SECURITIES AND EXCHANGE COMMISSION

Pre-Effective

121 South 13th Street, Suite 201

Terry J. Heimes

      Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

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TABLE OF CONTENTS

      You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Class A common stock.

      No action is being taken in any jurisdiction outside the United States to permit a public offering of the Class A common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to those jurisdictions.

      The product and service names and logos used in this prospectus are service marks/trademarks or registered service marks/trademarks of Nelnet or its affiliates. Nelnet, Ntrust, Ngenius, Nteract, Nservice, Nelnet Notes and @theU are service marks of Nelnet, Inc. Other products, services and company names mentioned in this prospectus are the service marks/trademarks of their respective owners.

PROSPECTUS SUMMARY

      In this prospectus, unless the context requires otherwise, “Nelnet,” “we,” “us” and “our” refer to Nelnet, Inc., a Nebraska corporation, and its subsidiaries, and not to the underwriters. A detailed description of the Federal Family Education Loan Program appears in Annex A to this prospectus.

      This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in shares of our Class A common stock. You should read this entire prospectus carefully, including “Risk Factors” and our financial statements and the related notes, before making an investment decision.

Nelnet, Inc.

      We are a vertically integrated education finance company, with over $11 billion in total assets, making us one of the leading education finance companies in the country. We are focused on providing quality products and services to participants in the education finance process. Headquartered in Lincoln, Nebraska, we originate, hold and service student loans, principally loans originated under the Federal Family Education Loan Program, which we refer to as the FFEL Program or FFELP. The FFEL Program is a federal program which provides for direct federal insurance of student loans made by private lenders as well as reinsurance of student loans guaranteed by guaranty agencies. For 2002, we were the fourth largest holder and second largest servicer of FFELP loans. In addition, we, together with our branding partners, originated and acquired approximately $3.2 billion of student loans in the nine months ended September 30, 2003 and $2.7 billion of student loans in 2002, making us a leading originator and acquirer of student loans.

      We offer a broad range of financial services and technology-based products, including student loan origination and lending, student loan and guarantee servicing and a suite of software solutions. Our products are designed to simplify the student loan process by automating financial aid delivery, loan processing and funds disbursement. Our infrastructure, technological expertise and breadth of product and service offerings connect the key constituents of the student loan process, including lenders, financial aid officers, guaranty agencies, governmental agencies, student and parent borrowers, servicers and the capital markets, thereby streamlining the education finance process.

      Our business is comprised of four primary product and service offerings:

	•	Asset management, including student loan originations and acquisitions  — provides student loan sales, marketing, origination, acquisition and portfolio management.
	•	Student loan servicing  — provides student loan servicing for our portfolio and for third parties.
	•	Guarantee servicing  — provides software systems and sub-servicing to guaranty agencies.
	•	Servicing software  — provides student loan servicing software internally and to third-party student loan holders and servicers.

      Under generally accepted accounting principles, we have two reportable operating segments: asset management and student loan servicing. Our guarantee servicing and servicing software offerings are not considered separate reportable operating segments and are combined in our other segment. In the nine months ended September 30, 2003, our asset management, student loan servicing and other segments generated 50.8%, 40.1% and 9.1%, respectively, of our total segment revenues and 73.2%, 23.3% and 3.5%, respectively, of our segment net income.

      We originate and acquire student loans through a variety of methods, or channels, including:

	•	our direct channel, in which we originate student loans in one of our brand names directly to student and parent borrowers, which accounted for 52.2% and 40.7% of the student loans we originated and acquired in the nine months ended September 30, 2003 and in 2002, respectively;

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	•	our branding partner channel, in which we acquire student loans from lenders to whom we provide marketing and origination services, which accounted for 22.8% and 19.5% of the student loans we originated and acquired in the nine months ended September 30, 2003 and in 2002, respectively; and
	•	our forward flow channel, in which we acquire student loans from lenders to whom we provide origination services, but provide no marketing services, or who have agreed to sell loans to us under forward sale commitments, which accounted for 15.3% and 21.7% of the student loans we originated and acquired in the nine months ended September 30, 2003 and in 2002, respectively.

      In addition, we acquire student loans through spot purchases and whole-company acquisitions, which accounted for 9.7% and 18.1% of the student loans we originated and acquired in the nine months ended September 30, 2003 and in 2002, respectively.

      Of the $3.2 billion and $2.7 billion in student loans we originated and acquired in the nine months ended September 30, 2003 and in 2002, respectively, $1.5 billion and $859 million, respectively, were loans consolidated through our direct channel. Student loans that we originate through our direct channel are our most profitable student loans because they typically cost us less than loans acquired through our other channels and remain in our portfolio for a longer period of time. As of September 30, 2003, our student loan portfolio was $10.1 billion.

      Our earnings and earnings growth are directly affected by the size of our portfolio of student loans, the interest rate characteristics of our portfolio, the costs associated with financing and managing our portfolio and the costs associated with origination and acquisition of the student loans in the portfolio. We generate the majority of our earnings from the spread between the yield we receive on our student loan portfolio and the cost of funding these loans. While the spread may vary due to fluctuations in interest rates, special allowance payments from the federal government ensure that we receive a minimum yield on our student loans, so long as certain requirements are met. For the nine months ended September 30, 2003, we generated net interest income of $133.8 million, total other income, including loan servicing income, of $83.8 million and net income of $16.8 million. In 2002, we generated net interest income of $190.9 million, total other income, including loan servicing income, of $125.2 million and net income of $48.5 million.

      We currently service more than $18 billion in FFELP loans, which makes us the second largest servicer of FFELP loans, according to Student Loan Servicing Alliance, or SLSA, statistics. Our software is also used by third parties to service an additional $27 billion in student loans. In addition, we currently provide servicing support to guaranty agencies on a total of $20 billion of FFELP loans. Servicing support includes functions such as system software, hardware and telecommunication support, borrower and loan updates, default aversion tracking services, claim processing services and post-default collection services. We provide student loan servicing and origination functions either directly or indirectly to more than 1.7 million borrowers at hundreds of colleges and universities through our proprietary software products and outsourcing functions. We protect our proprietary software products through copyrights, trade secrets and contractual agreements.

      The cost of funding our student loan portfolio is determined by the costs of borrowings under our operating lines of credit, secured warehouse financings and asset-backed securitizations. We currently have $65 million in operating lines of credit and a $35 million commercial paper facility. We are also in the process of increasing our operating lines of credit by an additional $30 million. In addition, we have obtained financing through asset-backed commercial paper conduit warehouse programs and the issuance of variable-rate and fixed-rate, taxable and tax-exempt bonds, including asset-backed securities. For the majority of our long-term financing needs, we rely on asset-backed securitization transactions. We completed three securitization transactions totaling $2.9 billion in the nine months ended September 30, 2003, three securitization transactions totaling $2.8 billion in 2002 and five securitization transactions totaling $1.3 billion in 2001. As a result of the increase in the size of these securitization transactions, we have achieved increased economies of scale in connection with our costs of financing.

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      We have entered into a series of agreements with Union Bank and Trust Company, or Union Bank, including transactions to sell interests in student loans to Union Bank in its capacity as trustee, to purchase student loans from Union Bank, to provide student loan servicing to Union Bank, to sublease real estate from Union Bank and to provide consulting services to and receive consulting services from Union Bank. Michael S. Dunlap, our Co-Chief Executive Officer, owns an indirect interest in Union Bank and serves as its non-executive chairman. In the nine months ended September 30, 2003, and in 2002, 2001 and 2000, approximately 19%, 14%, 15% and 68%, respectively, of the principal amount of the student loans added to our portfolio were acquired from Union Bank as part of our branding partner channel, a portion of which loans were originated by Union Bank and a portion of which were originated by third parties. To the extent Union Bank were to experience problems, it could have a material adverse effect on us.

Student Loan Industry

      Since the creation of the federal student loan programs, hundreds of billions of dollars in federal student loans have financed the higher education of millions of students at thousands of schools across the United States. More students and families depend on federal student loans to cover the costs of post-secondary education than any other single source of financial aid, and the demand for student loans is expected to grow along with the cost of a college education. According to U.S. Department of Education or, DOE, projections, annual gross federal student loan volume is expected to increase from $45.4 billion in federal fiscal year 2002 to $71.8 billion in federal fiscal year 2009, excluding consolidation loan volume.

      We have more than $11 billion in total assets, which places us, in terms of total student loan related assets, among the top four education finance companies in the United States. Of the $25.9 billion in FFELP loan originations by private lenders and the federal government in 2000, the combined figures for our own originations as well as origination rights acquired by us from Union Bank totaled $629.2 million.

