The Debts of the Spenders: Students Lose Access to Loans

As private lenders feel the effect of the credit crunch, schools are turning to the Education Department's Direct Loan program.

Dozens of lenders, led by College Loan Corp. and CIT Group Inc., stopped making federally guaranteed loans because the U.S. cut subsidies and investors hurt by the subprime-mortgage crisis shunned bonds backed by student loans. At least 178 schools have applied since Feb. 28 to let students borrow from the direct program, compared with 80 that applied for the program in all of last year.

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