Highlights:

• Revenue for the year rose 21.2% to US $132.9 million
• EBITDA* increased 15.6% to US $24.8 million for the year
• Approximately 92 % fuel usage mitigated or capped for fiscal year 2007
• Accretive growth in Canada and U.S. plus subsequent events improves outlook for fiscal 2007

Toronto, Ontario, September 25, 2006 – Student Transportation of America Ltd. (TSX: STB.UN) (“STA”) today reported financial results for the fiscal year and fourth quarter ended June 30, 2006. All financial results are reported in U.S. dollars except as otherwise noted.

“We are pleased with our overall achievements in fiscal 2006, our second year reporting as a public company,” said Denis Gallagher, Chairman and Chief Executive Officer. “We saw improvements in many of our key financial and operating metrics during the year. We completed several acquisitions, expanded our Canadian operations, won new bid-in contracts and completed two financings which strengthened our balance sheet for fiscal 2007. We also incurred higher fuel costs after the 2005-2006 school year began due to hurricane Katrina and various global events which caused fuel to rise during the fiscal year. We expect that the accretive growth secured to date and other initiatives taken during fiscal 2006 will allow us to achieve our target of an 85% pay out ratio by the end of fiscal 2007.”

Revenue for fiscal 2006 increased 21.2% to $132.9 million. Similarly, revenue in the fourth quarter increased 25.5% to $37.9 million compared to $30.2 million in the same period last year. These increases were mainly due to acquisitions, new bid-in contracts, favourable annual rate increases and expansion in service requirements of existing contracts.

EBITDA* for the fiscal year grew 15.6% to $24.8 million compared to $21.4 million in fiscal 2005. EBITDA for the fourth quarter increased 15.4% to $7.1 million from $6.1 million in the comparable period last year, despite higher fuel costs during the year and quarter.

STA’s solid financial performance this past year enabled the Company to raise capital to fund its accretive growth program. During the fiscal year, a total of Cdn $97.2 million was raised in two financings. Net proceeds from these financings were used to pay down debt on STA’s credit facilities which will reduce interest costs and strengthen the balance sheet.

In July, the company announced it had entered into an agreement to lease approximately 100 new school vehicles at a fixed interest rate for six years. The Company plans to use the low cost operating leases to fund its replacement capital expenditures going forward, allowing it to more efficiently use available debt financing for continued growth.

For the fourth quarter of fiscal 2006, distributable cash was Cdn $6.6 million (US $5.6 million) compared to Cdn $4.6 million (US $3.8 million) in the same period last year. Distributions paid during the fourth quarter totalled Cdn $4.7 million compared to Cdn $3.4 million last year. The Company generated distributable cash* of Cdn $16.7 million (US $13.8 million) for the fiscal year ended June 30, 2006. Distributions paid during the fiscal year totalled Cdn $16.7 million.

STA posted a net loss of $3.9 million for the fiscal year ended June 30, 2006 and a net loss of $0.9 million during the fourth quarter. This represents a net loss of $0.26 per IPS for the fiscal year ended June 30, 2006 and a net loss of $0.04 per IPS for the fourth quarter. The loss was mainly attributable to the allowable deduction of interest expense of $6.9 million, which represents interest paid to IPS holders as part of their distribution. In addition to the interest paid to IPS holders, non cash expense items such as minority interest, non cash stock compensation expense, amortization of deferred financing costs, depreciation and amortization expense were included in the loss.

Success Subsequent to Year End

Subsequent to fiscal year-end, the Company announced the acquisition of Simcoe Coach Lines Ltd. of Sutton in York Region, Ontario. STA also completed its largest conversion since its inception when the Company was awarded a five year contract to provide transportation services to the Altoona Area School District in Pennsylvania. Both of these transactions are expected to be immediately accretive to cash flow.

“Due to some strategic moves made during fiscal 2006, fiscal 2007 is off to a good start,” said Denis Gallagher. “We currently have a run rate of 23% increase in contracted revenue growth over fiscal 2006 and we are actively reviewing our pipeline of opportunities in Canada and the U.S. We also have approximately 92% of our fuel capped or mitigated for this school year through a combination of an increase in customer contract protection, which now covers 55% of our revenue, and a fuel hedge-cap in place to protect another 37%.”