Competitive Strengths

      The following competitive strengths distinguish us in the education finance industry:

	•	We are a focused leader with a vertically integrated platform. We provide school financial aid offices and students with a comprehensive, full-service student lending package (Stafford, PLUS, consolidation and private loans), loan and guarantee servicing and loan servicing software. In doing so, we maintain a strong position and expertise in each of our product and service offerings and are well positioned to capitalize on industry growth.
	•	We have established a high-quality loan portfolio through our concentration on FFELP loans. As of September 30, 2003, more than 99% of our student loan portfolio consisted of FFELP loans, which carry at least a 98% federal guarantee on principal and accrued interest.
	•	We enjoy strong relationships with student loan market constituents. We have established long-term strategic relationships with school financial aid offices and with eligible lenders that direct committed portions of their originations to us. The effort and cost to establish and maintain these relationships, as well as the low turnover of selected providers, act as a barrier to entry for competitors.
	•	We have benefited from access to cost-effective financings. Our $2 billion loan warehousing capacity allows us to pool student loans in order to aggregate sufficient volume for cost-effective long-term financing and to time securitization market conditions effectively. As a result, our securitizations routinely price in line with our largest competitor within the student loan industry.
	•	We have built a leading, cost-competitive servicing platform with a focus on asset protection. Our student loan servicing platform, which facilitates interaction with borrowers, is critical to our success as a lender in the student loan marketplace. The quality of our servicing capability is also a key factor in preserving the federal guarantee on our FFELP loans. The quality of our servicing operation is best demonstrated by our low initial claim reject rate due to servicer error, which was 0.25% in 2002.

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	•	Our comprehensive suite of software products enables us to carry our brand forward to the key constituents of the student loan market. Our products include an Internet-based financial aid delivery and management system, an Internet-based loan origination system and a centralized disbursement agent service. Our “open architecture” origination products afford schools the flexibility to work with multiple lenders.
	•	We are run by a management team with significant operating and acquisition experience. Our senior management employees have, on average, been with us or one of our predecessor companies for over ten years. We have a track record of successfully integrating the companies that we have acquired and retaining key employees. As a result, we have a management team with significant experience and knowledge in both student loan operations and portfolio and company acquisitions.

Strategy

      We intend to achieve our corporate objective of furthering our leadership position in the student loan industry by executing the following strategies:

	•	Establish and maintain leadership in all our product and service offerings by utilizing our technology. Schools, lenders, guaranty agencies and borrowers in today’s student loan industry demand cutting edge, state-of-the-art technology to streamline the burdensome and time consuming processes of originating, servicing and administering student loans. We believe that the technology products that we provide position us to become a preferred provider for participants in the student loan industry and that their expanded utilization will promote our originations and acquisitions. We will continue to invest, develop and upgrade our technology to help solidify our leadership position and further penetrate our potential market.
	•	Focus on increasing our organic growth while maintaining a low-cost infrastructure. We believe there is continued opportunity for significant growth in light of the DOE’s projected growth rates for the student loan industry. To increase our organic growth, we have expanded our sales and marketing force to promote FFELP loan origination and consolidation efforts. We believe the infrastructure we have developed has positioned us to continue to achieve economies of scale and be a low-cost provider to our customers. In this regard, we decreased our operating expenses as a percentage of average student loans from 0.78% in 1998 to 0.54% in 2002.
	•	Strengthen existing relationships while establishing new ones. We have extensive customer relationships with schools and lenders throughout the United States. We will continue to focus on expanding the loan volume associated with these existing relationships, while establishing new ones through our sales force.
	•	Continue our commitment to highly focused and disciplined loan origination and acquisition practices. We will continue to pursue our conservative approach to asset quality by concentrating on originating, acquiring and holding federally guaranteed loans through the FFEL Program, while maintaining a disciplined underwriting approach to private loans.
	•	Opportunistically make company and portfolio acquisitions. Although we have reached a point in our development where we offer a comprehensive set of products and services essential to our vertically integrated business model, we will still consider acquisitions of both individual companies and loan portfolios that we believe have the potential to enhance long-term shareholder value.

Potential Acquisitions

      We have entered into an agreement with a lender to acquire a portion of its portfolio of FFELP loans, as well as interests in other FFELP loans of that lender. It is anticipated that the outstanding principal and accrued interest on the FFELP loans and interests to be acquired will be financed initially through one of our warehouse line facilities, and ultimately through a long-term securitization. It also is anticipated that a significant portion of the purchase price of the interests will be funded through the issuance of debt securities of a consolidated student lending subsidiary. We currently estimate that the cash cost to us at

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The Offering

      Unless specifically stated otherwise, the information in this prospectus:

	•	assumes no exercise of the underwriters’ overallotment option of 1,200,000 shares;
	•	assumes an initial public offering price of $19.00 per share, the midpoint of the estimated initial public offering price range indicated on the front cover of this prospectus; and
	•	reflects our recapitalization described below under the heading “Description of Capital Stock — Recapitalization” and a subsequent reduction in the number of authorized shares of Class B common stock.

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Summary Consolidated Financial Data

      You should read the summary consolidated financial data set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus. We derived the financial data as of December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000 from our audited financial statements included elsewhere in this prospectus. We derived the financial data as of December 31, 2000 from our audited financial statements not included in this prospectus. We derived the financial data as of September 30, 2003 and for the nine months ended September 30, 2003 and 2002 from our unaudited financial statements included elsewhere in this prospectus. Results for interim periods are not necessarily indicative of results to be expected during the remainder of the fiscal year or for any future periods. The as adjusted balance sheet data set forth below have been adjusted to give effect to the sale of 8,000,000 shares of our Class A common stock in this offering and the use of $30 million of the net proceeds from this offering to repay revolving credit indebtedness. See “Capitalization.”

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(a)	Initial loans originated and acquired through various channels, including originations through our direct channel and acquisitions through our branding partner channel, our forward flow channel and the secondary market.
(b)	Net interest margin is computed by dividing net interest income by the sum of average student loans and the average balance of other interest earning assets.

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RISK FACTORS

      You should carefully consider the following risk factors and all other information contained in this prospectus before investing in shares of our Class A common stock. Investing in our Class A common stock involves a high degree of risk. If any of the following risks actually occurs, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of our Class A common stock could decline and you may lose part or all of your investment.

Risks Related to Our Business and Industry

      Our principal business is comprised of originating, acquiring, holding and servicing student loans made and guaranteed pursuant to the FFEL Program, which was created by the Higher Education Act. Most significant aspects of our lines of business are governed by the Higher Education Act. We are also subject to rules and regulations of the agencies that act as guarantors of the student loans, known as guaranty agencies. In addition, we are subject to certain federal and state banking laws, regulations and examinations.

      Our private loan portfolio is also subject to federal and state consumer protection laws and regulations, including state usury laws and related regulations and the Federal Truth in Lending Act. These laws and regulations impose substantial requirements upon lenders and servicers involved in consumer finance. Failure to comply with these laws and regulations could result in our liability to borrowers, the imposition of civil penalties and potential class action suits.

      Our failure to comply with regulatory regimes described above may arise from:

	•	breaches of our internal control system, such as a failure to adjust manual or automated servicing functions following a change in regulatory requirements;
	•	technological defects, such as a malfunction in or destruction of our computer systems; or
	•	fraud by our employees or other persons in activities such as borrower payment processing.

Such failure to comply, irrespective of the reason, could subject us to loss of the federal guarantee on FFELP loans, costs of curing servicing deficiencies or remedial servicing, suspension or termination of our right to participate in the FFEL Program or to participate as a servicer, negative publicity and potential legal claims or actions brought by our servicing customers and borrowers.

      We must meet various requirements in order to maintain the federal guarantee on our FFELP loans. These requirements establish servicing requirements and procedural guidelines and specify school and borrower eligibility criteria. The federal guarantee on our FFELP loans is conditioned on compliance with origination, servicing and collection standards set by the DOE and guaranty agencies. FFELP loans that are not originated, disbursed or serviced in accordance with DOE regulations risk loss of their guarantee, in full or in part. If we experience a high rate of servicing deficiencies or costs associated with remedial servicing, and if we are unsuccessful in curing such deficiencies, the eventual losses on the loans that are not cured could be material.

      A guaranty agency may reject a loan for claim payment due to a violation of FFEL Program due diligence collection and servicing requirements. In addition, a guaranty agency may reject claims under other circumstances, including, for example, if a claim is not timely filed or adequate documentation is not maintained. Once a loan ceases to be guaranteed, it is ineligible for federal interest subsidies and special allowance payments. If a loan is rejected for claim payment by a guaranty agency, we continue to pursue the borrower for payment and/or institute a process to reinstate the guarantee.

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      Rejections of claims as to portions of interest may be made by guaranty agencies for certain violations of the due diligence collection and servicing requirements, even though the remainder of a claim may be paid. Examples of errors that cause claim rejections include isolated missed collection calls or failures to send collection letters as required.

