The lifeline thrown to First Marblehead Corp., though an encouraging sign for student lending, does not mean that liquidity troubles are over for the company or the industry, observers said.

GS Capital Partners followed through on a commitment it had made nine months ago when it injected $132.7 million of cash into First Marblehead on Monday. The infusion brought the Goldman Sachs Group Inc. unit's total investment in the private-label student loan outsourcer to $192.5 million. But another commitment that Goldman made in December — to provide a $1 billion warehouse line to the Boston company — had fallen through months earlier.

John Dean, a special counsel for the Consumer Bankers Association, a trade group whose members include student lenders, said just "the fact that that money came in" is "a sign that the student loan market is coming back."

"I'm very encouraged by the financing of First Marblehead, and the industry is looking for positive signs," Mr. Dean said.

But Matt Snowling, an analyst at Friedman, Billings, Ramsey Group Inc.'s FBR Capital Markets Corp., said that "there is no funding, period" for student lenders.

Last week Education Finance Partners Inc. of San Francisco, which Mr. Snowling described as "a major lender" in the private loan market, announced on its Web site that it had ceased operations.

"I think there's a real chance that you start hearing stories from kids who thought they had funding and don't at the last minute, so the risk is they're delayed going to school, take less credits, or go to a community college," Mr. Snowling said.

First Marblehead shares dropped 26% Tuesday after surging by nearly 50% Monday on the news of GS Partners' infusion.

Mark Kantrowitz, the publisher of FinAid Page LLC, a student financial aid Web site owned by Monster Worldwide Inc., said that from GS Partners' perspective, "You wouldn't throw good money after bad unless you thought there was a chance that things would improve." But the absence of the warehouse line made the announcement "a mixed bag" for the industry, he said.

Typically, "student loans start on a warehousing facility, and when they go to securitization it frees up liquidity to make new loans," Mr. Kantrowitz said. "But now lenders have had to keep the loans on their balance sheet and they need liquidity." Unable to securitize loans, many lenders are quickly running out of cash, he said.

First Marblehead had disclosed in a securities filing in April that it had chosen "not to proceed with the warehouse facility." A former student lending executive, who requested anonymity, surmised that Goldman must have required terms that were "unattractive" to First Marblehead.

Janice Walker, a spokeswoman for First Marblehead, referred a reporter to the filing and would not discuss the matter further. Goldman declined to comment.

Mr. Dean said at least 100 mostly small private lenders have abandoned the student loan market in the last year. Congress passed legislation in September that cut subsidies to both for-profit and nonprofit lenders. The subsidy cuts and the inability to securitize private loans have wreaked havoc on the market, he said.

Wachovia Corp., which had nearly $10 billion in its student loan portfolio at the end of the second quarter, said this month that it stopped accepting undergraduate applications for private student loans, though it would continue to offer loans backed by the government.

Student Loan Corp., which is majority-owned by Citigroup Inc., stopped making federally guaranteed consolidation loans in April and suspended all lending at certain schools, citing "the dislocation in the capital markets."

Another student lender, Nelnet Inc., halted some loan production and cut 10% of its work force in January because of tighter credit conditions and the reduction in federal subsidies.

"If the market doesn't recover in July 2009, then we're going to see a lot more failures," Mr. Kantrowitz said. "A lot of lenders have enough liquidity to survive through the fall semester, and there's no reason why the market doesn't come back. If investors start investing in these companies, they'll be viable."

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