Senator Eliot Shapleigh - El Paso, Texas

A student visits the financial aid office to get information about applying for financial aid. (Luis Porras)

AUSTIN - The nationwide credit crisis is beginning to take a toll on a part of the population that is typically unemployed and unaccustomed to paying back major loans: college students.

And even though El Paso and the rest of Texas has managed to avoid much of the crisis, many college students now receiving financial aid are finding that money is no longer readily available.

"The credit problems have had an impact on federal student lending, but it's really had an impact on the private lenders," said Raul Lerma, financial aid director at the University of Texas at El Paso, where more than 60 percent of students rely on some form of financial aid.

"Some private lenders have pulled out because they haven't been as profitable recently," he said, "but there are still plenty of options for students out there."

More than 20 student loan lenders across the country have recently announced they are tightening or even terminating new loans to students through the Federal Family Education Loan Program. FFEL made loans with fixed interest rates to students, no matter their income level.

More than $3.2 billion in FFEL assistance is distributed to Texans each year, and last year more than 7 million students across the country took advantage of FFEL money.

Last month, Texas-based Brazos Higher Education Service Corp., one of the largest lenders in the nation, began suspending all new student lending. The company cited the ongoing credit crisis.

Carol McDonald, president of Independent Colleges and Universities of Texas, said the true impact of the credit crunch would not be known until students begin enrolling in universities for the fall semester.

"The impact could be anything from some inconvenience for students to a real money gap for students and families," she said.

"The question is how many lenders are going to be forced to leave the business? If too many leave, there simply won't be enough loan capital out there for students," she said.

Possible solutions

Last week, the Texas Higher Education Coordinating Board focused a major portion of its monthly meeting on student aid and ways to make it more efficient.

The board reviewed a preliminary draft of a recently commissioned study. It proposes that all college enrollees be required to fill out the Free Application for Federal Student Aid, or FAFSA, so that students who might be eligible for federal funds don't miss out.

The board also discussed making financial aid forms easier to fill out and understand.

"There is a real lack of awareness about the wide eligibility for federal loans," said Lauren Asher, associate director of the Project on Student Debt. "Many people think you can't get them unless you're low income."

She said that the project, which focuses on helping students find the right financial aid, is already lobbying the legislature to simplify the forms.

"It can be very hard to navigate the FAFSA process and that keeps a lot of people away," she said.

Echoing the frustration of many students and their familes, she added, "You basically have to be an accountant just to get through it, and a lot of that work shouldn't be necessary."

Still aid out there

Asher said even though some independent and federally funded lenders might be in trouble, there are many avenues for families to find college money.

"There are still plenty of lenders in the game," she said. "Federal loans are and will remain available to anyone who qualifies."

Lerma at UTEP said students who are going to seek financial aid should check with his office about options available to them.

"We're trying to stress that students and parents alike need to utilize federal loan eligibility first before they consider taking out a private loan," he said.

Federal loans generally have fixed interest rates and are backed by the government, while private student loans can be more expensive with adjustable rates.

"It's like using a credit card," Asher said.

"They are very risky loans to take unless you have a real financial cushion."

Promise plan

UTEP also offers the "Promise Program" which guarantees coverage of all tuition and fees for families with a low household income.

Just last week, UTEP raised the income level from $25,000 in household income to $30,000, making the program available to more students.

To qualify for the program, students must take a full course load and maintain a grade point average of 2.0 or higher.

"Finances should never exclude anyone from pursuing higher education," UTEP President Diana Natalicio said.

"The UTEP Promise Plan is one way the university ensures that all students have access to the educational opportunities they want."

Help on the way

Earlier this month, the U.S. House passed a bipartisan student loan bill by a vote of 383-27.

As a last resort, the House bill would allow Education Secretary Margaret Spellings to use federal funds for loans refused by private lenders.

It would only be allowed if the move does not create a net cost for the federal government. The bill would allow students to borrow $2,000 more from federal programs.

The White House backed the House bill last week while the Senate looks at similar legislation.

Both houses of Congress are expected to pass the bill before the summer recess and in time for the new academic year.