Private student lender stocks jumped following the federal government's decision last week to bolster the market, but their longer-term prospects are clouded by fretting among legislators and schools that students rely too heavily on unsubsidized lending.

Policy makers and education advocates have thus far offered lukewarm support thus far for the Term Asset-Backed Securities Loan Facility, or TALF, which will provide up to $200 billion to finance the purchase of asset-backed securities secured by a variety of debt, including student loans. The facility, unveiled by the Federal Reserve and Treasury last week, is intended to provide liquidity for private lenders, so that they are freed up to make more loans, benefitting borrowers.

"We hope that this new program will work as intended: To get credit markets flowing again and make loans more accessible and affordable for students and families," committee Chairman George Miller (D., Calif.) said in a statement last week. "We look forward to learning more details about this proposal so we can be assured that it will operate in the best interests of America's college students, their families and taxpayers."

A committee spokeswoman declined to elaborate on Miller's statement. But schools and legislators want students to borrow more from the government -- and, in turn, less from private sources -- than they are currently doing. The Ensuring Continued Access to Student Loans Act of 2008 increased federal loan limits in order to "reduce borrowers' reliance on costlier private college loans," according to a statement on the Web site of the House Committee of Education and Labor.

Support for private lenders is necessary, as the asset-backed securities market has been completely shut down for the past year, says Sameer Gokhale, an analyst at Keefe, Bruyette & Woods.

"It's not like you're talking about someone who can't borrow on a credit card to get a big screen TV. These are students who can't attend the school of their choice because they couldn't get a loan on reasonable terms," he says.

Shares of student loan giant Sallie Mae ( SLM) and smaller lenders like Nelnet ( NNI), Student Loan Corp. ( STU) and First Marblehead ( FMD) rallied Tuesday after the TALF news became public. Student Loan Corp. is a subsidiary of Citigroup ( C) and Goldman Sachs ( GS) owns a minority position in First Marblehead.

Gokhale recommends both Sallie Mae, in part because the company is moving to do more private lending. A large percentage of the loans it makes are government-guaranteed, and these loans are less profitable. The analyst also recommends Nelnet, but he does not cover First Marblehead or Student Loan Corp.

The stocks could, however, take a hit if legislators and universities are successful in making more government loans available to students.

A trade group representing some 3,000 colleges supports Treasury's proposal, though only as a "necessary evil," says Justin Draeger, vice president of planning for the National Association of Student Financial Aid Administrators.

"Our growing national dependence on private student loans serves as a harsh reminder about our lack of commitment to our core federal student aid programs," a statement from the trade group says.

If the Treasury's plan meets opposition from Congress, it is not clear who will stand behind it, particularly in an Obama administration. And should critics of the plan emerge, they will be able to point to the fact that lenders did not ask for the assistance it got Tuesday.

"Officials from various agencies have been in contact with Sallie Mae and other members of the student lending community for the industry's best thinking on how various programs could be structured to help ensure critical financing continues to flow to students and families," writes Sallie Mae spokesman Tom Joyce. "In the end, the plan was structured entirely by the government. I would add that complete details of the TALF have not been announced."

A spokesman for Nelnet did not return calls, and representatives from Student Loan Corp. could not be reached.