      School eligibility requirements, which include default rate limits, have been implemented by the DOE. In order to maintain eligibility in the FFEL Program, schools must maintain default rates below specified levels, and both guaranty agencies and lenders are required to ensure that loans are made to students attending schools that meet default criteria.

      If we fail to comply with any of the above requirements, we could incur penalties or lose the federal guarantee on some or all of our FFELP loans. Our actual loss experience on denied guarantee claims historically has not been material to our operations, but the impact on us could become material if losses were to increase substantially in future periods. During the last three fiscal years, our actual loss on denied guarantee claims did not exceed 0.004%.

      The Higher Education Act generally prohibits a lender from providing inducements to educational institutions or individuals in order to secure applicants for FFELP loans. We have entered into arrangements with various schools pursuant to which the schools become lenders of FFELP loans to graduate students, and we provide origination services, servicing and funding to the schools with respect to such loans. A similar “school-as-lender” arrangement that Sallie Mae previously had in place was challenged by the DOE, but a federal court decision determined that the arrangement fell within parameters of regulatory guidelines established by the DOE. Sallie Mae also has come under scrutiny as a result of recent charges that it makes private loans available to students of a school only if the school, in return, promises to leave the FDL Program and market FFELP loans to its students. The DOE has stated that private loans are legal and permissible if offered simply as a benefit to schools. We offer private loans to student borrowers on a regular basis, but we do so without requiring anything in return from the schools that these borrowers attend. In addition, as pronouncements from the DOE permit de minimus gifts in connection with advertising FFELP loans, we entertain financial aid officers from schools at student loan industry conferences and functions from time to time and sponsor promotional events such as lunches and golf outings from time to time. If the DOE were to change its position on any of these matters, this could potentially result in the DOE imposing sanctions upon us and could negatively impact our business.

      We have also entered into various agreements to acquire marketing lists of prospective FFELP loan borrowers from sources such as college alumni associations. We pay to acquire these lists and for the completed applications for loans resulting therefrom. We believe that such arrangements are permissible and do not violate restrictions on inducements, as they fit within a regulatory exception recognized by the DOE for generalized marketing and advertising activities. The DOE has provided informal guidance to us that such arrangements do not raise any improper inducement issues, since such arrangements fall within the generalized marketing exception. If the DOE were to change its position, this could hurt our reputation and could potentially result in the DOE imposing sanctions on us. These sanctions could negatively impact our business.

      Pursuant to the terms of the Higher Education Act, the FFEL Program is periodically amended, and the Higher Education Act must be reauthorized by Congress every five years in order to prevent sunset of that Act. Changes in the Higher Education Act made in the two most recent reauthorizations have included reductions in student loan yields paid to lenders, increased fees paid by lenders and a decreased level of federal guarantee. Future changes could result in further negative impacts on our business. Moreover, there can be no assurance that the provisions of the Higher Education Act, which is scheduled to expire on September 30, 2004, will be reauthorized. While Congress has consistently extended the

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      In addition, funds for payment of interest subsidies and other payments under the FFEL Program are subject to annual budgetary appropriation by Congress. In recent years, federal budget legislation has contained provisions that have restricted payments made under the FFEL Program to achieve reductions in federal spending. Future legislation may adversely affect expenditures by the DOE and the financial condition of guaranty agencies.

      Senator Edward M. Kennedy has introduced legislation, to which we refer as the Kennedy Bill, proposing a number of initiatives aimed at supporting the FDL Program to the detriment of the FFEL Program. The Kennedy Bill proposes to enable all graduates to refinance their FFELP loans at a fixed rate and proposes to pay schools as a reward for choosing to participate in the FDL Program. The Kennedy Bill also proposes to eliminate variable rate floor income as well as the 9.5% floor interest rate on loans financed with funds from pre-1993 tax-exempt financings. If the Kennedy Bill in its current form were to be enacted, this would have a material negative impact on us. Senator John Edwards has advocated elimination of the FFEL Program in its entirety, which also would have a material negative impact on us.

      Efforts are underway to pass legislation which would permit borrowers holding consolidation loans made under the Higher Education Act to refinance their loans under the FFEL Program multiple times, rather than only once, which would open approximately 43% of our student loan portfolio to further refinancing. Similar legislation may also abolish the so-called single holder rule, which restricts the ability of other lenders to consolidate student loans away from a lender that owns all of a particular borrower’s loans. This would put approximately one-third of our non-consolidated portfolio at risk of being consolidated away by our competitors. In addition, if legislation is enacted to allow variable-rate consolidation loans or to extend the term of Stafford loans, we may experience a decrease in our consolidation loan opportunities. Accordingly, any of these legislative changes could have a material adverse impact upon us. In addition, the DOE oversees and implements the Higher Education Act and periodically issues regulations and interpretations of that Act. Changes in such regulations and interpretations could negatively impact our business.

               Variation in the maturities, timing of rate reset and variation of indices of our assets and liabilities may pose risks to us.

      Because we generate the majority of our earnings from the spread between the yield we receive on our portfolio of student loans and the cost of financing these loans, the interest rate sensitivity of our balance sheet could have a material effect on our results of operations. The majority of our student loans have variable rate characteristics in interest rate environments where the special allowance payment formula exceeds the borrower rate. Some of our student loans, primarily consolidation loans, include fixed-rate components depending upon loan terms and the rate reset provisions set by the DOE. We have financed the majority of our student loan portfolio with variable-rate debt. Absent utilization of derivative instruments to match the interest rate characteristics and duration of the assets and liabilities, fluctuations in the interest rate environment will affect our results of operations. Such fluctuations may be adverse and may be material.

      In the current low interest rate environment, our FFELP loan portfolio is yielding excess income due to the reduction in the interest rates on the variable-rate liabilities financing student loans at a fixed borrower rate. Absent the use of derivative instruments, a rise in interest rates will have an adverse effect on earnings and fair values due to interest margin compression caused by increasing financing costs, until such time as that the FFELP loans earn interest at a variable rate in accordance with the special allowance payment formula. In higher interest rate environments, where the interest rate rises above the borrower rate and fixed-rate loans become variable, the impact of the rate fluctuations is reduced.

      Loans that reset annually on each July 1 can generate excess spread income as compared to the rate based on

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      Due to the variability in duration of our assets and varying market conditions, we do not attempt to perfectly match the interest rate characteristics of our entire loan portfolio with the underlying debt instruments. At September 30, 2003, approximately 48.5% of our assets was earning interest at the current fixed rate, while only 9.1% of the liabilities used to finance those assets was set at fixed rates. This mismatch in duration and interest rate characteristics could have a negative impact on our results of operations. We have employed various derivative instruments to somewhat offset this mismatch. For the nine months ended September 30, 2003, an increase in short-term rates of 100 basis points would decrease our earnings per share by approximately $0.20 while a corresponding decrease in short-term interest rates of 100 basis points would increase our earnings per share by approximately $0.23. Changes in interest rates, the composition of our student loan portfolio and derivative instruments will impact the effect of interest rates on our earnings, and we cannot predict any such impact with any level of certainty.

               Market risks to which we are subject may have an adverse impact upon our business and operations.

      Our primary market risk exposure arises from fluctuations in our borrowing and lending rates, the spread between which could be impacted by shifts in market interest rates. The borrower rates on our FFELP loans are generally reset by the DOE each July 1st based on a formula determined by the date of the origination of the loan, with the exception of rates on consolidation loans which are fixed to term. The interest rate we actually receive on our FFELP loans is the greater of the borrower rate and a rate determined by a formula based on a spread to either the 91-day Treasury Bill index or the 90-day commercial paper index, depending on when the loans were originated and the current repayment status of the loans.

      We issue asset-backed securities, both fixed- and variable-rate, to fund our student loan assets. The variable-rate debt is generally indexed to 90-day LIBOR or set by auction. The income generated by our student loan assets is generally driven by different short-term indices than our liabilities, which creates interest rate risk for us. We have historically borne this risk internally through the net spread on our portfolio while continuing to monitor our interest rate risk.

      When we utilize derivative instruments, we utilize them to manage our interest rate sensitivity. Although we do not use derivative instruments for speculative purposes, our derivative instruments may not meet the criteria set forth in Statement of Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivatives Instruments and Hedging Activities which would allow us to offset the changes in fair value of the derivative instrument against the effects of the changes in the hedged item in the statement of income. The derivative instruments we use are typically in the form of interest rate swaps and interest rate caps. Interest rate swaps effectively change variable-rate debt obligations either to fixed-rate debt obligations or to variable-rate debt obligations based on a different index. Interest rate caps effectively limit the maximum interest on variable-rate debt obligations. Developing an effective strategy for dealing with movements in interest rates is complex, and no strategy can completely insulate us from risks associated with such fluctuations. In addition, a counterparty to a derivative instrument could default on its obligation thereby exposing us to credit risk. Further, we may have to repay certain costs, such as transaction fees or brokerage costs, if a derivative instrument is terminated by us. Finally, our interest rate risk management

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      During 2001, we entered into an interest rate swap arrangement with a notional amount of $500 million. This swap was adjusted to fair value in our statements of income, resulting in a $579,000 loss in 2002 and a $3.0 million loss in 2001. This swap expired in June 2002. The only derivative instruments entered into in 2002 were embedded credit enhancement products within our securitization transactions. In the third quarter of 2003, we entered into various interest rate swap agreements, a basis swap and a cap contract with an aggregate notional amount of $3.5 billion.

