4. SHORT-TERM AND LONG-TERM INVESTMENTS

As of December 31, 2014, the Company held one auction rate security with a par value of $3,000,000. This auction rate security consists of a collateralized debt obligation, supported by a pool of student loans, sponsored by state student loan agencies and corporate student loan servicing firms. The interest rate for the security is reset at regular intervals ranging from seven to 28 days. The auction rate security held by the Company traded at par prior to February 2008 and is callable at par at the option of the issuer.

Until February 2008, the auction rate securities market was liquid, as the investment banks conducting the periodic “Dutch auctions” by which interest rates for the securities had been established had committed their capital to support such auctions in the event of insufficient third-party investor demand. Starting the week of February 11, 2008, a substantial number of auctions failed, as demand from third-party investors weakened and the investment banks conducting the auctions chose not to commit capital to support such auctions (i.e., investment banks chose not to purchase securities themselves in order to balance supply and demand, thereby facilitating a successful auction, as they had done in the past). The consequences of a failed auction are (a) an investor must hold the specific security until the next scheduled auction (unless that investor chooses to sell the security to a third party outside of the auction process) and (b) the interest rate on the security generally resets to an interest rate set forth in each security’s indenture.

As of December 31, 2014, the Company held one auction rate security that had experienced failed auctions, representing $3,000,000 at par value, (the “Failed Auction Security”), compared to December 31, 2013, when the Company had auction rate securities, including the Failed Auction Security, that had experienced failed auctions of $6,000,000 at par value, which had been purchased through and are held by a broker-dealer affiliate of Bank of America, N.A. (the “Failed Auction Securities”). The Failed Auction Security held by the Company is Aaa/AA+ rated by the major credit rating agencies, which is collateralized by student loans, and is guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program. Management is not aware of any reason to believe the issuer of the Failed Auction Security is presently at risk of default. Through December 31, 2014, the Company has continued to receive interest payments on the Failed Auction Security in accordance with the terms of its indenture. Management believes the Company ultimately should be able to liquidate the Failed Auction Security without significant loss primarily due to the overall quality of the issue held and the collateral securing the substantial majority of the underlying obligation. However, current conditions in the auction rate securities market have led management to conclude the recovery period for the Failed Auction Security exceeds 12 months. As a result, the Company continued to classify the Failed Auction Security as long-term as of December 31, 2014.

The following is a summary of available-for-sale securities (in thousands):


December 31, 2014	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Failed Auction Security	$	3,000	$	—	$	425	$	2,575
Brokered certificates of deposit		700		—		3		697

	$	3,700	$	—	$	428	$	3,272


December 31, 2013	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Failed Auction Securities	$	6,000	$	—	$	1,175	$	4,825
Brokered certificates of deposit		820		6		—		826

	$	6,820	$	6	$	1,175	$	5,651

All of the Failed Auction Securities as of December 31, 2014 and 2013, respectively have been in an unrealized loss position for greater than 12 months. A Failed Auction Security held as of December 31, 2013 was redeemed at par value of $3,000,000 during the fourth quarter of 2014.

The amortized cost and estimated fair value of available-for-sale securities on December 31, 2014, by contractual maturities, are shown below (in thousands):


	Cost		Estimated Fair Value
Due in one year or less	$	270	$	270
Due in two to ten years		430		427
Due in ten to twenty years		—		—
Due in twenty to forty years		3,000		2,575

	$	3,700	$	3,272

Based on the fair value measurements described in Note 5, the fair value of the Failed Auction Security on December 31, 2014, with a par value of $3,000,000, was estimated by the Company to be approximately $2,575,000. The gross unrealized loss of $425,000 on the Failed Auction Securities consists of two types of estimated loss: an aggregate credit loss of $84,000 and an aggregate temporary impairment of $341,000. In determining the amount of credit loss, the Company compared the present value of cash flows expected to be collected to the amortized cost basis of the securities, considering credit default risk probabilities and changes in credit ratings as significant inputs, among other factors (see Note 5).

The following table represents a rollforward of the activity related to the credit loss recognized in earnings on available-for-sale auction rate securities held by the Company for the years ended December 31 (in thousands):


	2014			2013			2012
Balance at the beginning of the period	$	395		$	317		$	308
Reductions for securities sold during the period		(272	)		(7	)		—
Additions for the amount related to credit loss for which other-than-temporary impairment was not previously recognized		(39	)		85			9

Balance at the end of the period	$	84		$	395		$	317

At this time, the Company has no intent to sell the Failed Auction Security and does not believe it is more likely than not the Company will be required to sell the security. If current market conditions deteriorate further, the Company may be required to record additional unrealized losses. If the credit rating of the security deteriorates, the Company may be required to adjust the carrying value of the investment through impairment charges recorded in the Consolidated Statement of Operations, and any such impairment adjustments may be material.

Based on the Company’s ability to access cash and cash equivalents and its expected operating cash flows, management does not anticipate the current lack of liquidity associated with the Failed Auction Security held will affect the Company’s ability to execute its current operating plan.