Nelnet (NNI)

Competition

The Company faces competition from many lenders in the highly competitive student loan industry. Through its size, the Company has leveraged economies of scale to gain market share and competes by offering a full array of FFELP and non-federally insured loan products and services. In addition, the Company has attempted to differentiate itself from other lenders through its vertical integration, technology, and strong relationships with colleges and universities.

The Company views SLM Corporation, the parent company of Sallie Mae, as its largest competitor in loan origination and student loans held. Large national and regional banks are also strong competition, although many are involved only in origination. In different geographic locations across the country, the Company faces strong competition from the local tax-exempt student loan secondary markets. The Federal Direct Lending (“FDL”) Program in which the Federal government lends money directly to students and families, has also historically reduced the origination volume available for FFEL Program participants. In 2005, the FDL Program accounted for approximately 23% of total student loan volume, although this portion of total volume has decreased from approximately 33% in 1998. In addition, in the last few years, low interest rates have attracted many new competitors to the student loan consolidation business.