      Our primary funding needs are those required to finance our student loan portfolio and satisfy our cash requirements for new student loan originations and acquisitions, operating expenses and technological development. Our operating and warehouse financings are substantially provided by third parties, over which we have no control. Unavailability of such financing sources may subject us to the risk that we may be unable to meet our financial commitments to creditors, branding partners, forward flow lenders or borrowers when due unless we find alternative funding mechanisms.

      We rely upon conduit warehouse loan financing vehicles to support our funding needs on a short-term basis. There can be no assurance that we will be able to maintain such warehouse financing in the future. We currently have four such conduit facilities in place, with various maturity dates. Currently, the aggregate short-term commitment amount from our conduit lenders is over $2 billion. There can be no assurance that we will be able to maintain such conduit facilities, find alternative funding or increase the commitment level of such facilities, if necessary. The term of each conduit facility is less than one year, and each facility is renewable at the option of the lender and may be terminated at any time for cause. While our conduit facilities have historically been renewed for successive terms, there can be no assurance that this will continue in the future. Our general operating lines of credit are also for terms of less than one year each, are renewable at the option of the lenders and may be terminated at any time for cause.

      We have historically relied upon, and expect to continue to rely upon, asset-backed securitizations as our most significant source of funding for student loans on a long-term basis. Approximately $8.6 billion of our student loans were funded by long-term asset backed securitizations as of September 30, 2003, and approximately $7.1 billion of our student loans were funded by asset-backed securitizations as of December 31, 2002. The net cash flow we receive from the securitized student loans generally represents the excess amounts, if any, generated by the underlying student loans over the amounts required to be paid to the bondholders, after deducting servicing fees and any other expenses relating to the securitizations. In addition, some of the residual interests in these securitizations have been pledged to secure additional bond obligations. Our rights to cash flow from securitized student loans are subordinate to bondholder interests and these loans may fail to generate any cash flow beyond what is due to pay bondholders.

      The interest rates on certain of our asset-backed securities are set and periodically reset via a “dutch auction” utilizing remarketing agents for varying intervals ranging from seven to 91 days. Investors and potential investors submit orders through a broker-dealer as to the principal amount of notes they wish to buy, hold or sell at various interest rates. The broker-dealers submit their clients’ orders to the auction agent or remarketing agent, who determines the interest rate for the upcoming period. If there are insufficient potential bid orders to purchase all of the notes offered for sale or being repriced, we could be subject to

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      Rising interest rates existing at the time our asset-backed securities are remarketed may cause other competing investments to become more attractive to investors than our securities, which may decrease our liquidity. We periodically utilize a variety of derivative instruments in order to protect against changing interest rate environments. To the extent that anticipated changes in interest rates differ from actual changes in interest rates, these derivative instruments may not operate as effective hedges.

      More than 99% of our student loan portfolio as of September 30, 2003 was comprised of FFELP loans. These loans benefit from a federal guarantee of between 98% and 100% of their principal balance and accrued interest. We bear full risk of losses experienced with respect to the unguaranteed portion of the student loans.

      Losses on our private loans will be borne by us, with the exception of certain privately insured loans. Privately insured loans constitute a minority of our private loan portfolio. The loan loss pattern on our private loan portfolio is not as developed as that on our FFELP loan portfolio. As of September 30, 2003, the aggregate principal balance of private loans comprised less than 1% of our entire student loan portfolio; however, it is expected to increase to between 1% and 2% over the next three years. There can be no assurance that this percentage will not further increase over the long term.

      The performance of student loans in our portfolio is affected by the economy, and a prolonged economic downturn may have an adverse effect on the credit performance of these loans. While we have provided allowances estimated to cover losses that may be experienced in both our student loans that are federally guaranteed under the FFEL Program as well as our private loan portfolio, there can be no assurance that such allowances will be sufficient to cover actual losses in the future.

      A deterioration in the financial status of a guaranty agency and its ability to honor guarantee claims on defaulted student loans could result in a failure of that guaranty agency to make its guarantee payments in a timely manner, if at all. The financial condition of a guaranty agency can be adversely affected if it submits a large number of reimbursement claims to the DOE, which results in a reduction of the amount of reimbursement that the DOE is obligated to pay the guaranty agency. The DOE may also require a guaranty agency to return its reserve funds to the DOE upon a finding that the reserves are unnecessary for the guaranty agency to pay its FFELP expenses or to serve the best interests of the FFEL Program.

      If the DOE has determined that a guaranty agency is unable to meet its guarantee obligations, the loan holder may submit claims directly to the DOE, and the DOE is required to pay the full guarantee claim. However, the DOE’s obligation to pay guarantee claims directly in this fashion is contingent upon the DOE making the determination that a guaranty agency is unable to meet its guarantee obligations. The DOE may not ever make this determination with respect to a guaranty agency and, even if the DOE does make this determination, payment of the guarantee claims may not be made in a timely manner, which could result in our experiencing cash shortfalls.

      In connection with our securitizations, we periodically utilize credit enhancements or other support agreements such as letters of credit, bond insurance and interest rate swap agreements. We utilize these credit enhancement agreements in order to improve the marketability of certain of our asset-backed securities when such enhancements will lower our over-all costs with respect to these securities. We cannot assure performance of the counterparties to these various agreements, and failure of such counterparties to perform their obligations under these agreements could impair the viability of our underlying debt or securitization structures, which in turn could adversely impact our results of operations and financial condition.

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      In 1992, Congress created the William D. Ford Federal Direct Loan Program, which we refer to as the FDL Program or the FDLP. Under the FDL Program, the DOE makes loans directly to student borrowers through the educational institutions they attend. The volume of student loans made under the FFEL Program and available for us to originate or acquire may be reduced to the extent loans are made to students under the FDL Program. In addition, if the FDL Program expands, to the extent the volume of loans serviced by us is reduced, we may experience reduced economies of scale, which could adversely affect our earnings. Loan volume reductions could further reduce amounts received by the guaranty agencies available to pay claims on defaulted student loans.

      In the FFELP market, we face significant competition from SLM Corporation, the parent company of Sallie Mae. SLM Corporation services nearly half of all outstanding FFELP loans and is the largest holder of student loans, with a portfolio of approximately $70 billion. We also face intense competition from other existing lenders and servicers. As we expand our student loan origination and acquisition activities, that expansion may result in increased competition with some of our servicing customers. This has in the past resulted in servicing customers terminating their contractual relationships with us, and we could in the future lose more servicing customers as a result. As we seek to further expand our business, we will face numerous other competitors, many of which will be well established in the markets we seek to penetrate. Some of our competitors are much larger than we are, have better name recognition than we do and have greater financial and other resources than we do. In addition, several of our competitors have large market capitalizations or cash reserves and are better positioned to acquire companies or portfolios in order to gain market share than we are. Furthermore, many of the institutions with which we compete have significantly more equity relative to their asset bases than we do. Consequently, such competitors may have more flexibility to address the risks inherent in the student loan business. Finally, some of our competitors are tax-exempt organizations which do not pay federal or state income taxes and which generally receive floor income on certain tax-exempt obligations on a greater percentage of their student loan portfolio than we do because they have financed a greater percentage of their student loans with tax-exempt obligations issued prior to October 1, 1993 than we have. These factors could give our competitors a strategic advantage.

      Pursuant to the Higher Education Act, borrowers may prepay loans made under the FFEL Program at any time. Prepayments may result from consolidating student loans, which tends to occur more frequently in low interest rate environments, from borrower defaults, which will result in the receipt of a guarantee payment, and from voluntary full or partial prepayments, among other things. High prepayment rates will have the most impact on our asset-backed securitization transactions priced in relation to LIBOR. At September 30, 2003, we had four transactions outstanding totaling approximately $3.4 billion which had experienced cumulative prepayment rates of 15.2% to 22.1%, respectively. At December 31, 2002, we had two transactions outstanding totaling approximately $2.0 billion which had experienced cumulative prepayment rates of 14.3% and 15.9%, respectively. The rate of prepayments of student loans may be influenced by a variety of economic, social and other factors affecting borrowers, including interest rates and the availability of alternative financing. Our profits could be adversely affected by higher prepayments, which would reduce the amount of interest we receive and expose us to reinvestment risk.

