Tom Connell

The tremors that shook the student loan industry and had private lenders threatening to abandon the business have quieted, but students are now likely to have to borrow more for higher education, experts said.

“So far, students are able to have access to loans,” Tom Connell, president of the Georgia Student Finance Authority, said Friday. “We weren’t far from a crisis, but I think we are going to miss it.”

Beginning in 2007 and earlier this year, private lenders threatened to pull out of the student loan business and stop participating in federal student loan programs.

The market was shaken when Congress passed legislation to increase Pell grants and raise the program’s borrowing capacity. Congress reduced the fees lenders could charge students, which reduced the lenders’ profit margins.

College and financial aid officials feared there would be no one to loan money to students, particularly at community colleges or historically black colleges, Mr. Connell said.

“If there were going to be difficulties, those are the schools mostly like to have them,” Mr. Connell said.

That didn’t happen. But lenders reduced benefits, such as lessening the amount of the loan or lowering the interest rate in exchange for a specific number of early payments, ultimately increasing the cost to students.

Under the new rules, “It’s going to be harder to get student loans,” said Stephanie Aylor, student loan administrator for the Tennessee Student Assistance Corp.

“It’s going to be more expensive, and with tuition increasing, students are going to be managing more debt. And there may be less of the Harvards and Yales loans,” Ms. Aylor said.

LOCAL SCENE STABLE

Financial aid professionals in Georgia and Tennessee said many of the companies providing loans through their colleges’ financial aid offices have stayed in the market.

“We only had one lender we had to take off (the list),” said Geraldine Parks, director of financial aid for Cleveland Tenn., State Community College. “And that was because they went with another guarantor and the students who got those loans would have had to make two different loan payments. We did that for the benefit of the student.”

Rick Taphorn, director of financial aid at Bryan College in Dayton, Tenn., said the loan situation “appeared dire” a few months ago.

“A company in Texas laid off 400 people and got out of the student loan business,” Mr. Taphorn said. “But we still have six or seven lenders willing to work with us. And that company has started to hire people back.”

Several things happened to account for the market’s change in direction, the experts said. One big factor was the significant changes the federal government made to the Federal Family Education Loan Program.

“The FFELP is a direct loan program that is guaranteed by the federal government,” Mr. Taphorn said. “Several months ago, we switched to the direct loan program so most all of our students are going to be using federal loans.”

Mr. Taphorn said about 300 education institutions across the country switched to direct federal loans last month.

MOVING TO COPE

At Dalton, Ga., State College, several large-volume lenders notified the school they were leaving the FFELP program, said Holly S. Woods, assistant director of financial aid.

“We were able to identify which of our students would be affected and contacted them through their Dalton State e-mail accounts and by mail to notify them of their options,” Ms. Woods said in an e-mail.

Ms. Woods said her office was able to help most students who had last-minute changes in lenders.

And while some two-year schools may struggle to find tuition lenders, the situation at Northwestern Technical Institute in Rock Spring, Ga., is different, assistant director of financial aid Chuck Oliver said.

“We don’t make loans at all,” Mr. Oliver said. “Most, if not all, of our students qualify for grants.”

The Georgia and Tennessee student assistance organizations offered a “last resort,” loan program to help schools where students absolutely could not find a loan.

Representatives from both organizations said that no schools in either state had to avail themselves of the “last resort” option.