Student loan stocks mixed amid broader rally

Shares of student loan lenders and originators were mixed Friday even after a government plan to rescue the banking sector sent the broader markets surging on confidence that the credit markets will open up, allowing lenders to boost business.
Rescue plan would see the government buy, probably at auction, all of the bad mortgage loans that are clogging banks' balance sheets and spooking lenders from doing business with virtually any party because there is little transparency on which companies are affected and to what extent.

Partners LP Michael Taiano also noted that last night, the Senate voted in favor of the House bill voted on earlier this week to extend a government credit facility and put option for new Federal Family Education Loan Program (FFELP) loan originations by one year, effectively providing financing for FFELP loans originated for the 2009/2010 academic year. Which given the state of the credit markets, has become more critical," wrote in a note to clients. FFELP is a private sector student loan program, which includes Stafford, PLUS and other loans.

While the stock has rebounded since the credit crisis almost forced the company it out of business last year, but shares are still down more than 80 percent this year.

First Marblehead, for example, had trouble selling packages of student loans that it initiated because investors were leery of buying any debt. That took away a large part of the company's business. It differs from Sallie Mae because it does not lend money itself and instead collects fees for processing loans.

Nelnet Inc. also rose sharply at the market open was has since retreated 15 cents to $15.10.

The price volatility could also have to do with a quarterly event known as a "quadruple-witching" day. On quadruple witching days, investors often unwind positions in their futures and options contract before those contracts expire.