Ratings

Preliminary Ratings As Of May 20, 2005
Class	Preliminary rating*	Preliminary amount (mil. $)
2005-A	AAA	142.000
2005-B	AAA	110.648
*The rating of each class of securities is preliminary and subject to change at any time.

Expected closing date: May 26, 2005.

Collateral: Federally guaranteed student loans.

Underwriters: Citigroup Global Markets Inc. and RBC Dain Rauscher Inc. Seller: Montana Student Loan Funding LLC.

Servicer: Student Assistance Foundation of Montana.

Subservicer: Sallie Mae Servicing.

Indenture trustee: Wells Fargo Bank N.A.

The preliminary rating assigned to Montana Higher Education Student Assistance Corp.'s student loan revenue bonds senior series 2005-A and senior series 2005-B reflects the approximately 7.4% previously issued subordinate bonds; the reserve fund requirement of 2% with a floor of $500,000; and the excess spread. There are interest rate swap agreements in place for a number of the previously issued series with various termination dates ranging from August 2007 to August 2013. Also, additional protection for noteholders is provided by asset coverage tests that must be met before excess funds can be released from the trust to the seller. At closing, total parity is expected to be 100.4%, and the senior parity is expected to be 108.4%. The proceeds of the series 2005 bonds are intended to be used to purchase approximately $251 million principal amount of and accrued interest on eligible loans and to pay cost of issuance.

The issuer, Montana Higher Education Student Assistance Corp., is a Montana nonprofit corporation incorporated July 7, 1980. The governor of the state has designated it as the sole and exclusive nonprofit in the state to provide a statewide student loan acquisition program associated with the guaranteed student loan program. It is organized for the purpose of lending and providing funds for the acquisition of student loan notes incurred under the Higher Education Act. As of Feb. 28, 2005, the issuer owned approximately $643 million outstanding principal amount of student loans to 48,539 borrowers.

Student Assistance Foundation of Montana (SAF) is a nonprofit corporation formed in 1999 to provide management and student loan servicing to the issuer and other nonprofit corporations organized at the request of a state or a political subdivision as well as education finance related services to the students and citizens in the state of Montana. On Feb. 1, 2000, the issuer transferred all its operating assets and employees to SAF. The issuer and SAF entered into management and servicing agreements. Effective Feb. 1, 2001, SAF entered into a remote services agreement with Pennsylvania Higher Education Assistance Agency (PHEAA). Under this agreement PHEAA provides SAF remote access to PHEAA's student loan servicing software and mainframe computer to service substantially all the issuer's student loan portfolio. As of Feb. 28, 2005, SAF had a staff of approximately 150 employees. SAF received an "Exceptional Performance" designation from the U.S. Department of Education (DOE) effective during the 12-month period beginning Dec. 15, 2004. As a result, the guarantee claims submitted by SAF will be eligible for 100% reimbursement while the designation is maintained. SAF entered into a servicing agreement with the issuer and trustee to act as the issuer's agent for the administration, collection, and servicing of financed student loans to be held under the indenture.

SAF is authorized as servicer to enter into subservicing agreements with other entities to perform servicing, collecting, accounting, and reporting obligations. Sallie Mae Servicing is a subservicer of out-of-state financed loans. The issuer expects the percentage of loans serviced by Sallie Mae to be approximately 12% of the aggregate principal amount of the series 2005 designated financed student loans and less than 5% of the aggregate principal amount of financed student loans. At this time, the subservicer maintains the "Exceptional Performer" designation from the DOE.

The series 2005 bonds will be the 10th issuance out of this indenture. As of Feb, 28, 2005, the total outstanding amount of bonds, excluding series 2005 issuance, was $1.089 billion, of which approximately $99 million was subordinated bonds.

To ensure that all notes are retired by the legal final maturity dates, Standard & Poor's Ratings Services ran several cash flow scenarios, including a zero constant prepayment rate and zero default rate with stress assumptions regarding deferment, forbearance, and payment lags. The legal maturities of the series were set as follows:

• Senior series 2005-A: June 20, 2015; and
• Senior series 2005-B: June 20, 2030.