      Our portfolio of FFELP loans is subject to refinancing through the use of consolidation loans, which are expressly permitted by the Higher Education Act. Consolidation loan activity may result in three detrimental effects on us. First, when we consolidate loans already held by us, the new consolidation loans have a lower yield than the loans being refinanced due to the statutorily mandated consolidation loan rebate fee of 1.05% per year. Although consolidation loans generally feature higher average balances, longer average lives and slightly higher special allowance payments, such attributes may not be sufficient to counterbalance the cost of the rebate fees. Second, and more significantly, we may lose student loans in

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      Our student loan originations generally are limited to students attending eligible educational institutions in the United States. Volumes of originations are greater at some schools than others, and our ability to remain an active lender at a particular school with concentrated volumes is subject to a variety of risks, including the fact that each school has the option to remove us from its “preferred lender” list or to add other lenders to its “preferred lender” list, the risk that a school may enter the FDL Program or the risk that a school may begin making student loans itself. We acquire student loans through forward flow commitments with other student loan lenders, but each of these commitments has a finite term. There can be no assurance that these lenders will renew or extend their existing forward flow commitments on terms that are favorable to us, if at all, following their expiration.

      In addition, as of September 30, 2003, approximately 52% of the loans we serviced were owned by third parties. To the extent that our third-party servicing clients reduce the volume of student loans that we process on their behalf, our income would be reduced, and, to the extent the related costs could not be reduced correspondingly, our net income could be materially adversely affected. Such volume reductions occur for a variety of reasons, including if our third-party servicing clients commence or increase internal servicing activities, shift volume to another service provider, perhaps because such other service provider does not compete with the client in student loan originations and acquisitions or exit the FFEL Program completely.

      Student loans originated or acquired with the proceeds of tax-exempt obligations issued prior to October 1, 1993, as well as student loans acquired with the sale proceeds of those student loans, receive only a portion of the special allowance payment which they would otherwise be entitled to receive, but are guaranteed a minimum rate of return of 9.5% per year, less the applicable interest rate for the student loan.

      As of September 30, 2003, approximately $1.7 billion of our student loan portfolio was comprised of loans which are currently or were previously financed with the proceeds of tax-exempt obligations issued prior to October 1, 1993. Based upon provisions of the Higher Education Act and related interpretations by the DOE, we believe that, for each of these student loans, we will receive partial special allowance payments, subject to the 9.5% minimum rate of return. However, the DOE may change its regulations or its interpretations of existing regulations, or the Higher Education Act may be amended, to eliminate this special allowance payment treatment. In this event, we would receive regular special allowance payments, but with no minimum rate of return.

      In the current low interest rate environment, we generally receive partial special allowance payments and the minimum 9.5% rate of return with respect to our eligible student loans originated or acquired with qualifying tax-exempt proceeds. In a higher interest rate environment, however, the regular special allowance payments on loans not originated or acquired with qualifying tax-exempt proceeds may exceed the total subsidy to holders of eligible loans originated or acquired with qualifying tax-exempt proceeds. Thus, in a higher interest rate environment, these loans could have an adverse effect upon our earnings.

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      Our servicing and operating processes are highly dependent upon our information technology system infrastructure, and we face the risk of business disruption if failures in our information systems occur, which could have a material impact upon our business and operations. We depend heavily on our own computer-based data processing systems in servicing both our own student loans and those of third-party servicing customers. On January 1, 2002, we converted the great majority of the student loans we service to a computer hardware and software platform developed and maintained by an affiliated company. In November 2002, we converted our remaining approximately $3 billion of student loans to this same computer hardware and software platform. Problems or errors of which we are not currently aware may have occurred in connection with this conversion, and problems or errors may occur in the future in connection with the conversion of newly originated and acquired loans to our platform. If servicing errors do occur, they may result in a loss of the federal guarantee on the FFELP loans that we service or in a failure to collect amounts due on the student loans that we service. In addition, although we regularly back up our data and maintain detailed disaster recovery plans, we do not maintain fully redundant information systems. A major physical disaster or other calamity that causes significant damage to our information systems could adversely affect our business. Additionally, loss of our information systems for a sustained period of time could have a negative impact on our performance and ultimately on our cash flow in the event we were unable to process borrower payments.

      We have entered into certain contractual arrangements with entities controlled by Michael S. Dunlap, our Chairman and Co-Chief Executive Officer and one of our principal shareholders, and members of his family and, to a lesser extent, with entities in which other directors and members of management hold equity interests or board or management positions. Such arrangements constitute a significant portion of our business and include, among other things:

	•	performance of servicing duties;
	•	sales of student loans by such affiliates to us; and
	•	sales of student loan origination rights by such affiliates to us.

These arrangements may present potential conflicts of interest.

      Many of these arrangements are with Union Bank in which Michael S. Dunlap owns an indirect interest and of which he serves as non-executive chairman. Union Bank is a significant source of student loans to us and a significant servicing customer of ours.

      In the nine months ended September 30, 2003 and in 2002, approximately 19% and 14%, respectively, of the principal amount of the student loans added to our portfolio were acquired from Union Bank, a portion of which loans were originated by Union Bank and portion of which were originated by third parties. We believe that the acquisitions were made on terms similar to those made from unrelated entities. We intend to maintain our relationship with Union Bank, which we believe provides substantial benefits to us, although there can be no assurance that all transactions in which we engage with Union Bank are, or in the future will be, on terms that are no less favorable than we could obtain from an unrelated third party. For information on affiliated transactions, see “Related Party Transactions.”

      The ability of Union Bank to continue to do business with us will depend on the development of Union Bank’s own business, financial condition and results of operations, which will be affected by competitive and other factors beyond our control or knowledge. Because Union Bank is a privately held company, an investor in our Class A common stock might have little advance warning of problems

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      A corporation is considered to be a “personal holding company” under the U.S. Internal Revenue Code of 1986, as amended, which we refer to as the Code, if (1) at least 60% of its adjusted ordinary gross income is “personal holding company income” (generally, passive income) and (2) at any time during the last half of the taxable year more than half, by value, of its stock is owned by five or fewer individuals, as determined under attribution rules of the Code. If both of these tests are met, a personal holding company is subject to an additional tax on its undistributed personal holding company income, currently at a 15% rate. Before this offering, more than half the value of our stock was held by five or fewer individuals, and immediately after this offering, we expect that this will continue to be the case. In June 2003, we submitted a request for a private letter ruling from the Internal Revenue Service seeking a determination that our federally guaranteed student loans qualify as assets of a “lending or finance business,” as defined in the Code. Such a determination would have enabled us to establish that a company holding such loans does not constitute a personal holding company. Based on its historical practice of not issuing private letter rulings concerning matters that it considers to be primarily factual, the Internal Revenue Service has indicated that it will not issue the requested ruling, taking no position on the merits of the legal issue. So long as more than half of our value continues to be held by five or fewer individuals, if it were to be determined that some portion of our federally guaranteed student loans does not qualify as assets of a “lending or finance business,” as defined in the Code, we could become subject to personal holding company tax on our undistributed personal holding company income. We continue to believe that neither Nelnet, Inc. nor any of its subsidiaries is a personal holding company. However, even if it were to be determined that any of such entities is a personal holding company, we believe that by utilizing intercompany distributions we can eliminate or substantially eliminate our exposure to personal holding company tax for at least 2003, 2004 and 2005, although we cannot assure you that this will be the case.

      Our direct marketing operations are or may become subject to various federal and state “do not call” list requirements. The Federal Trade Commission has recently amended its rules to provide for a national “do not call” registry. Under these new federal regulations, which are currently being challenged in court, consumers may have their phone numbers added to the national “do not call” registry. Generally, we will be prohibited from calling anyone on that registry. In September 2003, telemarketers will have access to the registry and will be required to compare their call lists against the national “do not call” registry at least once every 90 days. We also will be required to pay a fee to access the registry on a quarterly basis. Enforcement of the “do not call” provisions will begin in the fall of 2003, and the rule provides for fines of up to $11,000 per violation and other possible penalties. This rule may restrict our ability to market effectively our products and services to new customers. Furthermore, compliance with this new rule may prove difficult, and we may incur penalties for improperly conducting our marketing activities.

      Our inability to maintain strong relationships with significant schools, branding partners, servicing customers, guaranty agencies and software licensees could result in loss of:

	•	loan origination volume with borrowers’ attending certain schools;
	•	loan origination volume generated by some of our branding partners;
	•	loan and guarantee servicing volume generated by some of our loan servicing customers and guaranty agencies; and
	•	software licensing volume generated by some of our licensees.

