Student loan costs may be set to rise as borrowers are looking for even more security for their investment. Securities tied to these loans, which was considered a safe investment, now appear to be affected by the credit crunch. Auctions of these securities auctioned on Thursday failed to generate interest from investors, leaving roughly $2 billion on the table. Unfortunately, banks can't afford to pick up the slack these days and keep the securities, so they may have to raise student loan prices in order to make the interest rates on the securities more attractive to investors. Bad news for students...

From the Wall Street Journal:
Securities tied to student loans, another seemingly safe corner of the credit markets, are succumbing to the credit crunch. Wall Street's financial-engineering machine bundles together long-term student loans and uses them as collateral for short-term investments owned by money-market investors. Since Thursday, auctions of these securities conducted by Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Citigroup Inc. have failed to generate investors' interest, leaving roughly $3 billion of such securities in a sort of limbo. Under normal conditions, the banks would step in when investor demand is weak -- just as a specialist on the New York Stock Exchange intervenes to keep trading liquid in a stock. Because big banks are already bloated with other kinds of loans and bonds they are trying to get rid of, they have been allowing the auctions to fail.