted in the related records of the master servicer or the subservicer as being currently involved in a bankruptcy proceeding; and • has special allowance payments, if any, based on the three-month Commercial Paper Rate or the 91-day treasury bill rate. Unless otherwise specified, all information with respect to the trust student loans is presented herein as of June 1, 2010, which is the statistical cutoff date. The following tables provide a description of specified characteristics of the statistical trust student loans as of the statistical cutoff date. The aggregate outstanding A-1 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 $52,557,222.77 as of the statistical cutoff date. The distribution by weighted average interest rate applicable to the statistical trust student loans on any date following the statistical cutoff date may vary significantly from the information shown in the following tables as a result of variations in the effective rates of interest applicable to the trust student loans and in rates of principal reduction. Moreover, the information below about the weighted average remaining term to maturity of the statistical trust student loans as of the statistical cutoff date may vary significantly from the actual term to maturity of any of the trust student loans as a result of prepayments or the granting of deferment and forbearance periods. The following tables also contain information concerning the total number of loans and the total number of borrowers in the portfolio of statistical trust student loans. Percentages and dollar amounts in any table may not total 100% or the statistical trust student loan balance, as applicable, due to rounding. COMPOSITION OF THE STATISTICAL TRUST STUDENT LOANS AS OF THE STATISTICAL CUTOFF DATE Aggregate Outstanding Principal Balance ................................................................... Aggregate Outstanding Principal Balance—Treasury Bill ........................................ Percentage of Aggregate Outstanding Principal Balance—Treasury Bill................. Aggregate Outstanding Principal Balance—Commercial Paper .............................. Percentage of Aggregate Outstanding Principal Balance—Commercial Paper ..................................................................................................................... Number of Borrowers ................................................................................................... Average Outstanding Principal Balance Per Borrower ................................................ Weighted Average Remaining Term to Scheduled Maturity........................................ Weighted Average Annual Borrower Interest Rate...................................................... $1,289,117,766.67 $ 623,615.12 0.05% $1,288,494,151.55 $ 99.95% 104,718 12,310.37 129.23 months 6.32% The weighted average annual borrower interest rate shown in the table is exclusive of special allowance payments. The weighted average spread for special allowance payments to the 91-day Treasury bill rate was 2.55% as of the statistical cutoff date. For these purposes, the 91-day Treasury bill rate is the weighted average per annum discount rate, expressed on a bond equivalent basis and applied on a daily basis, for direct obligations of the United States with a maturity of thirteen weeks, as reported by the U.S. Department of the Treasury. The weighted average spread for special allowance payments to the three-month commercial paper rate was 1.74% as of the statistical cutoff date. See “Federal Family Education Loan Program—Special Allowance Payments” in Annex C to the offering memorandum. A-2 For these purposes, the three-month 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. DISTRIBUTION OF THE STATISTICAL TRUST STUDENT LOANS BY INTEREST RATES AS OF THE STATISTICAL CUTOFF DATE Interest Rate Less than or equal to 3.00% ............................ 3.01% – 3.50%................................................. 3.51% – 4.00%................................................. 4.01% – 4.50%................................................. 4.51% – 5.00%................................................. 5.01% – 5.50%................................................. 5.51% – 6.00%................................................. 6.01% – 6.50%................................................. 6.51% – 7.00%................................................. 7.01% – 7.50%................................................. 7.51% – 8.00%................................................. 8.01% – 8.50%................................................. Total........................................................... Number of Loans 39,976 234 0 0 0 0 37,525 0 187,638 0 0 8,479 273,852 Aggregate Outstanding Principal Balance $152,539,672.45 1,457,999.27 0.00 0.00 0.00 0.00 133,251,700.39 0.00 887,379,615.64 0.00 0.00 114,488,778.92 $1,289,117,766.67 Percent of Pool by Outstanding Principal Balance 11.83% 0.11 0.00 0.00 0.00 0.00 10.34 0.00 68.84 0.00 0.00 8.88 100.00% We determined the interest rates shown in the table above using the interest rates applicable to the trust student loans as of the statistical cutoff date. Because most of the trust student loans bear interest at variable rates of interest that reset annually effective as of July 1 of each year, and because, as a general matter, loans with different interest rates are likely to be repaid at different rates, this information will not remain applicable to the trust student loans in the future. See Annex C to the offering memorandum. A-3 DISTRIBUTION OF THE STATISTICAL TRUST STUDENT LOANS BY OUTSTANDING PRINCIPAL BALANCE AS OF THE STATISTICAL CUTOFF DATE Range of Outstanding Principal Balance Less than or equal to $0.00 ......................... $0.01 – $5,000.00 ........................................ $5,000.01 – $10,000.00 ............................... $10,000.01 – $15,000.00 ............................. $15,000.01 – $20,000.00 ............................. $20,000.01 – $25,000.00 ............................. $25,000.01 – $30,000.00 ............................. $30,000.01 – $35,000.00 ............................. $35,000.01 – $40,000.00 ............................. $40,000.01 – $45,000.00 ............................. $45,000.01 – $50,000.00 ............................. $50,000.01 – $55,000.00 ............................. $55,000.01 – $60,000.00 ............................. $60,000.01 – $65,000.00 ............................. $65,000.01 – $70,000.00 ............................. $70,000.01 – $75,000.00 ............................. $75,000.01 – $80,000.00 ............................. $80,000.01 – $85,000.00 ............................. $85,000.01 – $90,000.00 ............................. Total....................................................... Number of Loans 1,621 186,648 67,029 12,762 1,900 1,601 910 487 516 234 91 29 14 4 2 3 0 0 1 273,852 Aggregate Outstanding Principal Balance $0.00 532,303,988.99 450,538,342.41 160,345,992.65 33,063,399.13 35,895,093.84 24,843,175.69 15,784,793.50 19,149,429.96 9,918,163.49 4,271,052.34 1,505,050.95 804,916.12 248,863.10 137,500.16 221,207.08 0.00 0.00 86,797.26 $1,289,117,766.67 Percent of Pool by Outstanding Principal Balance 0% 41.29 34.95 12.44 2.56 2.78 1.93 1.22 1.49 0.77 0.33 0.12 0.06 0.02 0.01 0.02 0.00 0.00 0.01 100.00% DISTRIBUTION OF THE STATISTICAL TRUST STUDENT LOANS BY DELINQUENCY STATUS AS OF THE STATISTICAL CUTOFF DATE Number of Days Delinquent Less than or equal to 0..................................... 1 – 30 ............................................................... 31 – 60 ............................................................. 61 – 90 ............................................................. 91 – 120 ........................................................... 121 – 150 ......................................................... 151 – 180 ......................................................... 181 – 210 ......................................................... Total........................................................... Number of Loans 240,451 10,556 6,488 4,451 2,771 3,331 4,398 1,406 273,852 A-4 Aggregate Outstanding Principal Balance $1,150,712,609.72 47,378,940.49 27,118,401.85 17,252,153.20 10,981,826.32 13,051,657.38 17,503,297.18 5,118,880.53 $1,289,117,766.67 Percent of Pool by Outstanding Principal Balance 89.26% 3.68 2.10 1.34 0.85 1.01 1.36 0.40 100.00% DISTRIBUTION OF THE STATISTICAL TRUST STUDENT LOANS BY REMAINING TERM TO SCHEDULED MATURITY AS OF THE STATISTICAL CUTOFF DATE1 Number of Months Remaining to Scheduled Maturity Less than or equal to 72................................... 73 – 81 ............................................................. 82 – 90 ............................................................. 91 – 99 ............................................................. 100 – 108 ......................................................... 109 – 117 ......................................................... 118 – 126 ......................................................... 127 – 135 ......................................................... 136 – 144 ......................................................... 145 – 153 ......................................................... 154 – 162 ......................................................... 163 – 171 ......................................................... 172 – 180 ......................................................... 181 – 189 ......................................................... 190 – 198 ......................................................... 199 – 207 ......................................................... 208 – 216 ......................................................... 217 – 225 ......................................................... 226 – 234 ......................................................... 235 – 243 ......................................................... 244 – 252 ......................................................... 253 – 261 ......................................................... 262 – 270 ......................................................... 271 – 279 ......................................................... 280 – 288 ......................................................... 289 – 297 ......................................................... 298 – 306 ......................................................... 307 – 315 ......................................................... 316 – 324 ......................................................... 325 – 333 ......................................................... 334 – 342 ......................................................... 343 – 351 ......................................................... 352 – 360 ......................................................... Greater than or equal to 361 ............................ Total........................................................... Number of Loans 14,968 4,814 6,215 12,646 18,437 42,393 73,949 18,147 35,089 18,318 9,709 3,629 5,994 2,433 997 436 373 172 162 224 189 163 163 211 994 1,735 1,001 121 33 21 22 30 24 40 273,852 1 Aggregate Outstanding Principal Balance $27,080,808.39 15,819,883.88 23,376,140.48 58,380,649.88 87,674,092.80 199,577,133.29 394,534,862.58 91,612,329.57 165,604,798.88 80,910,761.33 42,572,987.93 16,060,852.69 25,692,618.74 10,470,840.52 4,380,453.75 2,041,698.45 1,808,881.41 926,981.99 805,591.28 1,239,480.92 1,168,564.21 1,186,459.91 1,268,560.50 2,126,768.38 8,264,267.57 14,236,874.34 8,339,553.51 920,596.71 177,413.00 144,677.18 138,056.02 201,030.49 181,378.98 191,717.11 $1,289,117,766.67 Percent of Pool by Outstanding Principal Balance 2.10% 1.23 1.81 4.53 6.80 15.48 30.61 7.11 12.85 6.28 3.30 1.25 1.99 0.81 0.34 0.16 0.14 0.07 0.06 0.10 0.09 0.09 0.10 0.16 0.64 1.10 0.65 0.07 0.01 0.01 0.01 0.02 0.01 0.01 100.00% 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 deferment or forbearance periods that may be granted in the future. See Annex C to the offering memorandum. A-5 DISTRIBUTION OF THE STATISTICAL TRUST STUDENT LOANS BY CURRENT BORROWER PAYMENT STATUS AS OF THE STATISTICAL CUTOFF DATE Current Borrower Payment Status In-School ............................................................ Grace.................................................................. Deferment........................................................... Forbearance....................................................... Repayment......................................................... Total ............................................................ Number of Loans 95,210 38,757 32,928 18,254 88,703 273,852 Aggregate Outstanding Principal Balance $422,173,229.80 184,768,307.19 163,298,896.98 105,066,720.06 413,810,612.64 $1,289,117,766.67 Percent of Pool by Outstanding Principal Balance 32.75% 14.33 12.67 8.15 32.10 100.00% Current borrower payment status refers to the status of the borrower of each trust student loan as of the statistical cutoff date. The borrower: • may still be attending school—in-school; • may be in a grace period after completing school and prior to repayment commencing—grace; • may have temporarily ceased repaying the loan through a deferment or a forbearance period; or • may be currently required to repay the loan—repayment. See Annex C to the offering memorandum. The weighted average number of months in repayment for all trust student loans currently in repayment is approximately 119.44, calculated as the maturity date less the last payment date assuming no future deferment or forbearance periods. A-6 SCHEDULED WEIGHTED AVERAGE REMAINING MONTHS IN STATUS OF THE STATISTICAL TRUST STUDENT LOANS BY CURRENT BORROWER PAYMENT STATUS AS OF THE STATISTICAL CUTOFF DATE Scheduled Remaining Months in Status Current Borrower Payment Status In-School In-School ................................................ 19.2 Grace...................................................... 0.0 Deferment............................................... 0.0 Forbearance........................................... 0.0 Repayment............................................. 0.0 Grace 6.0 2.5 0.0 0.0 0.0 Deferment 0.0 0.0 14.0 0.0 0.0 Forbearance 0.0 0.0 0.0 3.6 0.0 Repayment 117.5 119.5 116.0 124.0 119.4 We have determined the scheduled weighted average remaining months in status shown in the previous table without giving effect to any deferment or forbearance periods that may be granted in the future. See Annex C to the offering memorandum. A-7 GEOGRAPHIC DISTRIBUTION OF THE STATISTICAL TRUST STUDENT LOANS AS OF THE STATISTICAL CUTOFF DATE State Alabama.................................................................. Alaska ..................................................................... Arizona.................................................................... Arkansas ................................................................. California................................................................. Colorado ................................................................. Connecticut ............................................................. Delaware................................................................. District of Columbia ................................................. Florida ..................................................................... Georgia ................................................................... Hawaii ..................................................................... Idaho ....................................................................... Illinois ...................................................................... Indiana .................................................................... Iowa ........................................................................ Kansas .................................................................... Kentucky ................................................................. Louisiana................................................................. Maine ...................................................................... Maryland ................................................................. Massachusetts ........................................................ Michigan.................................................................. Minnesota ............................................................... Mississippi............................................................... Missouri................................................................... Montana .................................................................. Nebraska................................................................. Nevada.................................................................... New Hampshire....................................................... New Jersey ............................................................. New Mexico ............................................................ New York ................................................................ North Carolina ......................................................... North Dakota ........................................................... Ohio ........................................................................ Oklahoma................................................................ Oregon .................................................................... Pennsylvania........................................................... Rhode Island ........................................................... South Carolina ........................................................ South Dakota .......................................................... Tennessee .............................................................. Texas ...................................................................... Utah ........................................................................ Vermont .................................................................. Virginia .................................................................... Washington ............................................................. West Virginia ........................................................... Wisconsin................................................................ Wyoming ................................................................. Other ....................................................................... Total................................................................. Number of Loans 609 361 5,483 3,336 47,239 1,252 4,102 216 769 7,797 3,924 766 1,196 4,191 1,046 704 2,237 568 839 864 6,241 5,939 1,740 657 1,262 9,590 250 541 2,189 1,027 4,211 1,592 26,138 5,421 131 1,933 1,023 4,988 3,760 1,048 1,689 90 2,548 67,010 552 171 12,208 19,656 314 1,095 131 1,208 273,852 A-8 Aggregate Outstanding Principal Balance $2,832,116.89 1,897,854.51 22,793,441.85 13,403,898.39 247,859,925.97 6,664,325.57 19,578,594.36 1,181,179.87 6,644,247.99 40,671,241.65 21,474,658.26 3,793,960.92 5,179,891.45 20,898,601.54 4,517,795.86 3,723,995.15 11,646,840.49 2,900,093.63 4,174,354.02 3,818,740.09 33,614,834.31 30,410,506.76 8,590,889.75 4,127,954.33 5,875,190.20 37,689,707.59 1,296,376.59 2,151,439.67 10,177,958.89 5,191,629.52 23,206,563.02 6,655,883.17 111,481,565.05 24,632,827.03 542,856.81 9,731,744.37 5,026,343.59 21,715,609.21 18,418,111.70 4,225,130.23 7,274,522.24 515,754.51 11,083,915.56 294,169,048.79 3,531,264.81 896,711.95 63,356,523.02 80,118,545.86 1,826,155.00 4,942,043.30 608,758.28 10,375,643.10 $1,289,117,766.67 Percent of Pool by Outstanding Principal Balance 0.22% 0.15 1.77 1.04 19.23 0.52 1.52 0.09 0.52 3.15 1.67 0.29 0.40 1.62 0.35 0.29 0.90 0.22 0.32 0.30 2.61 2.36 0.67 0.32 0.46 2.92 0.10 0.17 0.79 0.40 1.80 0.52 8.65 1.91 0.04 0.75 0.39 1.68 1.43 0.33 0.56 0.04 0.86 22.82 0.27 0.07 4.91 6.21 0.14 0.38 0.05 0.80 100.00% 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 subservicer’s records as of the statistical cutoff date. 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, that 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 deferment 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. BANA makes available, through the subservicer, to borrowers of student loans it holds, payment terms that may result in the lengthening of the remaining term of the student loans. For example, not all of the loans owned by BANA 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. BANA also offers, through the subservicer, an income sensitive repayment plan, under which repayments are based on the borrower’s income. Under that plan, ultimate repayment may be delayed up to five years. Borrowers under trust student loans will continue to be eligible for the graduated payment and income-sensitive repayment plans. See “BANA’s Student Loan Financing Business” in the offering memorandum. A-9 The following tables provide certain information about trust student loans subject to the repayment terms described in the preceding paragraphs: DISTRIBUTION OF THE STATISTICAL TRUST STUDENT LOANS BY LOAN TYPE AS OF THE STATISTICAL CUTOFF DATE Loan Type Unsubsidized Stafford Loans ............................. Subsidized Stafford Loans ................................. Grad PLUS Loans .............................................. PLUS Loans ....................................................... Total............................................................. Number of Loans 119,750 145,407 3,365 5,330 273,852 Aggregate Outstanding Principal Balance $618,834,482.40 554,386,595.67 60,394,815.36 55,501,873.24 $1,289,117,766.67 Percent of Pool by Outstanding Principal Balance 48.00% 43.01 4.68 4.31 100.00% DISTRIBUTION OF THE STATISTICAL TRUST STUDENT LOANS BY REPAYMENT TERMS AS OF THE STATISTICAL CUTOFF DATE Loan Repayment Terms Level Repayment (1) ......................................... Other Repayment Options (2) ........................... Total........................................................... Number of Loans 265,983 7,869 273,852 Aggregate Outstanding Principal Balance $1,245,182,415.86 43,935,350.81 $1,289,117,766.67 Percent of Pool by Outstanding Principal Balance 96.59% 3.41 100.00% (1) Also includes in-school and grace loans. (2) Includes, among others, graduated repayment and interest-only loans. The master servicer, at the request of BANA or the depositor 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 such repayment terms are offered to and accepted by borrowers, the weighted average life of the securities could be lengthened. A-10 The following table provides information about the trust student loans regarding date of disbursement. DISTRIBUTION OF THE STATISTICAL TRUST STUDENT LOANS BY DATE OF DISBURSEMENT AS OF THE STATISTICAL CUTOFF DATE Disbursement Date Pre-January 1, 2000......................................... January 1, 2000 through March 31, 2006 ........ April 1, 2006 through June 30, 2006................ July 1, 2006 through September 30, 2007 .............................................................. October 1, 2007 and thereafter........................ Total........................................................... Number of Loans 199 36,968 3,036 Aggregate Outstanding Principal Balance $623,615.12 139,887,684.72 13,417,375.58 Percent of Pool by Outstanding Principal Balance 0.05% 10.85 1.04 92,475 141,174 273,852 486,823,066.79 648,366,024.46 $1,289,117,766.67 37.76 50.30 100.00% A-11 Guaranty Agencies for the Trust Student Loans. The eligible lender trustee has entered into a separate guarantee agreement with each of the guaranty agencies listed below, under which each of the guarantors has agreed to serve as guarantor for specified trust student loans. The following table provides information with respect to the portion of the trust student loans guaranteed by each guarantor. A-12 DISTRIBUTION OF THE STATISTICAL TRUST STUDENT LOANS BY GUARANTY AGENCY AS OF THE STATISTICAL CUTOFF DATE* Name of Guaranty Agency California Student Aid Commission ................. Texas Guaranteed Student Loan Corporation ................................................... New York State Higher Education Services Corporation .................................... Nebraska National Student Loan Program ........................................................ United Student Aid Funds, Inc. ........................ American Student Assistance Guarantor......... Northwest Education Loan Association ........... Missouri Department of Higher Education Educational Credit Management Corporation ................................................... Great Lakes Higher Education Guaranty Corporation ................................................... Student Loan Guarantee Foundation of Arkansas ....................................................... Office of Student Financial Assistance ............ Iowa College Student Aid Commission............ Rhode Island Higher Education Assistance Authority ..................................... Tennessee Student Assistance Corporation ................................................... Illinois Student Assistance Commission .......... New Jersey Higher Education Student Assistance Authority ..................................... Pennsylvania Higher Education Assistance Agency........................................ New Hampshire Higher Education Loan Corporation ................................................... Finance Authority of Maine .............................. Oklahoma Guaranteed Student Loan Program ........................................................ Kentucky Higher Education Assistance Authority........................................................ Total........................................................... * ** Number of Loans 93,698 Aggregate Outstanding Principal Balance $445,205,625.30 Percent of Pool by Outstanding Principal Balance 34.54% 66,985 300,911,296.31 23.34 30,735 135,521,568.60 10.51 13,520 17,722 8,851 11,953 10,550 103,072,551.47 77,309,000.11 56,658,798.41 47,479,231.72 40,773,727.71 8.00 6.00 4.40 3.68 3.16 5,062 18,451,321.82 1.43 3,636 17,574,066.64 1.36 3,053 1,529 1,173 11,757,216.68 6,175,372.96 5,961,547.87 0.91 0.48 0.46 1,305 5,161,739.23 0.40 1,367 1,215 5,173,710.38 4,834,238.30 0.40 0.38 600 2,467,932.86 0.19 507 2,212,959.25 0.17 195 167 1,605,921.38 700,279.35 0.12 0.05 28 102,754.13 0.01 1 273,852 6,906.19 $1,289,117,766.67 Additional trust student loans may be guaranteed by a guaranty agency not listed. Represents an interest greater than 0% but less than 0.005%. A-13 ** 100.00% SIGNIFICANT GUARANTOR INFORMATION The information shown for the Significant Guarantors relates to all student loans guaranteed by the Significant Guarantors. We obtained the following information from various sources, including from the Significant Guarantors and/or from the Department of Education. None of the depositor, BANA, their affiliates, the indenture trustee, the eligible lender trustee, the interim eligible lender trustee or the initial purchasers has audited or independently verified this information for accuracy or completeness. CALIFORNIA STUDENT AID COMMISSION The California Student Aid Commission (“CSAC”) is the designated state student loan guaranty agency for the State of California (“State”), responsible for the State’s participation in the FFELP pursuant to California Education Code Section 69760 et seq., and Section 428(c) of the Higher Education Act. CSAC’s role as a guaranty agency is to provide a source of credit to assist students in meeting their post-secondary education costs while attending eligible institutions of their choice. CSAC began guaranteeing student loans on April 1, 1979, and as of September 30, 2009, had cumulative principal guarantees outstanding of approximately $38.0 billion. As authorized under California law, in 1997, CSAC established EdFund, an auxiliary organization in the form of a nonprofit public benefit corporation to provide operational and administrative services related to CSAC’s participation in the FFELP. In May 2007, the State proposed the sale of, or other alternative arrangement for, its student loan guarantee program. Chapter 182, Statutes of 2007 (Senate Bill 89) authorized the State’s Director of Finance to act as an agent for the sale or alternative arrangement and gave the Director of Finance broad authority over the State’s student loan guarantee program. Any sale or transfer of the State’s guarantee program assets and liabilities requires the approval of the U. S. Secretary of Education. If such a transaction is consummated, it is contemplated that CSAC’s statutory responsibilities as a guaranty agency would be repealed. As part of the FFELP, and pursuant to the 1998 Reauthorization Amendments to the Higher Education Act, the State established the Federal Student Loan Reserve Fund, referred to as CSAC’s Federal Fund, and the Student Loan Operating Fund. CSAC’s liability pursuant to the FFELP, including for any loan guarantees, is limited solely to the amounts contained in these two funds, and the State has no obligation to replenish these funds if exhausted. As of September 30, 2009, CSAC’s Federal Fund and Operating Fund balances were as follows: CSAC’s Federal Fund had total assets of $123,921,251, total liabilities of $0 and total fund equity of $123,921,251; and CSAC’s Operating Fund had total assets of $103,684,751, total liabilities of $35,718,432 and total fund equity of $67,966,319. A-14 The information in the following tables has been provided by CSAC from reports provided by or to the U.S. Department of Education. CSAC has not verified, and makes no representation as to the accuracy or completeness of, the information compiled by the Department of Education or as to any calculations other than as required by federal regulation. Guaranty Volume: CSAC guaranteed the following amounts for the last five (5) fiscal years ending September 30, as follows: Federal Fiscal Year FFELP Loan Volume............................................ 2005 $6,577 2006 $6,878 2007 $6,765 2008 $8,226 2009 $10,373 As a result of the Health Care and Education Reconciliation Act of 2010, signed by President Obama on March 30, 2010, all new loans guaranteed and disbursed under the FFELP were eliminated and all federal student loans for higher education will be made directly by the federal government as of July 1, 2010, rather than by private lenders and guaranteed by a guaranty agency such as CSAC. As such, under current law, no new FFELP loan Guaranty Volume will occur after July 1, 2010. However, pending the outcome of any sale or alternative arrangement, CSAC will continue to perform its obligations as the guaranty agency for the remaining outstanding loan portfolio. Reserve Ratio: Pursuant to 34 C.F.R. 682.419, CSAC’s reserve ratio (determined by dividing its fund balance by the total amount of loans outstanding) for the last five (5) fiscal years ending September 30, is as follows: Federal Fiscal Year Reserve Ratio ....................................................... 2005 0.25% 2006 0.25% 2007 0.26% 2008 0.27% 2009 0.33% Recovery Rate: Pursuant to 34 C.F.R. 682.409, CSAC’s recovery rate for each of the last five (5) fiscal years ending September 30, is as follows: Federal Fiscal Year Recovery Rate ...................................................... 2005 31.12% 2006 21.73% 2007 19.85% 2008 29.14% 2009 28.59% Claims Rate: Pursuant to 34 C.F.R. 682.404, CSAC’s claims rate for each of the last five (5) fiscal years ending September 30, is as follows: Federal Fiscal Year Claims Rate........................................................... 2005 2.81% 2006 3.01% 2007 3.31% 2008 4.16% 2009 4.06% CSAC is located in Rancho Cordova, California. CSAC’s contact information is 10834 International Drive, Rancho Cordova, CA 95670. CSAC’s web address is A-15 www.csac.ca.gov. EDFUND is located in Rancho Cordova, California. EDFUND’s contact information is PO Box 419045, Rancho Cordova, CA 95741. EDFUND’s web address is www.edfund.org. A-16 NEW YORK STATE HIGHER EDUCATION SERVICES CORPORATION New York State Higher Education Services Corporation (HESC) was organized in 1975 as an agency of the State of New York, pursuant to an act of the New York legislature, to expand educational opportunities for students. HESC administers the New York Tuition Assistance Program (TAP) and a variety of state scholarships in addition to acting as a guarantee agency under the FFEL Program. HESC is the designated guarantee agency for the State of New York, and guarantees all types of FFELP Loans. For the FFELP, HESC has the responsibility of processing loans submitted for guarantee, issuing loan guarantees, providing collection assistance to lenders for delinquent loans, paying lender claims for loans in default, and collection activities on loans after purchase by HESC. In addition to FFELP, HESC continues to perform residual administrative activities of the State guaranteed loan program in which no new loans have been guaranteed since 1984. HESC has a Federal Student Loan Reserve Fund (Federal Fund) and an Agency Operating Fund to account for FFELP activity. The Federal Fund assets, and earnings on those assets, are restricted in use and are considered property of the U.S. Department of Education (ED). The Agency Operating Fund is considered property of HESC, and its assets and earnings may be used generally for guarantee agency and other student financial aid related activities. As of September 30, 2009, HESC had total FFEL Program assets of approximately $172 million (including balances for both the Federal Student Loan Reserve Fund and the Agency Operating Fund) and had a total of approximately $27.0 billion in original principal amount of loans outstanding. A recall of federal reserves was mandated in the 1998 Reauthorization Amendments. HESC’s total share of this reserve recall was $18,222,100 which was paid to the Department of Education in three installments with the final payment in August 2007. Guaranty Volume: HESC guaranteed the following amounts for the last five federal fiscal years ending September 30 (excluding consolidation loans): FFELP Loan Volume Fiscal Year ($ in millions) Guarantor New York State Higher Education Services Corporation .................................... 2005 2006 2007 2008 2009 $2,710.8 $2,970.4 $3,163.6 $3,551.4 $3,642.4 Reserve Ratio: A guarantee agency’s reserve ratio is determined by dividing its Federal Student Loan Reserve Fund balance by the original principal amount of loans A-17 outstanding. HESC’s reserve ratio for the last five federal fiscal years ending September 30 is as follows: Reserve Ratio Fiscal Year Guarantor New York State Higher Education Services Corporation .................................... 2005 2006 2007 2008 2009 0.25% 0.25% 0.29% 0.29% 0.30% Claims Rate: A guaranty agency’s claims rate (a.k.a. trigger rate) is determined by dividing the amount of federal reinsurance claims paid by ED during a federal fiscal year by the original principal amount of loans in repayment at the end of the prior federal fiscal year. HESC’s claims rate for each of the past five federal fiscal years ending September 30 is as follows: Claims Rate Fiscal Year Guarantor New York State Higher Education Services Corporation .................................... 2005 2006 2007 2008 2009 1.67% 1.50% 1.42% 1.60% 1.93% Recovery Rate: ED calculates a guaranty agency’s recovery rate by dividing the amount recovered from borrowers during a federal fiscal year by the guaranty agency’s outstanding default loan portfolio (beginning inventory) at the end of the prior federal fiscal year. HESC’s recovery rate for each of the past five federal fiscal years ending September 30 provided below uses the ED calculation method: Reserve Ratio Fiscal Year Guarantor New York State Higher Education Services Corporation .................................... 2005 2006 2007 2008 2009 18.50% 19.59% 26.54% 32.12% 23.64% HESC is headquartered at 99 Washington Avenue, Albany, New York 12255. Its most recent annual report is available on its web site, www.hesc.org. A-18 TEXAS GUARANTEED STUDENT LOAN CORPORATION Organization. The Texas Guaranteed Student Loan Corporation (TG) is a Texas public non-profit corporation organized in 1980 by the Texas legislature to operate as a guarantee agency under the Federal Family Education Loan Program (FFELP), providing a Federally reinsured guaranty of eligible Stafford, PLUS and consolidation student loans. Located at 301 Sundance Parkway, Round Rock, Texas 78681, TG is governed by ten directors appointed by the Governor of Texas in addition to the State Comptroller, and is staffed by approximately 680 employees. Guarantee Volume. Approximate annual loan guarantee volume net of cancellations is as follows (in billions): Federal Fiscal Year 2005...................................... 2006...................................... 2007...................................... 2008...................................... 2009...................................... Loan Guarantee Volume Excluding Including Consolidation Loans Consolidation Loans $3.31 $5.85 $3.73 $6.04 $4.28 $5.74 $6.72 $7.38 $9.58 $9.59 Portfolio Loans. As discussed under “Risk Factors” in the offering memorandum, loan default rates for students attending proprietary schools typically exceed that for two-year and four-year schools. School type mix for the most current Federal fiscal year and for the total portfolio are as follows: School Type Four-year .............................. Two-year............................... Proprietary ............................ Federal Fiscal Year 2009 73% 6% 21% Total Portfolio as of September 30, 2009 78% 7% 11% Including consolidation loans, the total portfolio as of September 30, 2009 is comprised of 54% four year, 5% two year, 10% proprietary, and 31% consolidation. Reserves. TG’s Reserve Ratio as reported by ED is as follows: Federal Fiscal Year 2005...................................... 2006...................................... 2007...................................... 2008...................................... 2009...................................... Reserve Ratio 0.849% 0.735% 0.900% 0.905% 0.980% A-19 Claims Rate. TG’s claims rate represents the percentage of Federal reinsurance claims made by TG during a Federal fiscal year relative to TG’s portfolio of loans designated as “in repayment” at the end of the prior Federal fiscal year. TG’s historical claims rates are as follows: Federal Fiscal Year 2005...................................... 2006...................................... 