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Home > Blog > Student Loan Auction-Rate Securities Continue to Suffer in the Market

Student Loan Auction-Rate Securities Continue to Suffer in the Market

Investors continue to have a difficult time retrieving money they have invested in student loan auction-rate bonds. These securities, originally perceived by millions of investors as safe, money-market funds, have turned out to be highly illiquid and have forced investors to sell them at a loss.

UBS AG and Citigroup are among the firms who have been accused of seriously underwriting these securities. 

A July 10th Bloomberg article noted that Pluris Valuation Advisors LLC discovered that that about two-thirds of companies responsible for valuing student-loan auction rate securities have written down the debt, some as much as 35%.

The consequences of the failing auction-rate securities market have fallen most heavily upon bonds backed by federally guaranteed loans, where many lenders have been forced to lay off employees or reduce the amount of loans they issue to clients. Student Financial Aid organizations are scrambling to find solutions to raise more money and refinance the debt.  

Although some student loan issuers such as Sallie Mae are attempting to slowly regain some of its losses, retirees who heavily invested in student loan auction-rate bonds see almost no signs of hope of the market recovering and unable to access their money.

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