In another sign of how the turmoil in the credit markets is affecting student lending, the Education Resources Institute, the largest nonprofit guarantor of private education loans in the country, announced today that it had filed for bankruptcy protection. In a written statement, the institute, which is known as TERI, attributed its “difficult decision” to increasing difficulties “in financing the securitization of private education loans” and “a rise in borrower defaults and delinquencies.”

Students typically turn to private loans, the type guaranteed by TERI, after exhausting the availability of other forms of financial aid, such as grants and government-backed loans. The Wall Street Journal noted that the bundling of student loans into structured securities had become “all but impossible to pull off” in the current financial environment.

Colleges and universities have begun to see a tightening in access to private student loans, according to two recent reports, as a number of lenders have curtailed or stopped making some types of loans in both the private and federally backed loan markets. At the urging of Congress, the U.S. Education Department has taken a number of steps recently in case emergency measures become necessary to assure the availability of student loans.

In its statement, TERI said that it expected to continue operations while restructuring under the protection of Chapter 11. Its president, Willis J. Hulings III, said the filing would give the organization “time and opportunity to determine how best to provide our programs and services for the long term in this challenging economy.” —Charles Huckabee