2007...................................... 2008...................................... 2009...................................... Claims Rate 3.48% 3.06% 3.01% 3.32% 3.40% Federal Family Education Loan Program Developments. Recent legislation provides for the sale of eligible FFELP loans to the U.S. Department of Education removing them from the guarantor’s portfolio, the extent of which cannot be determined. Enacted legislation discontinues FFELP loan originations after June 30, 2010. No Liability to Noteholders. The information concerning TG in the offering memorandum has been provided for the sole purpose of describing TG’s function as guarantor of certain of the Eligible Loans. TG has no obligation or liability of any kind to the noteholders or to pay the principal of redemption premium or interest on these notes. Miscellaneous. Liabilities created by TG are not debts of the State of Texas and TG may not secure any liability with funds or assets of the State except as otherwise provided in the final sentence of this paragraph. TG is subject to the Texas Sunset Act (Chapter 325, Government Code) and as a result of Sunset Review completed in 2004, the Texas Legislature enacted legislation to extend TG’s existence until September 1, 2017. If TG is abolished in a subsequent Sunset Review, the Comptroller of Public Accounts of the State of Texas is required under the Education Code to serve as trustee to administer the assets of TG and satisfy its outstanding obligations. TG has not reviewed any other section of the offering memorandum and shall have no responsibility of any information contained therein. A-20 ANNEX B 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 model used to calculate these prepayments is the constant prepayment rate (or “CPR”) model. The CPR model is based on prepayments assumed to occur at a constant percentage rate. CPR is stated as an annualized rate and is calculated as the percentage of the loan amount outstanding at the beginning of a period (including accrued interest to be capitalized), after applying scheduled payments, that are paid during that period. The CPR model 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 $1,000 balance after scheduled payments would be as follows for the percentages of CPR listed below: CPR Monthly Prepayment .......... 0% $0.00 2% $1.68 4% $3.40 6% $5.14 8% $6.92 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. Additional Assumptions For purposes of calculating the information presented in the tables below, it is assumed, among other things, that: • the statistical cutoff date for the trust student loans is June 1, 2010; • the closing date will be July 9, 2010; • the initial Pool Balance of the trust student loans as of the statistical cutoff date is $1,289,117,766.67; • all trust student loans (as grouped within the “rep lines” described below) remain in their current status until their status end date and then move to repayment, with the exception of in-school status loans, which are assumed to have a 6-month grace period before moving to repayment, and no trust student loan moves from repayment to any other status; B-1 • the trust student loans that are (i) non-subsidized Stafford loans not in repayment status, (ii) subsidized Stafford loans in forbearance status, or (iii) SLS or PLUS loans, have interest accrued and capitalized upon entering repayment; • the trust student loans that are subsidized Stafford loans and are in in-school, grace or deferment status, have interest paid (interest subsidy payments) by the Department of Education quarterly, based on a quarterly calendar accrual period; • 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; • there are government payment delays of 30 days for interest subsidy and special allowance payments; • index levels for calculation of borrower and government payments are: • a 91-day Treasury bill rate of 0.09%; • a three-month commercial paper rate of 0.45051%; and • a 1-year Treasury bill rate that equals the 91-day Treasury bill rate; • distributions begin on October 25, 2010, and payments are made monthly on the 25th day of every month thereafter, whether or not the 25th is a business day; • the interest rate for the class A notes at all times will be equal to 1.38925%; • an administration and calculation agent fee equal to $87,500 is paid quarterly by the trust to the administrator and calculation agent, beginning in October 2010; • the primary servicing fee for any month shall be 1/12 of 0.90% of the outstanding principal balance of the trust student loans; • the reserve account has an initial balance equal to $3,222,794.42 and at all times a balance equal to the greater of (1) 0.25% of the Pool Balance and (2) $1,289,117.77; • the collection account has an initial balance equal to $0; • the capitalized interest account has an initial balance equal to $42,000,000, on the April 2012 distribution date, all funds remaining on deposit in the capitalized interest account will be included in Available Funds on that distribution date; • all payments are assumed to be made at the end of the month and amounts on deposit in the collection account, reserve account and capitalized interest account, including reinvestment income earned in the previous month, net of servicing fees, are reinvested in eligible B-2 investments at the assumed reinvestment rate of 0.43925% per annum through the end of the collection period, and reinvestment earnings are available for distribution from the prior collection period; • prepayments on the trust student loans are applied monthly in accordance with CPR, as described above; • an optional redemption by the master 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 • the pool of trust student loans consists of 142 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 indicated in the following tables, 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. CPR Tables The following tables show the weighted average remaining lives, expected maturity dates and percentages of original principal of the class A notes at various percentages of CPR from the closing date until the optional redemption date. Weighted Average Lives and Expected Maturities of the Class A Notes at Various CPR Percentages Weighted Average Life (years)(1) Class A Notes Expected Maturity Date Class A Notes 0% CPR 5.93 2% CPR 5.44 4% CPR 5.00 6% CPR 4.60 8% CPR 4.24 10/25/2020 07/25/2020 04/25/2020 01/25/2020 10/25/2019 (1) 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 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 principal amount of the notes as of the closing date. B-3 Class A Notes Percentages Of Original Principal Of The Notes Remaining At Certain Distribution Dates At Various CPR Percentages Distribution Date Closing Date October 2010 October 2011 October 2012 October 2013 October 2014 October 2015 October 2016 October 2017 October 2018 October 2019 October 2020 0% CPR 100% 99% 96% 87% 78% 68% 58% 47% 35% 23% 10% 0% 2% CPR 100% 98% 93% 82% 72% 62% 51% 40% 29% 18% 7% 0% 4% CPR 100% 98% 91% 78% 67% 56% 45% 34% 24% 14% 4% 0% B-4 6% CPR 100% 97% 88% 74% 62% 50% 39% 29% 19% 10% 2% 0% 8% CPR 100% 96% 85% 70% 57% 45% 34% 24% 15% 7% 0% 0% ANNEX C FEDERAL FAMILY EDUCATION LOAN PROGRAM General The Federal Family Education Loan Program, known as the FFELP, under Title IV of the Higher Education Act, provides for loans to students who are enrolled in eligible institutions, or to parents of dependent students, to finance their educational costs. Payment of principal and interest on the trust student loans is guaranteed by a state or not-for-profit guaranty agency against: • default of the borrower; • the death, bankruptcy or permanent, total disability of the borrower; • closing of the borrower’s school prior to the end of the academic period; • false certification by the borrower’s school of his eligibility for the loan; and • an unpaid school refund. In addition to the guarantee payments, the holder of student loans is entitled to receive interest subsidy payments and special allowance payments from the U.S. Department of Education (which we refer to as the U.S. Department of Education) on eligible student loans. Special allowance payments raise the interest rate of return to student loan lenders when the statutory borrower interest rate is below an indexed market value. Subject to certain conditions, a program of federal reinsurance under the Higher Education Act entitles guaranty agencies to reimbursement from the U.S. Department of Education for between 75% and 100% of the amount of each guarantee payment. Four types of student loans are currently authorized under the Higher Education Act: • Subsidized Stafford Loans to students who demonstrate requisite financial need; • Unsubsidized Stafford Loans to students who either do not demonstrate financial need or require additional loans to supplement their Subsidized Stafford Loans; • Parent Loans for Undergraduate Students, known as “PLUS Loans,” to parents of dependent students whose estimated costs of attending school exceed other available financial aid; and C-1 • Consolidation Loans, which consolidate into a single loan a borrower’s obligations under various federally authorized student loan programs. Before July 1, 1994, the Higher Education Act also authorized loans called “Supplemental Loans to Students” or “SLS Loans” to independent students and, under some circumstances, dependent undergraduate students, to supplement their Subsidized Stafford Loans. The Unsubsidized Stafford Loan program replaced the SLS program. This appendix and the offering memorandum describe or summarize the material provisions of the Higher Education Act, the FFELP and related statutes and regulations. They, however, are not complete and are qualified in their entirety by reference to each actual statute and regulation. Both the Higher Education Act and the related regulations have been the subject of extensive amendments. Accordingly, we cannot predict whether future amendments or modifications might materially change any of the programs described in this appendix or the statutes and regulations that implement them. Legislative Developments On March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”) was enacted into law. Effective July 1, 2010, the Reconciliation Act eliminated FFELP. The terms of existing FFELP loans are not materially affected by the Reconciliation Act. Legislative Matters The FFELP was subject to comprehensive reauthorization every 5 years and to frequent statutory and regulatory changes. The most recent reauthorization was the Higher Education Reconciliation Act of 2005, which was signed into law February 8, 2006 as part of the Deficit Reduction Act, Public Law 109-171. The 2005 reauthorization extended the U.S. Department of Education’s authority to provide federal insurance on loans, make subsidized loans and make consolidation loans through September 30, 2012. Several provisions of the Higher Education Act governing the FFELP were also amended, including (i) an increase in the annual Stafford loan limits for first and second year undergraduate students, (ii) the reduction of reimbursement due to servicers deemed as exceptional performers from 100% to 99%, (iii) requiring lenders to pay the U.S. Department of Education interest paid by borrowers that exceed the special allowance support levels applicable to such loans, (iv) deferment eligibility for a borrower who is on active military or other qualifying service duty, (v) the increase in forgiveness amounts for certain teachers and (vi) the availability of PLUS loans to graduate and professional students. On September 27, 2007, the President of the United States signed the “College Cost Reduction and Access Act of 2007,” Public Law 110-84, into law, which, by amending the Higher Education Act of 1965, eliminated certain government subsidies to education lenders. The legislation also included provisions that: (1) phased in cuts in C-2 the interest rate charged to undergraduate student borrowers on subsidized FFELP loans from 6.8%, which rate became effective in July 2006, to 3.4%, in July 2012, (2) reduced the Federal Family Education Loan Program lender insurance percentage to 95% of the unpaid balance of such FFELP loans disbursed on or after October 1, 2012, (3) reduced special allowance payments made to FFELP lenders and (4) eliminated the “exceptional performance” status for lenders, servicers and guaranty agencies as of October 1, 2007. The U.S. Department of Education amended the FFELP regulations on November 1, 2007. On May 21, 2008, the U.S. Department of Education announced that it will implement a program under the recently enacted “Ensuring Continued Access to Student Loan Act of 2008” (P.L. 110-227) to purchase certain FFELP loans and to provide liquidity to FFELP lenders. Under the program, the U.S. Department of Education will purchase, until