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      We cannot assure you that our forward flow channel lenders or our branding partners will continue their relationships with us. Loss of a strong relationship, like that with a significant branding partner such as Union Bank, or with schools such as the University of Phoenix and Nova Southeastern University from which we directly or indirectly acquire a significant volume of student loans, could result in an adverse effect on our business. For example, Nova Southeastern University, from which we purchased FFELP loans (through its relationship with Union Bank) which comprised approximately 5.9% of our total student loan volume in the nine months ended September 30, 2003 and 7.4% in 2002, has informed us and Union Bank, the direct acquirer of the student loans, of its intent not to renew its sale commitment starting January 2007, in order to make a request for a proposal to potential purchasers.

Risks Related to This Offering

      The market price of our Class A common stock could decline as a result of sales of substantial amounts of our Class A common stock in the public market after this offering, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future equity offerings. There will be 39,015,034 shares of our Class A common stock and 14,023,454 shares of our Class B common stock, which are convertible on a one-for-one basis into shares of Class A common stock, outstanding immediately after this offering.

      All of the shares of our Class A common stock sold in this offering will be freely transferable by persons other than our affiliates without restriction or further registration under the Securities Act of 1933. Substantially all of the remaining shares of our Class A common stock, including shares of Class A common stock issued upon conversion of shares of Class B common stock, will be eligible for immediate sale in the public market pursuant to Rule 144 under the Securities Act of 1933 (other than shares of common stock held by our affiliates which will be subject to volume limitations) subject to 180-day lock-up agreements with the underwriters and to our share retention policy. See “Description of Capital Stock — Share Retention Policy” and “Shares Eligible for Future Sale — Sales of Restricted Shares” and “— Lock-up Agreements.”

      We and our executive officers and directors and all of our shareholders have entered into 180-day lock-up agreements with the underwriters. The lock-up agreements prohibit each of us from selling or otherwise disposing of shares of common stock except in limited circumstances. The lock-up agreements are only contractual agreements, and J.P. Morgan Securities Inc. and Banc of America Securities LLC, at their discretion, can waive the restrictions of any lock-up agreement at an earlier time without prior notice or announcement and allow any of us to sell shares of common stock. If the restrictions in the lock-up agreement are waived, shares of our Class A common stock will be available for sale into the public market, subject to applicable securities laws and our share retention policy, which could reduce the market price for shares of our Class A common stock. Our share retention policy prevents, subject to some exceptions, our officers or the officers of any of our direct or indirect subsidiaries at or above the level of executive director, defined for purposes of this policy as Executives, from selling or otherwise disposing of a number of shares of common stock in any calendar year in excess of one-third of the number of shares of common stock beneficially owned by such Executive on the first day of the calendar year. See “Description of Capital Stock — Share Retention Policy” and “Shares Eligible for Future Sale — Sales of Restricted Shares.”

      Michael S. Dunlap, Stephen F. Butterfield and persons related to them and trusts in which they have beneficial interests have the right, subject to limitations, to make two written demands of Nelnet for registration with the Securities and Exchange Commission of all or part of their common stock. These shareholders also have piggyback registration rights for their common stock following the consummation of this offering. See “Description of Capital Stock — Registration Rights.”

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      You will pay a price per share that substantially exceeds the per share value of our tangible assets after subtracting our total liabilities. As a result, if we were to distribute our net tangible assets to our shareholders immediately following this offering, you would receive less than the amount you paid for your shares of our Class A common stock. As of September 30, 2003, our net tangible book value was $2.59 per share of common stock. After giving effect to the issuance and sale of 8,000,000 shares of our Class A common stock in this offering, and after deducting the underwriting discounts and estimated offering expenses that we will pay, our pro forma net tangible book value as of September 30, 2003 would have been $4.79 per share of common stock. This represents an immediate increase in net tangible book value of $2.20 per share to existing shareholders and an immediate dilution of $14.21 per share to new investors purchasing shares of Class A common stock in this offering. See “Dilution.”

      Immediately after this offering, our executive officers, directors and principal shareholders will beneficially own, in the aggregate, 71.0% of our outstanding common stock and possess 91.4% of the combined voting power of our common stock, and Michael S. Dunlap and Stephen F. Butterfield, our Co-Chief Executive Officers, persons related to them and trusts in which they have beneficial interests will beneficially own an aggregate of 60.7% of our common stock and possess 88.4% of the combined voting power of our common stock. Each share of Class A common stock has one vote and each share of Class B common stock has ten votes on all matters to be voted upon by our shareholders. As a result, our executive officers, directors and principal shareholders, as a group, and Messrs. Dunlap and Butterfield, by themselves, will be able to control substantially all matters requiring approval by our shareholders, including the election of all directors, and they may do so in a manner with which you may not agree or which may not be in the best interest of other shareholders. See “Description of Capital Stock — Common Stock.”

      As of the date of this prospectus, we cannot specify with certainty the amounts we will spend on particular uses from the net proceeds that we will receive from this offering. Our management will have broad discretion in the application of these net proceeds, but currently intends to use them as described in “Use of Proceeds.” The failure by our management to apply these net proceeds effectively could adversely affect our ability to continue to develop our business.

      Provisions of our charter and by-laws could discourage potential acquisition proposals or make it more difficult for a third party to acquire control of us. These provisions include, among others, the authority of our board of directors to create and issue rights entitling the holders thereof to purchase our securities or the securities of any other corporation. In addition, we are subject to the provisions of the Nebraska Shareholders Protection Act, an anti-takeover law, which may also dissuade a potential acquiror of our common stock. These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding voting stock or may delay, prevent or deter a merger, acquisition, tender offer or proxy contest, which may negatively affect our stock price. See “Description of Capital Stock — Nebraska Anti-takeover Law and Certain Charter and By-law Provisions.”

USE OF PROCEEDS

      Our net proceeds from this offering are estimated to be $137.4 million, or $158.6 million if the underwriters’ overallotment option is exercised in full, after deducting the underwriting discounts and estimated offering expenses that we will pay.

      We intend to use the net proceeds from this offering to originate and acquire interests in student loans potentially including up to approximately $55 million to fund a portion of the acquisitions described in “Prospectus Summary — Potential Acquisitions,” to repay any revolving credit indebtedness outstanding at the closing of this offering and for general corporate purposes, including capital expenditures, working capital and possible acquisitions complementary to our business. The indebtedness to be repaid is revolving credit indebtedness with a weighted average interest rate of 1.40% as of October 31, 2003, and that matures on September 24, 2004. The proceeds of the indebtedness to be repaid were used to refinance one of our operating lines of credit. The borrowings under that line of credit were used to finance our 2001 acquisition of EFS, Inc., an Indiana student loan servicing and secondary market company. We do not expect revolving credit indebtedness to be repaid with the net proceeds of this offering to exceed $35 million, which was the amount of such indebtedness outstanding on November 21, 2003. Except as described in “Prospectus Summary — Potential Acquisitions,” we currently have no agreements or understandings with respect to any material acquisition.

      A portion of the net proceeds from this offering may be applied to capital expenditures, which could include costs incurred in connection with expanding our sales and marketing forces. Such expansion may include up to the addition, between August 2003 and the end of the first quarter of 2004, of approximately 10 additional personnel, who market to schools and are dispersed throughout the country. During the same time period, we may also use a portion of the net proceeds from this offering to add up to approximately 100 direct consumer marketing personnel in Denver, Colorado, 70 in Lincoln, Nebraska and 30 in Fredericksburg, Virginia.

      The foregoing uses of the net proceeds from this offering represent our current intentions based upon our present plans and business condition. We retain broad discretion in the allocation and use of the net proceeds of this offering and a change in our plans or business condition could result in the application of the net proceeds from this offering in a manner other than as described in this prospectus. Pending the uses described above, we intend to invest the net proceeds from this offering in our student loan portfolio and/or short-term, investment grade securities.

DIVIDEND POLICY

      We have not declared or paid dividends on our capital stock during 2001, 2002 or 2003 and do not intend to pay any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and other factors that our board of directors may deem relevant.

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CAPITALIZATION

      The following table sets forth our capitalization as of September 30, 2003:

	•	on an actual basis; and
	•	on an as adjusted basis to give effect to the sale of 8,000,000 shares of our Class A common stock in this offering and the use of a portion of the net proceeds from this offering to repay revolving credit indebtedness; $30 million of such indebtedness was outstanding on September 30, 2003, and $35 million was outstanding on November 21, 2003.

      You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus.

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DILUTION

      If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book value per share of our common stock after this offering.

