For Wells Fargo, "student loans are not a profit-making business," said Michael DeVito, executive vice president of education financial services for Wells Fargo, which ranks fourth in annual origination. "We are here to meet the demand and the need of our customers," he added, but "in terms of trying to use this as an opportunity to take market share, that's not our strategy."

Citigroup, which is the nation's second-largest student lender, also has no plans to aggressively expand its current FFEL lending operations, said a person familiar with the situation, noting the weak securitization markets. Cleveland's KeyCorp, a top-50 lender, says it isn't looking to grow into "new places we've never been before," says Richard Vonk, president of Key Education Resources.

J.P. Morgan Chase & Co., the nation's seventh-largest originator of student loans, has said it plans to increase its share of the student-loan market, but spokesman Tom Kelly declined to specify if the expansion will concentrate on FFEL loans or the more-lucrative private variety.

Students in the 2006-07 government fiscal year are estimated to have borrowed $114.8 billion through federal loan programs. That includes new loans and loans used to consolidate or refinance existing loans. Of the total, about 85 percent were FFEL loans, according to government data. The rest are direct government loans.

In addition, students borrowed an estimated $18.5 billion in private and state-sponsored loans. Private loans are not controlled by the government and often carry higher interest rates.

A storm has hit Brazos and its competitors in the past six months.

First, the auction-rate-securities market, an important source of financing for many lenders, collapsed. That doubled some lenders' costs overnight.

Meantime, the cost of borrowing in the longer-term asset-backed securitization market, where more than half of all loans were securitized, has risen. For instance, Citigroup's Student Lending Corp. securitized $1.9 billion in student loans at Libor plus 1.4 percent, compared with deals at Libor plus 0.10 percent last June.

The market turmoil combined toxically with last fall's College Cost Reduction Act, in which the government slashed lenders' subsidies by more than $20 billion, or roughly in half.

If private lenders don't fill a void that develops at FFEL, the government could be left to come up with another solution. The Education Department and industry participants are reviewing contingency plans for Lender of Last Resort, a program that is untested.

The government also has a direct-lending program, which could take up some of the FFEL market share. This would require schools to switch their systems and relationships quickly. Boston's Northeastern University and Pennsylvania State University have taken that step.