September 30, 2009, eligible FFELP loans originated between May 1, 2008 and June 30, 2009 at a purchase price equal to the sum of (i) par value, (ii) accrued interest (net of special allowance payments), (iii) the 1% origination fee paid to the U.S. Department of Education, and (iv) a fixed amount of $75.00 per loan. Also, the U.S. Department of Education will provide liquidity until September 30, 2009 by purchasing participation interests in pools of eligible FFELP loans at a price that will yield the U.S. Department of Education the commercial paper rate plus 50 basis points. Details of the program are available in the Federal Register. In 1993, Congress created the William D. Ford Federal Direct Loan Program (“FDLP”) pursuant to which Stafford, PLUS and Consolidation Loans may be funded directly by the United States Department of the Treasury as well as by private lenders under the FFELP. The Higher Education Amendments of 1998 extended the principal provisions of the FFELP and the FDLP to October 1, 2004, which was extended through federal fiscal year 2005 by Public Law 108-366. The 1998 reauthorization, as modified by the Ticket to Work and Work Incentives Improvement Act of 1999, lowered both the borrower interest rate on Stafford Loans to a formula based on the 91-day treasury bill rate plus 2.3% (1.7% during in-school and grace periods) and the lender’s rate after special allowance payments to the 91-day treasury bill rate plus 2.8% (2.2% during in-school and grace periods) for loans originated on or after October 1, 1998 and before July 1, 2003. The borrower interest rate on PLUS loans originated during this period is equal to the 91-day treasury bill rate plus 3.1%. The 1999 act changed the financial index on which special allowance payments are computed on new loans from the 91-day treasury bill rate to the three-month Commercial Paper Rate (financial) for FFELP loans disbursed on or after January 1, 2000 and before July 1, 2003. For these FFELP loans, the special allowance payments to lenders are based upon the three-month commercial paper (financial) rate plus 2.34% (1.74% during in-school and grace periods). The 1999 act did not change the rate that the borrower pays on FFELP loans. C-3 The Consolidated Appropriations Act of 2001 changed the financial index on which the interest rate for some borrowers of SLS and PLUS loans are computed. The index was changed from the 1-year treasury bill rate to the weekly average one-year constant maturity Treasury yield. This change was effective beginning in July 2001. Public Law 107-139, dated February 8, 2002, amended the Higher Education Act to (i) extend current borrower interest rates for student or parent loans with a first disbursement before July 1, 2006 and for consolidation loans with an application received by the lender before July 1, 2006, (ii) establish fixed borrower interest rates on student loans made on or after July 1, 2006 and (iii) extend the computation of special allowance payments based on the three-month commercial paper (financial) index. Other amendments since the 1998 reauthorization include Public Law 108-98, dated October 10, 2003, Public Law 108-409, dated October 30, 2004, and the Third Higher Education Extension Act of 2006, Public Law 109-292, dated September 30, 2006. We cannot predict whether further changes will be made to the Higher Education Act in future legislation or the effect of such additional legislation on the sponsor’s student loan program or the trust student loans. Eligible Lenders, Students and Educational Institutions Lenders eligible to make loans under the FFELP generally include banks, savings and loan associations, credit unions, pension funds and, under some conditions, schools and guarantors. A student loan may be made to, or on behalf of, a “qualified student.” A “qualified student” is an individual who • is a United States citizen, national or permanent resident; • has been accepted for enrollment or is enrolled and is maintaining satisfactory academic progress at a participating educational institution; • is carrying at least one-half of the normal full-time academic workload for the course of study the student is pursuing; and • meets the financial need requirements for the particular loan program. Eligible schools include institutions of higher education, including proprietary institutions, meeting the standards provided in the Higher Education Act. For a school to participate in the program, the U.S. Department of Education must approve its eligibility under standards established by regulation. Financial Need Analysis Subject to program limits and conditions, student loans generally are made in amounts sufficient to cover the student’s estimated costs of attending school, including tuition and fees, books, supplies, room and board, transportation and miscellaneous C-4 personal expenses as determined by the institution. Each Stafford Loan applicant (and parents in the case of a dependent child) must undergo a financial need analysis. This requires the applicant (and parents in the case of a dependent child) to submit financial data to a federal processor. The federal processor evaluates the parents’ and student’s financial condition under federal guidelines and calculates the amount that the student and the family are expected to contribute towards the student’s cost of education. After receiving information on the family contribution, the institution then subtracts the family contribution from the student’s costs to attend the institution to determine the student’s need for financial aid. Some of this need is met by grants, scholarships, institutional loans and work assistance. A student’s “unmet need” is further reduced by the amount of Stafford Loans for which the borrower is eligible. Special Allowance Payments The Higher Education Act provides for quarterly special allowance payments to be made by the U.S. Department of Education to holders of student loans to the extent necessary to ensure that they receive at least specified market interest rates of return. The rates for special allowance payments depend on formulas that vary according to the type of loan, the date the loan was made and the type of funds, tax-exempt or taxable, used to finance the loan. The U.S. Department of Education makes a special allowance payment for each calendar quarter, generally within 45 to 60 days after the receipt of a bill from the lender. The special allowance payment equals the average unpaid principal balance, including interest which has been capitalized, of all eligible loans held by a holder during the quarterly period multiplied by the special allowance percentage. For student loans disbursed before January 1, 2000, the special allowance percentage is computed by: (1) determining the average of the bond equivalent rates of 91-day Treasury bills auctioned for that quarter; (2) subtracting the applicable borrower interest rate; (3) adding the applicable special allowance margin described in the table below; and (4) dividing the resultant percentage by 4. If the result is negative, the special allowance payment is zero. C-5 Date of First Disbursement Before 10/17/86......................................... From 10/17/86 through 09/30/92 .............. From 10/01/92 through 06/30/95 .............. From 07/01/95 through 06/30/98 .............. From 07/01/98 through 12/31/99 .............. Special Allowance Margin 3.50% 3.25% 3.10% 2.50% for Stafford Loans that are in In-School, Grace or Deferment 3.10% for Stafford Loans that are in Repayment and all other loans 2.20% for Stafford Loans that are in In-School, Grace or Deferment 2.80% for Stafford Loans that are in Repayment and Forbearance 3.10% for PLUS, SLS and Consolidation Loans For student loans disbursed after January 1, 2000, the special allowance percentage is computed by: (1) determining the average of the bond equivalent rates of 3-month commercial paper (financial) rates quoted for that quarter; (2) subtracting the applicable borrower interest rate; (3) adding the applicable special allowance margin described in the table below; and (4) dividing the resultant percentage by 4. If the result is negative, the special allowance payment is zero. Date of First Disbursement From 01/01/00 through 09/30/07 ............... From 10/01/07 and after............................. Special Allowance Margin 1.74% for Stafford Loans that are in In-School, Grace or Deferment 2.34% for Stafford Loans that are in Repayment and Forbearance 2.64% for PLUS and Consolidation Loans 1.19% for Stafford Loans that are In-School, Grace or Deferment 1.79% for Stafford Loans that are in Repayment and PLUS 2.09% for Consolidation Loans For student loans disbursed on or after April 1, 2006, lenders are required to pay the U.S. Department of Education any interest paid by borrowers on student loans that exceeds the special allowance support levels applicable to such loans. Special allowance payments are available on variable rate PLUS Loans and SLS Loans only if the variable rate, which is reset annually, exceeds the applicable maximum borrower rate. The variable rate is based on the weekly average one-year constant maturity Treasury yield for loans made before July 1, 1998 and based on the 91-day Treasury bill for loans made on or after July 1, 1998. The maximum borrower rate for these loans is between 9% and 12%. Effective July 1, 2006, this limitation on C-6 special allowance payments for PLUS Loans made on and after January 1, 2000 was repealed. Fees Origination Fee. An origination fee must be paid to the U.S. Department of Education for all Stafford and PLUS Loans originated in the FFELP. An origination fee is not paid on a Consolidation Loan. A 3% origination fee must be deducted from the amount of each PLUS Loan. An origination fee may be, but is not required to be, deducted from the amount of a Stafford Loan according to the following table: Date of First Disbursement Before 07/01/06....................................................... From 07/01/06 through 06/30/07 ............................ From 07/01/07 through 06/30/08 ............................ From 07/01/08 through 06/30/09 ............................ From 07/01/09 through 06/30/10 ............................ Maximum Origination Fee 3.0% 2.0% 1.5% 1.0% 0.5% Federal Default Fee. A federal default fee up to 1% (previously called an insurance premium) may be, but is not required to be, deducted from the amount of a Stafford or PLUS Loan. A federal default fee is not deducted from the amount of a Consolidation Loan. Lender Loan Fee. A lender loan fee is paid to the U.S. Department of Education on the amount of each loan disbursement of all FFELP loans. For loans disbursed from October 1, 1993 to September 30, 2007, the fee was 0.50% of the loan amount. The fee increased to 1% of the loan amount for loans disbursed on or after October 1, 2007. Loan Rebate Fee. A loan rebate fee of 1.05% is paid annually on the unpaid principal and interest of each Consolidation Loan disbursed on or after October 1, 1993. This fee was reduced to 0.62% for loans made from October 1, 1998 to January 31, 1999. Stafford Loan Program For Stafford Loans, the Higher Education Act provides for: • federal insurance or reinsurance of Stafford Loans made by eligible lenders to qualified students; • federal interest subsidy payments on Subsidized Stafford Loans paid by the U.S. Department of Education to holders of the loans in lieu of the borrowers’ making interest payments; and • special allowance payments representing an additional subsidy paid by the U.S. Department of Education to the holders of eligible Stafford Loans. C-7 We refer to all three types of assistance as “federal assistance.” Interest. The borrower’s interest rate on a Stafford Loan can be fixed or variable. Stafford Loan interest rates are presented below. Trigger Date Before 10/01/81......................... From 01/01/81 through 09/12/83 ................................. From 09/13/83 through 06/30/88 ................................. From 07/01/88 through 09/30/92 ................................. Borrower Rate 7% From 10/01/92 through 06/30/94 ................................. 91-day Treasury + Interest Rate Margin 91-day Treasury + Interest Rate Margin 91-day Treasury + Interest Rate Margin 91-day Treasury + Interest Rate Margin 6.8% From 07/01/94 through 06/30/95 ................................. From 07/01/95 through 06/30/98 ................................. From 07/01/98 through 06/30/06 ................................. From 07/01/06 through 06/30/08 ................................. From 07/01/08 through 06/30/09 ................................. From 07/01/09 through 06/30/10 ................................. 