      Our net tangible book value as of September 30, 2003 was approximately $116.8 million, or $2.59 per share of common stock. Net tangible book value per share represents total tangible assets less total liabilities, divided by the number of shares of common stock outstanding. After giving effect to the issuance and sale of 8,000,000 shares of our Class A common stock in this offering, and after deducting the underwriting discounts and estimated offering expenses that we will pay, our pro forma net tangible book value as of September 30, 2003 would have been approximately $254.2 million, or $4.79 per share of common stock. This represents an immediate increase in net tangible book value of $2.20 per share to existing shareholders and an immediate dilution of $14.21 per share to new investors purchasing shares of Class A common stock in this offering.

      The following table illustrates this dilution:

      The following table summarizes, as of September 30, 2003, on a pro forma basis, the total number of shares of common stock acquired from us for cash (in one case for cash and services) during the past five years by existing shareholders and the total consideration received by us and the average price per share paid by them and by new investors purchasing shares of Class A common stock in this offering, before deducting the underwriting discounts and estimated offering expenses that we will pay:

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SELECTED CONSOLIDATED FINANCIAL DATA

      You should read the selected consolidated financial data set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus. We derived the financial data as of December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000 from our audited financial statements included elsewhere in this prospectus. We derived the financial data as of December 31, 2000, 1999 and 1998 and for the years ended December 31, 1999 and 1998 from our audited financial statements not included in this prospectus. We derived the financial data as of September 30, 2003 and for the nine months ended September 30, 2003 and 2002 from our unaudited financial statements included elsewhere in this prospectus; and such unaudited interim financial statements reflect all material adjustments, consisting only of normal recurring accruals, which, in the opinion of management, are necessary for a fair presentation. Results for interim periods are not necessarily indicative of results to be expected during the remainder of the fiscal year or for any future periods.

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(a)	Initial loans originated and acquired through various channels, including originations through our direct channel and acquisitions through our branding partner channel, our forward flow channel and the secondary market.
(b)	Net interest margin is computed by dividing net interest income by the sum of average student loans and the average balance of other interest earning assets.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

      You should read the following discussion and analysis by our management of our financial condition and results of operations in conjunction with our “Selected Consolidated Financial Data” and our financial statements and the related notes included elsewhere in this prospectus.

Overview

      We are a vertically integrated education finance company, with over $11 billion in total assets, making us one of the leading education finance companies in the country. We are focused on providing quality products and services to participants in the education finance process. Headquartered in Lincoln, Nebraska, we originate, hold and service student loans, principally loans originated under the Federal Family Education Loan Program. For 2002, we were the fourth largest holder and second largest servicer of FFELP loans. In addition, we, together with our branding partners, originated and acquired approximately $3.2 billion of student loans in the nine months ended September 30, 2003 and $2.7 billion of student loans in 2002, making us a leading originator and acquirer of student loans.

      Our business is comprised of four primary product and service offerings:

	•	Asset management, including student loan originations and acquisitions. We provide student loan sales, marketing, originations, acquisition and portfolio management. We own a large portfolio of student loan assets through a series of education lending subsidiaries. As of September 30, 2003, our student loan portfolio was $10.1 billion, consisting of over 99% of FFELP loans and less than 1% of private loans. We generate loans owned in special purpose lending facilities through direct origination or through acquisition of loans. We generate the majority of our earnings from the spread between the yield we earn on our student loan portfolio and the cost of funding these loans. We also provide marketing and sales support and managerial and administrative support related to our asset generation activities, as well as those performed for our branding partners or other lenders who sell us loans. Revenues are primarily generated from interest earnings. While our net interest margin may vary due to fluctuations in interest rates, government special allowance payments ensure that we receive a minimum yield on our student loans, so long as certain requirements are met.
	•	Student loan servicing. We service our student loan portfolio and the portfolios of third parties. We currently service or provide complete outsourcing of servicing activities for more than $18 billion in student loans, including approximately $8.7 billion of loans in our own portfolio. The servicing activities provided include loan origination activities, application processing, borrower updates, payment processing, claim processing and due diligence procedures. These activities are performed internally for our own portfolio in addition to generating fee revenue when performed for third-party clients.
	•	Guarantee servicing. We provide servicing support to guaranty agencies, which includes system software, hardware and telecommunication support, borrower and loan updates, default aversion tracking services, claim processing services and post-default collection services. We currently provide servicing support to agencies that guarantee $20 billion of FFELP loans. These activities generate fee revenue in addition to expanding our relationship with other participants in the education finance sector.
	•	Servicing software. We provide student loan servicing software internally and to third-party student loan holders and servicers. We currently service more than $18 billion in student loans, which makes us the second largest servicer of FFELP loans, according to SLSA statistics. Our software is also used by third parties to service an additional $27 billion in student loans. We earn software license and maintenance fees annually from third-party clients for use of this software. We also provide computer consulting, custom software applications and customer service support.

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      In accordance with accounting principles generally accepted in the United States, our asset management and student loan servicing offerings constitute reportable operating segments. Our guarantee servicing and servicing software offerings are operating segments that do not meet the quantitative thresholds, and, therefore, are included as other segments that do not meet the reportable segment criteria. In the nine months ended September 30, 2003, our asset management, student loan servicing and other segments generated 50.8%, 40.1% and 9.1%, respectively, of our total segment revenues and 73.2%, 23.3% and 3.5%, respectively, of our segment net income. For additional information, see note 19 of the notes to consolidated financial statements.

      Our student loan portfolio has grown significantly through origination and acquisition. With the development of our fully integrated platform, we are positioned for sustained organic growth. We originated and acquired $3.2 billion of student loans in the nine months ended September 30, 2003 and $2.7 billion in student loans during 2002 through various channels, including:

	•	our direct channel, in which we originate student loans in one of our brand names directly to student and parent borrowers, which accounted for 52.2% and 40.7% of the student loans we originated and acquired in the nine months ended September 30, 2003 and in 2002, respectively;
	•	our branding partner channel, in which we acquire student loans from lenders to whom we provide marketing and origination services, which accounted for 22.8% and 19.5% of the student loans we originated and acquired in the nine months ended September 30, 2003 and in 2002, respectively; and
	•	our forward flow channel, in which we acquire student loans from lenders to whom we provide origination services, but provide no marketing services, or who have agreed to sell loans to us under forward sale commitments, which accounted for 15.3% and 21.7% of the student loans we originated and acquired in the nine months ended September 30, 2003 and in 2002, respectively.

      In addition, we also acquire student loans through spot purchases and whole-company acquisitions, which accounted for 9.7% and 18.1% of student loans that we originated and acquired in the nine months ended September 30, 2003 and in 2002, respectively. We have increased our student loan portfolio by $6.4 billion over the last two years and nine months, including $2.9 billion of loans acquired in subsidiary acquisitions.

      Our student loan portfolio and asset growth will be significant factors in determining future growth in our net interest income as our primary source of income is interest earned on our student loan portfolio. If our student loan portfolio continues to grow and our net interest margin remains relatively stable, we expect our net interest income to increase after adjusting for any variable rate floor income. Interest income, and to a certain extent our net income, is also dependent upon the relative level of interest rates. While we expect our student loan portfolio and interest earning assets to continue to grow, which should cause interest income and earnings growth, we do not expect to continue to grow at historical levels. Specifically, our net income for the nine months ended September 30, 2003 decreased $31.1 million, or 65.0%, as compared to the comparable period in 2002. Net interest income decreased by $22.5 million, or 14.4%, for the nine months ended September 30, 2003 as compared to the comparable period in 2002. However, net interest income, excluding the effects of variable rate floor income, increased approximately $11.9 million, or 10.9%, for the nine months ended September 30, 2003 as compared to the comparable period in 2002. This increase in net interest income, excluding variable rate floor income, has resulted from the portfolio growth previously discussed. Variable rate floor income occurs in certain declining interest rate environments, and we cannot predict whether these interest rate environments will occur in the future. We generally do not anticipate receiving or plan to receive variable rate floor income.

      We have positioned ourself for growth by building a strong foundation through mergers and acquisitions of related and unrelated entities. Although our assets and loan portfolios increased through these transactions, a key aspect of each transaction was its impact on our prospective organic growth and the development of our integrated platform of services. As a result of our rapid growth, the development of

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	•	We acquired the operations of UNIPAC Service Corporation, a related entity, in March 2000, which added servicing operations and growth potential.
	•	We added the servicing and origination operations of InTuition Holdings, Inc. in June 2000, which expanded our presence in the southeastern United States.
	•	We acquired MELMAC, Inc., a Maine student loan company, in January 2001, which increased our FFELP portfolio by $424 million, and increased our presence on the East Coast.
	•	We acquired GuaranTec, LLP in June 2001, which expanded our products and services through the addition of guarantee servicing.
	•	We acquired EFS, Inc. in December 2001, which increased our origination opportunities in the Midwest, increased our loan servicing operations and added $2.5 billion to our FFELP portfolio.
	•	We acquired Idaho Financial Associates, Inc. in January 2002 and Charter Account Systems, Inc. in May 2002, which further secured and expanded our product suite through proven and tested loan servicing software products.
	•	We acquired UFS Securities, LLC in August 2003, which added broker-dealer services to our services.

