1262279--9/2/2010--FIRST_MARBLEHEAD

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Risks Related to Our Industry, Business and Operations Challenges exist in implementing revisions to our business model. We have provided or agreed to provide credit enhancement in connection with two loan programs and plan to enter into similar arrangements in connection with future loan programs based on our Monogram product. As a result, we have capital at risk in connection with each lender's loan program. We may lose the capital we have provided as credit enhancement, and our financial results could be adversely affected. We will need to facilitate substantial loan volume in order to return to profitability. The outsourcing services market for education lending is competitive, and if we are not able to compete effectively, our revenue and results of operations may be adversely affected. The growth of our business could be adversely affected by changes in government education loan programs or expansions in the population of students eligible for loans under government education loan programs. Access to alternative means of financing the costs of education may reduce demand for private education loans. Continuation of the current economic conditions could adversely affect the private education loan industry. If our clients do not actively or successfully market and fund private education loans, our business will be adversely affected. If we fail to manage our cost reductions effectively, our business could be disrupted and our financial results could be adversely affected. If competitors acquire or develop a private education loan database or advanced loan information processing systems, our business could be adversely affected. If we are unable to protect the confidentiality of our historical loan database and proprietary information systems and processes, the value of our services and technology will be adversely affected. The loan origination process is becoming increasingly dependent upon technological advancement, and we could lose clients and market share if we are not able to keep pace with rapid changes in technology. Our business could be adversely affected if PHEAA fails to provide adequate or timely services or if our relationship with PHEAA terminates. An interruption in or breach of our information systems, or those of third parties on which we rely, may result in lost business. If we experience a data security breach and confidential customer information is disclosed, we may be subject to penalties imposed by regulators, civil actions for damages and negative publicity, which could affect our customer relationships and have a material adverse effect on our business. In addition, state and federal legislative proposals, if enacted, may impose additional requirements on us to safeguard confidential customer information, which may result in increased compliance costs. Risks Related to Our Financial Reporting and Liquidity If the estimates we make, or the assumptions on which we rely, in preparing our financial statements prove inaccurate, our actual results may vary materially from those reflected in our financial statements. We will be required to consolidate certain securitization trusts in our financial results after July 1, 2010, which will result in significant changes to the presentation of our financial statements and may result in increased volatility in our reported financial condition and results of operations. Our liquidity could be adversely affected if the sale of the Trust Certificate does not result in the tax consequences that we expect. We have guaranteed the performance of Union Federal's obligations under a loan purchase and sale agreement and assumed potential contingent liabilities of Union Federal under an indenture. We may incur substantial costs if we have to perform or assume obligations of Union Federal, which could have a material adverse effect on our liquidity or financial condition. Changes in interest rates could affect the value of our additional structural advisory fees, asset servicing fees and residual receivables, as well as demand for private education loans and our services. If sufficient funds to finance our business, including Union Federal, are not available to us when needed or on acceptable terms, then we may be required to delay, scale back or alter our strategy. Risks Related to Asset-Backed Securitizations and Other Funding Sources We have historically recognized a significant portion of our revenue and substantially all of our income from structuring securitization transactions; our financial results and future growth may continue to be adversely affected if we are unable to structure securitizations or alternative financings. Our business, financial condition, results of operations and cash flows will be adversely affected if we do not achieve widespread market acceptance of loan programs based on our Monogram product offering. A number of factors, some of which are beyond our control, have adversely affected and may continue to adversely affect our portfolio funding activities and thereby adversely affect our results of operations. Capital markets dislocations, and the timing, size and structure of any future capital markets transactions, could greatly affect our quarterly financial results. Recent legislation will affect the terms of future securitization transactions. In structuring and facilitating securitizations of our clients' loans, administering securitization trusts or as holders of rights to receive residual cash flows in non-NCSLT Trusts, we may incur liabilities to transaction parties. Risks Related to the TERI Reorganization The Creditors Committee has challenged the enforceability of certain of the trusts' security interests, which may result in additional delay and expense, as well as a significant reduction in collateral available to the trusts. The TERI Reorganization will adversely affect our ability to facilitate the securitization of TERI-guaranteed loans, and could adversely affect our cash flows from the securitization trusts. Our claims against TERI will not be settled by the Modified Plan of Reorganization, and our potential recovery from TERI's bankruptcy estate on our general unsecured claim has been eroded by the costs and pace of the reorganization proceeding. Risks Relating to Regulatory Matters We will become subject to new regulations which could increase our costs of compliance and alter our business practices. We are subject to regulation as a savings and loan holding company, and Union Federal is regulated extensively. We may become subject to state registration or licensing requirements. If we determine that we are subject to the registration or licensing requirements of any jurisdiction, our compliance costs could increase significantly and other adverse consequences may result. We may be exposed to liability for failures of third parties with which we do business to comply with the registration, licensing and other requirements that apply to them. Failure to comply with consumer protection laws could subject us to civil and criminal penalties or litigation, including class actions, and have a material adverse effect on our business. A recent Supreme Court decision, and recent legislative proposals, could affect the non-dischargeability of private education loans in bankruptcy. Recent litigation has sought to re-characterize certain loan marketers and other originators as lenders; if litigation on similar theories were successful against us or any third-party marketer we have worked with in the past, the loans that we facilitate would be subject to individual state consumer protection laws. Risks Relating to Ownership of Our Common Stock The price of our common stock may be volatile. Insiders have substantial control over us and could limit your ability to influence the outcome of key transactions, including a change of control. Some provisions in our restated certificate of incorporation and amended and restated by-laws may deter third-parties from acquiring us. Section 203 of the Delaware General Corporation Law may delay, defer or prevent a change in control that our stockholders might consider to be in their best interests.

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1262279--9/2/2010--FIRST_MARBLEHEAD_CORP