Counterion condensation of multivalent, charged spin probes to highly charged cationic and anionic polyelectrolytes is characterized by CW and FT EPR spectroscopy. Line broadening and deviation from Lorentzian line shape in the EPR spectra of the spin probes are observed upon addition of the polyelectrolyte. These effete are due to dynamic electrostatic attachment of the counterions with exchange between the condensed and free states on a subnanosecond time scale. The spectral changes can be separated into a contribution due to slowdown of rotational dynamics and a contribution due to enhanced spin exchange. drastic increase of the spin-exchange contribution is observed upon increasing the concentration of two anionic spin probes in aqueous solutions of the cationic polyelectrolyte poly(diallyldimethylammonium chloride), PDADMAC. This can be traced back to a counterion-induced chain collapse which is, however, not observed in mixtures of water with organic solvents of either higher (N-methylpropionamide) or lower (ethanol) permittivity. Simple polyelectrolyte theory, which considers solvents only as a dielectric continuum, cannot explain these findings. Screening of hydrophobic interactions between repeat units of the chain by the organic solvents is suggested as an explanation.