Student Transportation’s annual financial statements, notes to financial statements and management’s discussion and analysis are available at www.sedar.com or at the Company’s investor website at www.sta-ips.com.

Conference Call & Webcast

Management will host a conference call and live audio webcast to discuss Student Transportation’s performance for the fiscal year and fourth quarter on Tuesday, September 26, 2006 at 10 a.m. ET. The call can be accessed by dialing 416-849-9305 or 1-866-838-4337. The audio webcast will be archived at www.sta-ips.com. A taped rebroadcast will be available until Tuesday, October 3, 2006 at 12 a.m. To access the rebroadcast, please dial 416-915-1035 or 1-866-245-6755 and enter the passcode 81418#.

Annual Meeting of IPS Holders

STA will hold its Annual General Meeting of IPS holders on Friday, November 3, 2006 at 10 a.m. ET at the TSX Gallery located at The Exchange Tower at 130 King Street West in Toronto. The meeting will also be webcast live at STA’s web site at www.sta-ips.com.

Profile

The Issuer is the fifth-largest provider of school bus transportation services in North America, conducting operations through local operating subsidiaries. The Issuer has become a leading school bus transportation company by aggregating operations through the consolidation of existing providers and conversion of in-house operations and currently operates more than 4,000 school vehicles in North America. For more information, please visit www.sta-ips.com.

* Non-GAAP Measures

EBITDA is a non-GAAP financial measure, but management believes it is useful in measuring STA’s performance. Readers are cautioned that this measure should not be construed as an alternative to net income or loss or other comparable measures determined in accordance with GAAP as an indicator of the company’s performance or as a measure of its liquidity and cash flow. The Company’s method of calculating non-GAAP measures may differ from the methods used by other issuers and accordingly, the company’s non-GAAP measures may not be comparable to similarly titled measures used by other issuers. EBITDA represents earnings before interest, taxes, depreciation and amortizations, non cash items such as minority interest, unrealized gain / loss on foreign currency exchange contracts, and non cash stock compensation expense, and other income / loss.

Cash available for distributions is a non-GAAP measure, and is not intended to be representative of cash flow or results of operations determined in accordance with GAAP. Investors are cautioned that cash available for distribution, as calculated by the Company, is unlikely to be comparable to similar measures used by other issuers.

Forward-Looking Statements

This news release contains “forward-looking statements” within the meaning of applicable securities laws, which reflects the expectations of management regarding the Issuer’s and Company’s results of operations, expense levels, seasonality, cash flows, performance, liquidity, borrowing availability, financial ratios, ability to execute the Company’s growth strategy and cash distributions. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “track”, “targeted”, “estimate”, “anticipate”, “believe”, “should”, “plans” or “continue” or similar expressions suggesting future outcomes or events. These forward looking statements reflect the Company’s current expectations regarding anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward looking statements involve significant risks and uncertainties, and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not or the times at which or by the performance or results will be achieved. A number of factors could cause our actual results to differ materially from the results discussed, expressed or implied in any forward-looking statement made by us or on our behalf, including, but not limited to, the factors discussed under “Risk Factors” in our Annual Information Form, a copy of which can be obtained at www.sedar.com. Material factors and assumptions that were relied upon in making the forward-looking statements include contract and customer retention, current and future expense levels, availability of quality acquisition, bid and conversion opportunities, current borrowing availability and financial ratios, as well as current and historical results of operations and performance. These forward looking statements are made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

For more information contact:

Denis J. Gallagher
Chairman and Chief Executive Officer
Phone: (732) 280-4200
Fax: (732) 280-4213

Patrick J. Walker
Chief Financial Officer
Phone (732) 280-4200
Fax: (732) 280-4213

Keith P. Engelbert
Director of Investor Relations
Phone: (732) 280-4200
Fax: (732) 280-4213

[email protected]