9% Maximum Borrower Rate N/A N/A 8% 8% for 48 months; thereafter, 91day Treasury + Interest Rate Margin 6.0% for undergraduate subsidized loans; and 6.8% for unsubsidized loans and graduate subsidized loans 5.6% for undergraduate subsidized loans; and 6.8% for unsubsidized loans and graduate loans C-8 N/A 8% for 48 months, then 10% 9% 8.25% 8.25% 8.25% N/A Interest Rate Margin N/A N/A N/A 3.25% for loans made before 7/23/92 and for loans made on or before 10/1/92 to new student borrowers; 3.10% for loans made after 7/23/92 and before 7/1/94 to borrowers with outstanding FFELP loans 3.10% 3.10% 2.50% (In-School, Grace or Deferment); 3.10% (Repayment) 1.70% (In-School, Grace or Deferment); 2.30% (Repayment) N/A 6.0%, 6.8% N/A 5.6%, 6.8% N/A The rate for variable rate Stafford Loans applicable for any 12-month period beginning on July 1 and ending on June 30 is determined on the preceding June 1 and is equal to the lesser of: • the applicable maximum borrower rate, and • the sum of: • the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held before that June 1, and • the applicable interest rate margin. Interest Subsidy Payments. The U.S. Department of Education is responsible for paying interest on Subsidized Stafford Loans: • while the borrower is a qualified student; • during the grace period; and • during prescribed deferment periods. The U.S. Department of Education makes quarterly interest subsidy payments to the owner of a Subsidized Stafford Loan in an amount equal to the interest that accrues on the unpaid balance of that loan before repayment begins or during any deferment periods. The Higher Education Act provides that the owner of an eligible Subsidized Stafford Loan has a contractual right against the United States to receive interest subsidy and special allowance payments. However, receipt of interest subsidy and special allowance payments is conditioned on compliance with the requirements of the Higher Education Act, including the following: • satisfaction of need criteria; and • continued eligibility of the loan for federal insurance or reinsurance. If the loan is not held by an eligible lender in accordance with the requirements of the Higher Education Act and the applicable guarantee agreement, the loan may lose its eligibility for federal assistance. C-9 Lenders generally receive interest subsidy payments within 45 days to 60 days after the submission of the applicable data for any given calendar quarter to the U.S. Department of Education. However, there can be no assurance that payments will, in fact, be received from the U.S. Department of Education within that period. Loan Limits. The Higher Education Act generally requires that lenders disburse student loans in at least two equal disbursements. The Higher Education Act limits the amount a student can borrow in any academic year. The following chart shows current and historic loan limits. Independent Students Dependent Students Subsidized Subsidized Subsidized and and and Unsubsidized Unsubsidized Unsubsidized on or after on or after on or after Borrower’s 10/1/93 7/1/07 7/1/08 Academic Level Undergraduate (per year): 1st year $ 2,625 $ 3,500 $ 5,500 2nd year $ 3,500 $ 4,500 $ 6,500 3rd year and above $ 5,500 $ 5,500 $ 7,500 Graduate (per year) $ 8,500 $ 8,500 $ 8,500 Aggregate Limit: Undergraduate $23,000 $23,000 $31,000 Graduate (including $65,500 $65,500 undergraduate) $65,500 Additional Additional Additional Unsubsidized Unsubsidized Unsubsidized only on only on only on or after or after or after 7/1/94 7/1/07 7/1/08 $ 4,000 $ 4,000 $ 4,000 $ 4,000 $ 4,000 $ 4,000 $ 9,500 $ 10,500 $ 5,000 $ 5,000 $ 5,000 $ 12,500 $10,000 $12,000 $12,000 $ 20,500 $23,000 $23,000 $26,500 $ 57,500 $73,000 $73,000 $73,000 $138,500 For the purposes of the table above: • The loan limits include both FFELP and FDLP loans. • The amounts in the final column represent the combined maximum loan amount per year for Subsidized and Unsubsidized Stafford Loans. Accordingly, the maximum amount that a student may borrow under an Unsubsidized Stafford Loan is the difference between the combined maximum loan amount and the amount the student received in the form of a Subsidized Stafford Loan. • Independent undergraduate students, graduate students and professional students may borrow the additional amounts shown in the third and fourth columns. Dependent undergraduate students may also receive these additional loan amounts if their parents are unable to provide the family contribution amount and cannot qualify for a PLUS Loan. • Students attending certain medical schools are eligible for $38,500 annually and $189,000 in the aggregate. C-10 Maximum Annual Total Amount • The annual loan limits are sometimes reduced when the student is enrolled in a program of less than one academic year or has less than a full academic year remaining in his program. Repayment. Repayment of principal on a Stafford Loan does not begin while the borrower remains a qualified student, but only after a 6-month grace period. In general, each loan must be scheduled for repayment over a period of not more than 10 years after repayment begins. New borrowers on or after October 7, 1998 who accumulate FFELP loans totaling more than $30,000 in principal and unpaid interest are entitled to extend repayment for up to 25 years, subject to minimum repayment amounts. Consolidation Loan borrowers may be scheduled for repayment up to 30 years depending on the borrower’s indebtedness. Outlined in the table below are the maximum repayment periods available based on the outstanding FFELP indebtedness. Outstanding FFELP Indebtedness $7,500-$9,999 .................................................................. $10,000-$19,999 .............................................................. $20,000-$30,000 .............................................................. $30,001-$59,999 .............................................................. $60,000 or more............................................................... Maximum Repayment Period 12 Years 15 Years 20 Years 25 Years 30 Years Note: Maximum repayment period excludes authorized periods of deferment and forbearance. In addition to the outstanding FFELP indebtedness requirements described above, the Higher Education Act currently requires minimum annual payments of $600, unless the borrower and the lender agree to lower payments, except that negative amortization is not allowed. The Higher Education Act and related regulations require lenders to offer a choice among standard, graduated, income-sensitive and extended repayment schedules, if applicable, to all borrowers entering repayment. The 2007 legislation introduces an income-based repayment plan on July 1, 2009 that a student borrower may elect during a period of partial financial hardship and have annual payments that do not exceed 15% of the amount by which adjusted gross income exceeds 150% of the poverty line. The Secretary repays or cancels any outstanding principal and interest under certain criteria after 25 years. Grace Periods, Deferment Periods and Forbearance Periods. After the borrower stops pursuing at least a half-time course of study, he generally must begin to repay principal of a Stafford Loan following the grace period. However, no principal repayments need be made, subject to some conditions, during deferment and forbearance periods. For borrowers whose first loans are disbursed on or after July 1, 1993, repayment of principal may be postponed: • while the borrower returns to school at least half-time or is enrolled in an approved graduate fellowship program or rehabilitation program; C-11 • when the borrower is seeking, but unable to find, full-time employment, subject to a maximum deferment of three years; or • when the lender determines that repayment will cause the borrower “economic hardship,” as defined in the Higher Education Act, subject to a maximum deferment of three years. For loans with a disbursement made on or after July 1, 2001, a borrower who is serving on active military duty during a war or other military operation or national emergency, or performing qualifying National Guard duty during a war or other military operation or national emergency is eligible for deferment for up to three years. Math, science and special education teachers, with loans disbursed on or after October 1, 1998 are now eligible for increased forgiveness amounts of up to $17,500. Interest that accrues during a deferment is paid by the U.S. Department of Education for Subsidized Stafford Loans or deferred and capitalized for Unsubsidized Stafford Loans. The Higher Education Act also permits, and in some cases requires, “forbearance” periods from loan collection in some circumstances. Interest that accrues during a forbearance period is never subsidized. When a borrower ends forbearance and enters repayment, the account is considered current. PLUS and SLS Loan Programs The Higher Education Act authorizes (i) PLUS Loans to be made to parents of eligible dependent students and graduate and professional students and (ii) previously authorized SLS Loans to be made to the categories of students now served by the Unsubsidized Stafford Loan program. Only parents or graduate or professional students who have no adverse credit history or who are able to secure an endorser without an adverse credit history are eligible for PLUS Loans. The basic provisions applicable to PLUS and SLS Loans are similar to those of Stafford Loans for federal insurance and reinsurance. However, interest subsidy payments are not available under the PLUS and SLS programs and, in some instances, special allowance payments are more restricted. Loan Limits. PLUS and SLS Loans disbursed before July 1, 1993 were limited to $4,000 per academic year with a maximum aggregate amount of $20,000. The annual loan limits for SLS Loans disbursed on or after July 1, 1993 range from $4,000 for first and second year undergraduate borrowers to $10,000 for graduate borrowers, with a maximum aggregate amount of $23,000 for undergraduate borrowers and $73,000 for graduate and professional borrowers. The annual and aggregate amounts of PLUS Loans first disbursed on or after July 1, 1993 are limited only to the difference between the cost of the student’s education and other financial aid received, including scholarship, grants and other student loans. C-12 Interest. The interest rates for PLUS Loans and SLS Loans are presented in the chart below. For PLUS or SLS Loans that bear interest based on a variable rate, the rate is set annually for 12-month periods, from July 1 through June 30, on the preceding June 1 and is equal to the lesser of: • the applicable maximum borrower rate; and • the sum of: • the applicable 1-year Index or the bond equivalent rate of 91-day Treasury bills, as applicable; and • the applicable interest rate margin. Under current law, PLUS Loans with a first disbursement on or after July 1, 2006 will return to a fixed annual interest rate of 8.5%. Until July 1, 2001, the 1-year index was the bond equivalent rate of 52-week Treasury bills auctioned at the final auction held prior to each June 1. Beginning July 1, 2001, the 1-year index is the weekly average 1-year constant maturity Treasury, as published by the Board of Governors of the Federal Reserve System, for the last calendar week ending on or before the June 26 immediately preceding the July 1 reset date. Trigger Date Before 10/01/81............................ From 10/01/81 through 10/30/82 .................................... From 11/01/82 through 06/30/87 .................................... From 07/01/87 through 09/30/92 .................................... From 10/01/92 through 06/30/94 .................................... From 07/01/94 through 06/30/98 .................................... From 07/01/98 through 06/30/06 .................................... From 07/01/06.............................. Borrower Rate 9% Maximum Borrower Rate N/A 14% N/A N/A 12% N/A N/A 3.25% 1-year Index + Interest Rate Margin 1-year Index + Interest Rate Margin 12% PLUS 10%, SLS 11% Interest Rate Margin N/A 3.10% 3.10% 1-year Index + Interest Rate Margin 91-day Treasury + Interest Rate Margin 8.5% C-13 9% 9% 8.5% 3.10% N/A A holder of a PLUS or SLS Loan is eligible to receive special allowance payments during any quarter if: • the borrower rate is set at the maximum borrower rate; and • the sum of the average of the bond equivalent rates of 91-day Treasury bills auctioned during that quarter and the applicable interest rate margin exceeds the maximum borrower rate. Effective July 1, 2006, this limitation on special allowance payments for PLUS Loans made on or after January 1, 2000 was repealed. Repayment; Deferments. Borrowers begin to repay principal on their PLUS and SLS Loans no later than 60 days after the final disbursement, subject to deferment and forbearance provisions. Borrowers may defer and capitalize repayment of interest during periods of educational enrollment, unemployment and economic hardship, as defined in the Higher Education Act. Maximum loan repayment periods and minimum payment amounts for PLUS and SLS Loans are the same as those for Stafford Loans. Guaranty Agencies under the FFELP Under the FFELP, guaranty agencies guarantee loans made by eligible lending institutions. Student loans are guaranteed as to 100% of principal and accrued interest against death or discharge. The guarantor also pays 100% of the unpaid principal and accrued interest on PLUS Loans, where the student on whose behalf the loan was borrowed dies. Guaranty agencies also guarantee lenders against default. For loans made prior to October 1, 1993, lenders are insured against default for 100% of principal and accrued interest. For loans disbursed from October 1, 1993 through June 30, 2006, lenders are insured against default for 98% of principal and accrued interest. For loans disbursed on or after July 1, 2006, lenders are insured against default for 97% of principal and accrued interest. The Secretary of Education reinsures guarantors for amounts paid to lenders on loans that are discharged or defaulted. The reimbursement rate on discharged loans is for 100% of the amount paid to the holder. The reimbursement rate for defaulted loans decreases as a guarantor’s default rate increases. The first trigger for a lower reinsurance rate is when the amount of defaulted loan reimbursements exceeds 5% of the amount of all loans guaranteed by the agency in repayment status at the beginning of the federal fiscal year. The second trigger is when the amount of defaults exceeds 9% of the loans in repayment. Guaranty agency reinsurance rates are presented in the table below. Claims Paid Date Before October 1, 1993................................................... October 1, 1993 – September 30, 1998.......................... On or after October 1, 1998 ............................................ C-14 Maximum 100% 98% 95% 5% Trigger 90% 88% 85% 9% Trigger 80% 78% 75% After the Secretary reimburses a guarantor for a default claim, the guarantor attempts to seek repayment of the loan from the borrower. However, the Secretary requires that the defaulted guaranteed loans be assigned to the U.S. Department of Education when the guarantor is not successful. A guarantor also refers defaulted guaranteed loans to the Secretary to “offset” any federal income tax refunds or other federal reimbursement that may be due the borrowers. Some states have similar offset programs. To be eligible for federal reinsurance, guaranteed loans must be made by an eligible lender and meet the requirements of the Higher Education Act and the regulations issued thereunder. Generally, these regulations require that lenders determine whether the applicant is an eligible borrower attending an eligible institution, explain to borrowers their responsibilities under the loan, ensure that the promissory notes evidencing the loan are executed by the borrower, and disburse the loan proceeds as required. After the loan is made, the lender must establish repayment terms with the borrower, properly administer deferments and forbearances and credit the borrower for payments made. If a borrower becomes delinquent in repaying a loan, a lender must perform collection procedures that vary depending upon the length of time a loan is delinquent. The collection procedures consist of telephone calls, demand letters, skiptracing procedures and requesting assistance from the guarantor. A lender may submit a default claim to the guarantor after the related student loan has been delinquent for at least 270 days. The guarantor must review and pay the claim within 90 days after the lender filed it. The guarantor will pay the lender interest accrued on the loan for up to 450 days after delinquency. The guarantor must file a reimbursement claim with the Secretary within 30 days after the guarantor paid the lender for the default claim. Student Loan Discharges FFELP loans are not generally dischargeable in bankruptcy. Under the United States Bankruptcy Code, before a student loan may be discharged, the borrower must demonstrate that repaying it would cause the borrower or his family undue hardship. When a FFELP borrower files for bankruptcy, collection of the loan is suspended during the time of the proceeding. If the borrower files under the “wage earner” provisions of the Bankruptcy Code or files a petition for discharge on the grounds of undue hardship, then the lender transfers the loan to the guaranty agency which guaranteed that loan and that agency then participates in the bankruptcy proceeding. When the proceeding is complete, unless there was a finding of undue hardship, the loan is transferred back to the lender and collection resumes. Student loans are discharged if the borrower dies or becomes totally and permanently disabled. A physician must certify eligibility for discharge due to disability. This discharge is conditional for the first three years; if a borrower recovers sufficiently during that period to earn a reasonable income, the borrower must resume repayment. Effective January 29, 2007, discharge eligibility was extended to survivors of eligible C-15 public servants and certain other eligible victims of the September 11, 2001 terrorist attacks on the United States. If a school closes while a student is enrolled, or within 90 days after the student withdrew, loans made for that enrollment period are discharged. If a school falsely certifies that a borrower is eligible for the loan, the loan may be discharged. Moreover, if a school fails to make a refund to which a student is entitled, the loan is discharged to the extent of the unpaid refund. Effective July 1, 2006, a loan is also eligible for discharge if it is determined that the borrower’s eligibility for the loan was falsely certified as a result of a crime of identity theft. Rehabilitation of Defaulted Loans The Secretary of Education is authorized to enter into agreements with the guarantor under which the guarantor may sell defaulted loans that are eligible for rehabilitation to an eligible lender. For a loan to be eligible for rehabilitation the guarantor must have received reasonable and affordable payments for 12 months (reduced to 9 payments in 10 months effective July 1, 2006), and then the borrower may request that the loan be rehabilitated. Because monthly payments are usually greater after rehabilitation, not all borrowers opt for rehabilitation. Upon rehabilitation, a loan is eligible for all the benefits under the Higher Education Act for which it would have been eligible had no default occurred and the negative credit record is expunged. No student loan may be rehabilitated more than once. Guarantor Funding In addition to providing the primary guarantee on FFELP loans, guaranty agencies are charged, under the Higher Education Act, with responsibility for maintaining records on all loans on which they have issued a guarantee (“account maintenance”), assisting lenders to prevent default by delinquent borrowers (“default aversion”), post-default loan administration and collections and program awareness and oversight. These activities are funded by revenues from the following statutorily prescribed sources plus earnings on investments. C-16 Source Basis Insurance Premium ................................................. Up to 1% of the principal amount guaranteed, withheld from the proceeds of each loan disbursement Loan Processing and Origination Fee.................. 0.40% of the principal amount guaranteed, paid by the U.S. Department of Education Account Maintenance Fee ................................... 0.10% of the original principal amount of loans outstanding, paid by the U.S. Department of Education Default Aversion Fee............................................ 1% of the outstanding amount of loans that were reported delinquent but did not default within 300 days thereafter, paid by transfers out of the Student Loan Reserve Fund Collection Retention Fee...................................... 16% of the amount collected on loans on which reinsurance has been paid (10% of the amount collected for a defaulted loan that is purchased by a lender for rehabilitation or consolidation), withheld from gross receipts The Higher Education Act requires guaranty agencies to establish two funds: a Student Loan Reserve Fund and an Agency Operating Fund. The Student Loan Reserve Fund contains the reinsurance payments received from the U.S. Department of Education, Insurance Premiums and the Collection Retention Fee. The fund is federal property and its assets may be used only to pay insurance claims and to pay Default Aversion Fees. The Agency Operating Fund is the guarantor’s property and is not subject to strict limitations on its use. U.S. Department of Education Oversight The Secretary of Education has oversight powers over guarantors. If the U.S. Department of Education determines that a guarantor is unable to meet its insurance obligations, the holders of loans guaranteed by that guarantor may submit claims directly to the U.S. Department of Education. The U.S. Department of Education is required to pay the full guarantee payments due in accordance with guarantee claim processing standards no more stringent than those applied by the terminated guarantor. However, the U.S. Department of Education’s obligation to pay guarantee claims directly in this fashion is contingent upon its making the determination referred to above. C-17 ANNEX D GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES The notes offered under the offering memorandum will be available only in bookentry form as “Global Securities.” Investors in the Global Securities may hold them through DTC or, if applicable, Clearstream, Luxembourg or Euroclear. The Global Securities are tradeable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through Clearstream, Luxembourg and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice. Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations. Secondary cross-market trading between Clearstream, Luxembourg or Euroclear and DTC participants holding Securities will be effected on a delivery-against-payment basis through the depositaries of Clearstream, Luxembourg and Euroclear and as participants in DTC. Non-U.S. holders of Global Securities will be exempt from U.S. withholding taxes, provided that the holders meet specific requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. Initial Settlement All U.S. Dollar denominated Global Securities will be held in book-entry form by DTC in the name of Cede & Co., as nominee of DTC. Investors’ interests in the U.S. Dollar denominated Global Securities will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC. As a result, Clearstream, Luxembourg and Euroclear will hold positions in U.S. Dollar denominated Global Securities on behalf of their participants through their respective depositaries, which in turn will hold positions in accounts as participants of DTC. All non-U.S. Dollar denominated Global Securities will be held in book-entry form by a common depositary for Clearstream, Luxembourg and Euroclear in the name of a nominee to be selected by the common depositary. Investors’ interests in the non-U.S. Dollar denominated Global Securities will be represented through financial institutions acting on their behalf as direct and indirect participants in Clearstream, Luxembourg or Euroclear. As a result, DTC will hold positions in the non-U.S. Dollar denominated Global Securities on behalf of its participants through its depositaries, which in turn will hold positions in accounts as participants of Clearstream, Luxembourg or Euroclear. D-1 Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to U.S. corporate debt obligations. