Recently we covered the shutdown of the auction rate securities market here. Risk's Peter Madigan wrote:

The apparent explanation for the rapid seizing up of the market was the almost simultaneous decision by every auction agent to pull out of their back-stop role in taking unwanted securities on to their balance sheets. In the weeks that followed, broker-dealers have remained silent on why they chose to withdraw from the market, leading local authorities, saddled with significantly higher interest rates, to cite this as the latest example of Wall Street protecting itself at the expense of Main Street...

Trouble is, of course, with no ARS market, student loan companies are finding it difficult to keep distributing the loans they originate. Solution - stop lending so much. Specifically, stop lending to poor people.

Some of the nation’s biggest banks have closed their doors to students at community colleges, for-profit universities and other less competitive institutions, even as they continue to extend federally backed loans to students at the nation’s top universities...By splitting out community colleges and less-selective four-year institutions, some remaining lenders seem to be breaking the marketplace into tiers. Students attending elite, expensive, public and private four-year universities can expect loans to remain plentiful. The banks generally say these loans are bigger, more profitable and less risky, in part perhaps because the banks expect the universities’ graduates to earn more....

Now, according to Alea, there is a plan: a conduit set up with the support of the Treasury to buy student loan ARS and issue short-term commercial paper. Note that the underlyings (unlike mortgages!) have a 97% or 95% federal guarantee.
The two banks involved are Goldman Sachs and Lehman Brothers. (Treasury might want to think about a substitute, just in case.)

Unrelated interesting link: Inside a bank failure