The downturn of the economy and decreasing money available for borrowing are affecting another area for students. Student loans for US students wanting to attend college have traditionally been accessible, but it seems as though this reliable source of student aid may be getting shut down. Financial institutions, which used to dole out funds under the Federal government backed student loans, are finding this is not profitable enough for their bottom line in the current global credit crisis.

It’s been reported that a state agency has stopped a student aid program that serves those needing help to pay for college. This will affect 100 universities and colleges and there are fears that other agencies and colleges may follow the same path. Some say the reason was the lack of support from financial institutions.

Traditionally, student loans have been backed by some of the major US banks, including JP Morgan, Sachs Goldman and Citibank. These banks will no longer be supporting the auction system that allocated resources for money. There are also predictions that funds will become more pricey.

The biggest scheme that provides college loans is the Federal government-backed student loan scheme, providing loans to means-tested students. Students mainly use these loans to pay for tuition and then seek a private loan to cover their additional expenses. It is these private loans that are set to become more difficult to find, although it looks as though companies are still supplying funds for the government scheme.

The effect of the credit squeeze will affect those families with poor credit ratings and lower incomes. The people who have been caught up in the mortgage crisis may have children studying at college, who will no longer be able to access student loans because of their parents’ credit score.

It has been estimated that about 100,000 students will not qualify for private or government loans this year due to poor credit. Add to this the decreasing number of companies providing student loans, and there will be problems for many college students.

For those who are caught between a rock and hard place with this credit crisis, a trip to your schools financial aid department is in order. They will be able to steer you in the right direction to find student aid assistance.

If Mom and Dad come up short and you find yourself unable to secure financial aid for your College studies, you may have to resort to an old school way of getting an education. By working your way through College! Yeah, that’s an unpopular way of getting an education these days, but it’s a way to get an education and come out of college with no student loan debt. You will just have to cut back on the excessive partying and vacations. It all comes down to how bad you want an education.