The senior series 2005-A and 2005-B bonds will be offered as floating-rate securities at a spread above three-month LIBOR.

The issuer has entered into various interest rate swap agreements with Citibank N.A. ('AA/A-1+') to provide stability to the indenture in a rising-interest-rate environment. The swap counterparty is required to pay the trust the required floating rate for the specific series. The payment required from the trust is based on a fixed rate ranging from 3.64% to 4.93% depending on the series.

The indenture establishes a number of funds and accounts to process the flow of funds. The 11th supplement indenture provides for the series 2005 designated accounts and subaccounts in these funds. Distribution dates for the LIBOR notes are the 20th of each March, June, September, and December, beginning Sept. 20, 2005. The indenture trustee will also pay certain expenses related to the notes and the student loans held in the trust monthly. Distributions will be made from collections on a pool of financed student loans, interest subsidies, special allowance payments from the DOE, any earning on investments, guarantee payments, and all liquidation proceeds.

Payments are generally made in the order of priority shown in the table below.

Payment Waterfall
1	Monthly payments to rebate fund for amounts due to the DOE.
2	To the interest account, senior bond interest obligations.
3	To the principal account, senior bond principal obligations.
4	To the retirement account for the redemption or prepayment of senior bonds.
5	To the interest account for the payment of subordinate obligations.
6	To the principal account for the payment of subordinate obligations.
7	To the retirement account for the redemption or prepayment of subordinate bonds.
8	To the administration fund (but only from the income account).
9	The reserve fund.
10	To the principal account relating to cumulative sinking fund installments to subordinate term bonds.
11	To the principal distribution and special redemption account, which includes the series 2005 principal distribution subaccount.
12	Any remainder to the surplus account.

The reserve account will be available to pay note interest and principal at final maturity of each class.

The preliminary 'AAA' rating for the senior series 2005-A and 2005-B bonds only addresses the receipt of principal at the stated maturity date. Principal payments before the stated maturity dates will be made to the extent funds are received.

Principal distributions will be made for the senior series 2005-A and 2005-B bonds on each principal distribution date in amounts necessary to reduce the aggregate outstanding principal amount of each series to the respective "targeted balances." The 2005-A bonds are scheduled to amortize from September 2005 to December 2011, and the 2005-B bonds are scheduled to begin amortizing December 2011 with a final payment in September 2020.

The securities issued under the indenture receive payments primarily from collections on a pool of approximately $813 million of student loans originated under the Federal Family Education Loan Program (FFELP) and reinsured by the DOE. A relatively strong credit profile is indicated by the loan characteristics of the pool. The collateral pool, as of Feb. 28, 2005, is made up of 69% consolidation loans, 17% Subsidized Stafford loans, 10% Unsubsidized Stafford loans, and 4% PLUS loans. The weighted average coupon of all borrowers is 4.18%; and there is 14% in deferment, 4% in forbearance, and 70% in repayment.

In sizing cumulative expected default rates, Standard & Poor's evaluated the composition of the collateral pool by loan and school type, level of seasoning, payment status of the loan, and geographical concentration. Standard & Poor's uses various methods to determine expected default rates by loan type and school type based on information provided by the issuer and other published sources of similar loan performances, adjusted to reflect the composition of this pool. The derived expected cumulative default rate was then stressed according to the required ratings.

The primary risk in a student loan transaction consisting of FFELP loans is the rejection of reimbursement claims by the guarantor and the DOE for noncompliance with servicing standards. Rejected claims lose both the guarantor's and the DOE's insurance coverage, resulting in full principal loss to the trust. In evaluating these risks, Standard & Poor's uses available historical information from the seller regarding historical claims payment and rejection rates as well as servicer performance data. The data are appropriately adjusted for the ratings assigned and incorporated in cash flow runs along with conservative forbearance, deferment, and reimbursement lag assumptions.