So, How is the Credit Crunch effecting student lending?

This article is pretty typical of how student lending firms are getting squeezed by the credit crunch. Keep in mind, and this is important, this is only half of the problem. And this situation only effects the state agencies, the monolines, and "non-profit" lenders. The banks aren't so much effected by the credit crunch in the same manner.

But, this article describes how the auction rate securities market, a typical borrowing vehicle for student loan companies, has reacted to the liquidity situation and the impact on making student loans. A few things worth further consideration: 1) Brazos, whom this article details, is a "non-profit", monoline lender. Meaning they have a not for profit status with the IRS. We wonder how they can be "non-profit" and not really a state agency or anything like that. It's our opinion that there were huge profits generated from the Brazos organization. Where did all that money go? Brazo's is tightly controlled by the Murray Watson and his family. We're sure the Watson's know where the profits went. It's just not public knowledge. 2) An additional consideration, how come these auction rate securities financing student loan issues are in a pickle? 98% of the underlying loans backing these student loan securities are backed by the full faith and credit of the United States government. It just seems illogical to us. And, 3) Although not an issue in this article, but something that crossed our minds: how on earth can the Department of Education buy and price student loans in a secondary market environment? The DoE doesn't do this for a living. They have NO expertise in pricing student loan issues. They have NO experience in managing secondary market operations. This is a complicated deal the DoE is proposing, yet they have no experience, expertise, or vision of how their loan buying program will work. We predict failure. The markets cannot figure it out....do we really want to rely on the DoE?