June 11 (Bloomberg) -- A U.S. program to support college lenders is ensuring that students will get the government-backed financial aid they need for the 2008-2009 academic year, after a seizure in the credit markets threatened the flow of funding.

At Michigan State University in East Lansing, 6,042 students have received $26 million in federally guaranteed loans since early May, said Val Meyers, associate director of financial aid, in an interview on June 6. SLM Corp., the largest U.S. provider of education loans, said yesterday it is committed to providing aid to ``every eligible'' applicant this year.

Financing obtained for summer classes and reassurances from lenders have made college administrators confident that students won't be denied funds, said Judith Carter, financial aid director at Dickinson College in Carlisle, Pennsylvania. Aid officers at Fordham University in New York, Trinity University in Washington, and Smith College in Northampton, Massachusetts, also said in interviews that they anticipate no shortage of money even after dozens of private companies abandoned the business this year.

``We haven't had any problems to date and we don't expect to have any difficulty with loan availability,'' Carter said in an e-mail on June 2. Dickinson's tuition, room-and-board and other annual costs for students total $47,834.

President George W. Bush signed a law on May 7 aimed at ensuring students can get government-guaranteed loans. The legislation empowered the U.S. Education Department to buy loans that private lenders were having trouble selling to investors because of the credit contraction tied to the subprime-mortgage crisis.

Colleges in the U.S. normally end the academic year in May or June and start again in September, with summer school in the interim.

30 Minutes

Jenny Nguyen, 19, said it took her about 30 minutes to fill out forms on the Internet and line up about $2,500 in federally guaranteed loans toward summer courses at the University of California, Los Angeles. She is among 1,707 UCLA students who received federal loans totaling $3.7 million for summer school, said Juan Abenojar, a financial aid officer, in a telephone interview yesterday. The school, founded in 1919, has almost 27,000 undergraduates.

Students will borrow about $93 billion for the next academic year, 9.4 percent more than this year, according to Mark Kantrowitz, publisher of FinAid.org, a Cranberry Township, Pennsylvania-based Web site devoted to providing information to consumers about educational lending. That will include $70 billion in loans guaranteed by the U.S., a 13 percent increase, he said in a telephone interview yesterday.

`Turning of Corner'

Sallie Mae's is now getting funds at three-month Libor plus 0.97 percent. Libor is the London interbank offered rate, or price at which lenders typically provide funds to one another. Interest costs hovered at Libor plus 0.2 percent from January 2006 to July 2007, before spiking to Libor plus 1.54 percent in April, according to Kantrowitz.

``Prices were going up and now they are going down for the first time in a year,'' he said. ``This is the first turning of the corner.''

College officials had expressed rising concern during the past six months that the credit contraction might curtail educational loans, said Patricia McGuire, Trinity's president.

``The lenders have tried to create panic among institutions and students to serve their own purposes and that's shameful,'' she said in June 3 interview. The school, whose undergraduates are all women, was founded in 1897.

Loan Crisis

John Dean, special counsel to the Arlington, Virginia-based Consumer Bankers Association, said the student lenders were appropriately concerned.

``People will differ about how extensive the crisis would have been if Congress had not intervened,'' Dean said in an interview on June 6.

Dozens of college lenders, including New York-based CIT Group Inc. and St. Paul, Minnesota-based NorthStar Education Finance Inc., stopped making federally guaranteed loans after the U.S. cut subsidies and investors shunned bonds backed by the loans.

Wilmington, Delaware-based National Education stopped making loans in January to students at Trinity in Washington, Cathy Geier, the school's vice president for enrollment services, said in a telephone interview June 3. That caused about 60 students to sign new promissory notes with other lenders in what was ``a minor inconvenience,'' she said.

While National Education has decided to provide loans again to Trinity, it won't be added to the school's list of preferred lenders, Geier said. Enrollees pay about $26,000 a year to attend the school, where the median family income is about $30,000.

Banks Step In

Johanna Liadis, senior vice president of National Education, said in an interview today the company intends to resume lending at Trinity and at least 700 other schools.

At Fordham, one lender dropped out and two banks have stepped in, Angela Van Dekker, assistant vice president of student financial services, said in an interview at her New York office. Tuition at the school, established in 1841, will exceed $48,000 for first-year students.

Students at community colleges also are obtaining federal loans, said David Baine, vice president for government relations for the Washington-based American Association of Community Colleges, which represents about 1,000 schools.

``We haven't found any student that has not been able to obtain a loan or chosen not to enroll because of a student loan problem,'' said Roger Goodman, a vice president at Moody's Investors Service, the New York bond-rating company, in an interview on June 2.

To contact the reporter on this story: Janet Frankston Lorin in New York jlorin@bloomberg.net.

Last Updated: June 11, 2008 09:31 EDT