      Our earnings and earnings growth are directly affected by the size of our portfolio of student loans, the interest rate characteristics of our portfolio, the costs associated with financing and managing our portfolio and the costs associated with the origination and acquisition of the student loans in the portfolio. See “Liquidity and Capital Resources — Student Loan Portfolio.”

      We generate the majority of our earnings from the spread between the yield we receive on our portfolio of student loans and the cost of funding these loans. This spread income is reported on our income statement as net interest income. The amortization and write-offs of premiums or discounts, including capitalized costs of origination, the consolidation loan rebate fee and yield adjustments from borrower benefit programs are netted against loan interest income on our income statement. The amortization and write-offs of bond issuance costs are included in interest expense on our income statement.

      Our portfolio of FFELP loans generally earns interest at the higher of a variable rate based on the special allowance payment, or SAP, formula set by the DOE, and the borrower rate, which is fixed over a period of time. The SAP formula is based on an applicable index plus a fixed spread that is dependent upon when the loan was originated and the loan’s repayment status. Depending on the type of student loan and when the loan was originated, the borrower rate is either fixed to term or is reset to a market rate each July 1. Loans that reset annually on each July 1 can generate excess spread income as compared to the rate based on the SAP formula in certain declining interest rate environments. We refer to this additional income as variable rate floor income and it is included in loan interest income as described further in “— Results of Operations” below. Historically, we have earned excess spread, or variable rate floor income, in declining interest rate environments as recently as our most recent fiscal year. Since the rates are reset annually, we view these earnings as temporary and not necessarily sustainable. Our ability to earn variable rate floor income in the future periods is dependent upon the interest rate environment following the annual reset of borrower rates, and we cannot assure that such environment will exist in the future.

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      The table below sets forth the weighted average borrower interest rate and weighted average lender interest rate for all variable-rate student loan assets for the period indicated.

      Because we generate the majority of our earnings from the spread between the yield we receive on our portfolio of student loans and the cost of financing these loans, the interest rate sensitivity of our balance sheet is very important to our operations. The current and future interest rate environment can and will affect our interest earnings, net interest income and net income. The effects of changing interest rate environments are further outlined in “— Interest Rate Risk” below.

      On those FFELP loans with fixed to term borrower rates, primarily consolidation loans, we earn interest at the greater of the borrower rate or a variable rate based on the SAP formula. Since we finance the majority of our student loan portfolio with variable-rate debt, we may earn excess spread on these loans for an extended period of time.

      On most consolidation loans, we must pay a 1.05% per year rebate fee to the DOE. Those consolidation loans which have variable interest rates based on the SAP formula earn a yield less than that of a Stafford loan. Those consolidation loans which have fixed interest rates less than the sum of 1.05% and the variable rate based on the SAP formula also earn a yield less than that of a Stafford loan. As a result, as consolidation loans matching these criteria become a larger portion of our loan portfolio, there will be a lower yield on our loan portfolio in the short term. However, due to the extended terms of consolidation loans, we expect to earn the yield on these loans for a longer duration, making them beneficial to us in the long term.

      A portion of our FFELP loan portfolio, with an outstanding balance of $1.4 billion as of September 30, 2003, is comprised of loans which were previously financed with tax-exempt obligations issued prior to October 1, 1993. Based upon provisions of the Higher Education Act and related interpretations by the DOE, we believe that we may be entitled to receive special allowance payments on these loans providing us with a 9.5% minimum rate of return. To date, we have not recognized interest income generated by these loans based on the 9.5% minimum rate of return. We have asked the DOE to confirm that we are allowed to recognize the income based on the 9.5% minimum rate of return. We have deferred recognition of this excess interest income pending satisfactory resolution of this issue. As of September 30, 2003, the amount of excess interest income deferred totaled approximately $20.3 million. Since we did not refinance loans with the aforementioned tax-exempt obligations until 2003, all of this deferred income was recorded this year.

      In declining interest rate environments, we can earn significant amounts of variable rate floor income. The more drastic the reduction in rates subsequent to the July 1 annual borrower interest rate reset date, the greater our opportunity to earn such income. Conversely, as the decline in rates abates, or in environments where interest rates are rising, our opportunity to earn variable rate floor income can be reduced, in some cases substantially. This, for example, occurred in the nine months ended September 30, 2003 as compared with the comparable period of the prior year. Although we have been in a historically low interest rate environment, interest rates have been rising since the second quarter of 2003, possibly from a recovering economy. As interest rates increase, we incur greater financing costs on our variable rate financings. An increase in our financing costs, in turn, decreases the spread between the rate of our FFELP loans (which reset annually) and the rate of our financings, ultimately causing a decrease in variable rate floor income.

      Investment interest income includes income from unrestricted interest-earning deposits and funds in our special purpose entities for our asset-backed securitizations.

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      We maintain an allowance for loan losses associated with our student loan portfolio at a level that is based on the performance characteristics of the underlying loans. We analyze the allowance separately for our FFELP loans and our private loans.

      The loan loss allowance attributable to FFELP loans consists of two components: a risk sharing reserve and a reserve for rejected guaranty agency claim losses, caused mainly by servicing defects. The risk sharing reserve is an estimate based on the amount of loans subject to the 2% risk sharing and on the historical experience of losses. The rejected claim loss reserve is based on the historical trend of ultimate losses on loans initially rejected for reimbursement by guaranty agencies. FFELP loans are guaranteed as to both principal and interest and, therefore, continue to accrue interest until the time they are paid by the guaranty agency. Once a FFELP loan is rejected for claim payment, our policy is to continue to pursue recovery of principal and interest, whether by curing the reject or collecting from the borrower. We attempt to cure the rejected claims through our collection efforts. As of September 30, 2003, we had an allowance for loan losses on FFELP loans aggregating approximately $11.0 million.

      In determining the private loan loss allowance, we divide the portfolio into various categories, such as the type of program, loan status and months into repayment. We then estimate defaults based on the borrowers’ credit profiles, net of estimated recoveries. We place a private loan on non-accrual status and charge off the loan when the collection of principal and interest is 120 days past due. We utilize this data to estimate the amount of losses in the portfolio, net of subsequent collections, that are probable of occurrence. As of September 30, 2003, we had an allowance for loan losses on private loans of approximately $4.7 million.

      The evaluation of the provision for loan losses is inherently subjective, as it requires material estimates that may be subject to significant changes. The provision for loan losses reflects the activity for the applicable period and provides an allowance at a level which our management believes is adequate to cover probable losses inherent in the loan portfolio.

      We also earn fees and generate income from other sources, including principally loan servicing, guarantee servicing and licensing fees on our software products. Loan servicing fees are determined according to individual agreements with customers and are calculated based on the dollar value or number of loans or accounts serviced for each customer. Guarantee servicing fees are earned as a result of our providing system software, hardware and telecommunication support, borrower and loan updates, default aversion tracking services, claim processing services and post-default collection services to guaranty agencies. Guarantee servicing fees are calculated based on the number of loans serviced or amounts collected. Software services income includes software license and maintenance fees associated with student loan software products as well as certain loan marketing fees. We also charge borrowers fees on certain private loans, both at origination and when the loan enters repayment, which help to compensate for anticipated loan losses. In addition, we earn fee income on some of our securitization transactions through UFS Securities LLC, our wholly owned broker-dealer, or UFS Securities, which effectively decreases our costs associated with accessing this market. UFS Securities sells certain tranches of our auction rate securities in a co-broker dealer arrangement with certain third-party broker-dealers. UFS Securities is paid the same amount of fees as the third-party broker-dealers for selling the auction rate securities. Since UFS Securities, which was acquired in August 2003, is our wholly owned subsidiary, these sales and the fees received for the sales by our wholly owned subsidiary will have the effect of reducing our overall costs on the sales of our auction rate securities.

      As we expand our student loan origination and acquisition activities, we may face increased competition with some of our servicing customers. In the past, including in one case in 2003, servicing customers have terminated their servicing relationships with us. Furthermore, we could in the future lose more servicing customers as a result of such increased competition. However, the vast majority of our servicing agreements provide for life-of-loan servicing of the existing loans, and, as such, we do not expect

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      One of our guarantee servicing customers recently notified us of its intention not to renew its servicing contract. The loss of this customer is not expected to have a material effect on our results of operations due to the relative portion of our earnings attributable to guarantee servicing revenue and the size of the individual customer.

      The income and revenues provided through our servicing software operations have increased in recent years with the acquisitions of Idaho Financial Associates, Inc. and Charter Account Systems, Inc. To the extent that our servicing software license and maintenance revenues continue to increase, we believe that such increase will primarily come from our existing customer base.