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream, Luxembourg or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no “lock-up” or restricted period. Global Securities will be credited to the securities custody accounts on the closing date against payment in same-day funds. Secondary Market Trading Since the purchase determines the place of delivery, it is important to establish at the time of the trade where both the purchaser’s and the depositor’s accounts are located to ensure that settlement can be made on the desired value date. Trading between DTC participants. Secondary market trading between DTC participants will be settled using the procedures applicable to U.S. corporate debt issues in same-day funds. Trading between Clearstream, Luxembourg and/or Euroclear participants. Secondary market trading between Clearstream, Luxembourg participants and/or Euroclear participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. Trading between DTC seller and Clearstream, Luxembourg or Euroclear purchaser. When Global Securities are to be transferred from the account of a DTC participant to the account of a Clearstream, Luxembourg participant or a Euroclear participant, the purchaser will send instructions to Clearstream, Luxembourg or Euroclear through a participant at least one business day before settlement. Clearstream, Luxembourg or Euroclear will instruct the applicable depositary to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date. Payment will then be made by the respective depositary to the DTC participant’s account against delivery of the Global Securities. Securities. After settlement has been completed, the Global Securities will be credited to the applicable clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream, Luxembourg participant’s or Euroclear participant’s account. The Global Securities credit will appear the next day (European time) and the cash debit will be back-valued to, and the interest on the Global Securities will accrue from, the value date, which would be the preceding day when settlement occurred in New York. If settlement is not completed on the intended value date so that the trade fails, the Clearstream, Luxembourg or Euroclear cash debit will be valued instead as of the actual settlement date. Clearstream, Luxembourg participants and Euroclear participants will need to make available to the clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement D-2 occurring within Clearstream, Luxembourg or Euroclear. Under this approach, they may take on credit exposure to Clearstream, Luxembourg or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream, Luxembourg or Euroclear has extended a line of credit to them, participants can elect not to preposition funds and allow that credit line to be drawn upon to finance settlement. Under this procedure, Clearstream, Luxembourg participants or Euroclear participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of the overdraft charges, although this result will depend on each participant’s particular cost of funds. Since the settlement is taking place during New York business hours, DTC participants can employ their usual procedures for sending Global Securities to the applicable depositary for the benefit of Clearstream, Luxembourg participants or Euroclear participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC participant a cross-market transaction will settle no differently than a trade between two DTC participants. Trading between Clearstream, Luxembourg or Euroclear seller and DTC purchaser. Due to time zone differences in their favor, Clearstream, Luxembourg and Euroclear participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective depositary, to a DTC participant. The depositor will send instructions to Clearstream, Luxembourg or Euroclear through a participant at least one business day before settlement. In this case, Clearstream, Luxembourg or Euroclear will instruct the applicable depositary to deliver the securities to the DTC participant’s account against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date. The payment will then be reflected in the account of the Clearstream, Luxembourg participant or Euroclear participant the following day, and receipt of the cash proceeds in the Clearstream, Luxembourg or Euroclear participant’s account would be backvalued to the value date, which would be the preceding day, when settlement occurred in New York. Should the Clearstream, Luxembourg or Euroclear participant have a line of credit with its clearing system and elect to be in debit in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft charges incurred over that one-day period. If settlement is not completed on the intended value date so that the trade fails, receipt of the cash proceeds in the Clearstream, Luxembourg or Euroclear participant’s account would instead be valued as of the actual settlement date. D-3 Finally, day traders that use Clearstream, Luxembourg or Euroclear and that purchase Global Securities from DTC Participants for delivery to Clearstream, Luxembourg participants or Euroclear participants should note that these trades would automatically fail on the sale side unless affirmative action is taken. At least three techniques should be readily available to eliminate this potential problem: • borrowing through Clearstream, Luxembourg or Euroclear for one day until the purchase side of the day trade is reflected in their Clearstream, Luxembourg or Euroclear accounts, in accordance with the clearing system’s customary procedures; • borrowing the Global Securities in the U.S. from a DTC participant no later than one day before settlement, which would give the Global Securities sufficient time to be reflected in their Clearstream, Luxembourg or Euroclear account in order to settle the sale side of the trade; or • staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day before the value date for the sale to the Clearstream, Luxembourg participant or Euroclear participant. U.S. Federal Income Tax Documentation Requirements A holder that is not a “United States person” (a “U.S. person”) within the meaning of Section 7701(a)(30) of the Code (a “non-U.S. holder”) holding Global Securities through Clearstream, Euroclear or DTC may be subject to U.S. withholding tax unless such holder provides certain documentation to the trust of such holder’s Global Securities, the paying agent or any other entity required to withhold tax (any of the foregoing, a “U.S. withholding agent”) establishing an exemption from withholding. A non-U.S. holder may be subject to withholding unless each U.S. withholding agent receives: 1. from a non-U.S. holder that is classified as a corporation for U.S. federal income tax purposes or is an individual, and is eligible for the benefits of the portfolio interest exemption or an exemption (or reduced rate) based on a treaty, a duly completed and executed IRS Form W-8BEN (or any successor form); 2. from a non-U.S. holder that is eligible for an exemption on the basis that the holder’s income from the note is effectively connected to its U.S. trade or business, a duly completed and executed IRS Form W-8ECI (or any successor form); 3. from a non-U.S. holder that is classified as a partnership for U.S. federal income tax purposes, a duly completed and executed IRS Form W-8IMY (or any successor form) with all supporting documentation (as specified in the U.S. Treasury Regulations) required to substantiate exemptions from withholding on behalf of its partners; certain partnerships may enter into agreements with the IRS providing for different documentation requirements and it is recommended that such partnerships consult their tax advisors with respect to these certification rules; D-4 4. from a non-U.S. holder that is an intermediary (i.e., a person acting as a custodian, a broker, nominee or otherwise as an agent for the beneficial owner of a note): (a) if the intermediary is a “qualified intermediary” (a “qualified intermediary”) within the meaning of section 1.1441-1(e)(5)(ii) of the U.S. Treasury Regulations, a duly completed and executed IRS Form W-8IMY (or any successor or substitute form): (1) stating the name, permanent residence address and qualified intermediary employer identification number of the qualified intermediary and the country under the laws of which the qualified intermediary is created, incorporated or governed; (2) certifying that the qualified intermediary has provided, or will provide, a withholding statement as required under section 1.1441-1(e)(5)(v) of the U.S. Treasury Regulations; (3) certifying that, with respect to accounts it identifies on its withholding statement, the qualified intermediary is not acting for its own account but is acting as a qualified intermediary; and (4) providing any other information, certifications, or statements that may be required by the IRS Form W-8IMY or accompanying instructions in addition to, or in lieu of, the information and certifications described in section 1.1441-1(e)(3)(ii) or 1.1441-1(e)(5)(v) of the U.S. Treasury Regulations; or (b) if the intermediary is not a qualified intermediary (a “nonqualified intermediary”), a duly completed and executed IRS Form W-8IMY (or any successor or substitute form): (1) stating the name and permanent residence address of the nonqualified intermediary and the country under the laws of which the nonqualified intermediary is created, incorporated or governed; (2) account; certifying that the nonqualified intermediary is not acting for its own (3) certifying that the nonqualified intermediary has provided, or will provide, a withholding statement that is associated with the appropriate IRS Forms W-8 and W-9 required to substantiate exemptions from withholding on behalf of such nonqualified intermediary’s beneficial owners; and (4) providing any other information, certifications or statements that may be required by the IRS Form W-8IMY or accompanying instructions in addition to, or in lieu of, the information, certifications, and statements described in section 1.1441-1(e)(3)(iii) or (iv) of the U.S. Treasury Regulations; or D-5 5. from a non-U.S. holder that is a trust, depending on whether the trust is classified for U.S. federal income tax purposes as the beneficial owner of the note, either an IRS Form W-8BEN or W-8IMY; any non-U.S. holder that is a trust should consult its tax advisors to determine which of these forms it should provide. All non-U.S. holders will be required to update the above-listed forms and any supporting documentation in accordance with the requirements under the U.S. Treasury Regulations. These forms generally remain in effect for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. Under certain circumstances, an IRS Form W-8BEN, if furnished with a taxpayer identification number, remains in effect until the status of the beneficial owner changes, or a change in circumstances makes any information on the form incorrect. In addition, all holders, including holders that are U.S. persons, holding Global Securities through Clearstream, Euroclear or DTC may be subject to backup withholding unless the holder: (1) provides the appropriate IRS Form W-8 (or any successor or substitute form), duly completed and executed, if the holder is a non-U.S. holder; (2) provides a duly completed and executed IRS Form W-9, if the holder is a U.S. person; or (3) can be treated as an “exempt recipient” within the meaning of section 1.6049-4(c)(1)(ii) of the U.S. Treasury Regulations (e.g., a corporation or a financial institution such as a bank). This summary does not deal with all of the aspects of U.S. federal income tax withholding or backup withholding that may be relevant to investors that are non-U.S. holders. Such holders are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of Global Securities. D-6 PRINCIPAL OFFICES ISSUING ENTITY BANK OF AMERICA STUDENT LOAN TRUST 2010-1 60 Wall Street, 26th Floor Mailstop NYC60 2606 New York, New York 10005 DEPOSITOR BANK OF AMERICA STUDENT LOAN SECURITIZATION CORPORATION Bank of America Corporate Center 100 N. Tryon Street Charlotte, North Carolina 28225 Mail Code: NC1-007-06-82 SPONSOR, MASTER SERVICER AND ADMINISTRATOR BANK OF AMERICA, NATIONAL ASSOCIATION Bank of America Corporate Center 100 N. Tryon Street Charlotte, North Carolina 28225 Mail Code: NC1-007-06-82 SUBSERVICER AND CALCULATION AGENT ACS EDUCATION SERVICES, INC. One World Trade Center, Suite 2200 Long Beach, California 90831 AND ACS ASSET MANAGEMENT GROUP, INC. One World Trade Center, Suite 2200 Long Beach, California 90831 ELIGIBLE LENDER TRUSTEE, INDENTURE TRUSTEE AND PAYING AGENT DEUTSCHE BANK TRUST COMPANY AMERICAS 60 Wall Street, 26th Floor Mailstop NYC60 2606 New York, New York 10005 DELAWARE TRUSTEE WILMINGTON TRUST COMPANY Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 IRISH LISTING AGENT McCann FitzGerald Listing Services Limited Riverside One Sir John Rogerson’s Quay Dublin 2 Ireland LEGAL ADVISORS TO THE DEPOSITOR, THE TRUST, THE MASTER SERVICER, THE SPONSOR AND THE ADMINISTRATOR CADWALADER, WICKERSHAM & TAFT LLP One World Financial Center New York, New York 10281 LEGAL ADVISORS TO THE TRUST AND THE DELAWARE TRUSTEE RICHARDS, LAYTON & FINGER. P.A. One Rodney Square 920 North King Street Wilmington, Delaware 19801 LEGAL ADVISORS TO THE INITIAL PURCHASERS BINGHAM McCUTCHEN LLP One Battery Park Plaza, 34th Floor New York, New York 10004 INDEPENDENT PUBLIC ACCOUNTANTS PRICEWATERHOUSECOOPERS LLP 214 North Tryon Street Charlotte, North Carolina 28255 $1,231,596,000 Bank of America Student Loan Trust 2010-1 Issuing Entity $1,231,596,000 Floating Rate Class A Student Loan-Backed Notes Bank of America Student Loan Securitization Corporation Depositor Bank of America, National Association Sponsor, Master Servicer and Administrator Initial Purchaser and Book-Runner BofA Merrill Lynch Initial Purchasers and Co-Managers Barclays Capital Credit Suisse J.P. Morgan RBS _________________ August 3, 2010