(CBS) Student loans aren't immune to the credit woes affecting the rest of the economy and, as Early Show financial guru Ray Martin explains in this column, the result has been numerous changes on that front, even as demand for such loans peaks. Martin also offers advice to students and parents to help them navigate the moving education loan waters.

Students Struggle to Get Loans for College

Homeowners aren’t the only ones caught in the crosshairs of the credit crunch. More students heading to college this fall may have a difficult time pulling together the money they will need to pay for their college costs, since fewer lenders are willing to make student loans. And with more unemployed workers looking to go back to school, the competition for loans is likely to intensify.

Last month, the student loan crisis hit full-tilt, as student loan giant Sallie Mae, Citigroup, Bank of America and about 50 other lenders had stopped offering some forms of private student loans. The global credit crisis also increased the lenders' financial costs above the rates the federal government allows them to charge on federally guaranteed loans, so such loans could only be made at a loss. Also, once-burned-twice-shy investors are no longer offering money to buy loans from lenders, causing some to cease doing business altogether.

In a hurried attempt to avert a looming shortage in available student loans, Congress passed a student loan bill last week designed to ensure that students will continue to be able to get federally-backed student loans. President Bush has since signed it into law. According to the Education Department, about 7 million students will need more than $68 billion in federal loans for education this coming school year. Under the plan, the Education Department would direct federal funds to state-level guaranty agencies, and the funds would then be disbursed directly to colleges and students. With summer typically being the peak season for student borrowing, the hope is that these funds will be available beginning June 1.

So, there will be a few new twists for students and parents to be aware of when applying for federally-backed loans. Also, there will be new, higher limits on amounts students can borrow under federal education loan programs. Typically these limits are $3,500 for freshman year, $4,500 for sophomore year and $5,500 a year after that. According to just-reported details, under the new student loan bill, these annual limits would be increased by $2,000.

But, as college costs have increased at a faster rate, more students have turned to private loans to fund their education and, this year, getting these private loans will be more challenging and costly.

Tips for Getting College Loans and Financial Aid

Apply for Financial Aid NOW: Under the “lender of last resort” provisions of the recently enacted student loan bill, state guaranty agencies or colleges would award loans only after a student eligible for financial aid is denied by at least two lenders. For this reason, it’s critical to apply for your federal student loans now, if you have not already done so. Also on the to-do list for immediate action: Students and their parents should speak directly with their college or university's financial aid office to learn how this program will work for their school of choice.

Seek PLUS Loans: While interest rates for federally-guaranteed student loans are fixed at 6.8%, interest rates for Parent Loans for Undergrad Students, or PLUS loans, are typically higher, currently 8.5%. Clearly, the attractions of student loans are the low rate and that the parent is not obligated to repay. But the annual borrowing limits on student loans make PLUS loans worth considering, because parents can borrow up to the full cost of college costs and PLUS loans should be more economical than private loans.

Get a Co-Signer: If you need to turn to private lenders for loans, then try to get a co-signer on the loan. Often, students don’t have an established credit history or they have low credit sores, resulting in high interest rates and extra fees. But interest rates on loans where there is a co-signer with good credit can be about six to seven percent, compared to 14 percent when taking out a loan on your own.

Check out Peer-to-Peer Lenders: According to reports, more and more students are turning to peer-to-peer lending services that facilitate loans between unrelated people. In essence, these peer-to-peer services enable a cash-strapped individual to get a loan from another person who is willing to lend out his or her own money. Typically, the rates on these loans can range from 8.5 percent to 10 percent and can be found on Web sites such as Prosper.com and LendingClub.com. The downside here is that the benefits of student loans -- deductible interest and deferment of payments until after graduation -- do not apply to these loans, so these are typically recommended as a last resort.

Consider a “Safety School”: While nobody wants to hear this, the reality for some students is that they simply will not be able to come up with enough loan money to afford the costs of their school of choice. For this reason, start looking into the financial aid packages of loans and grants offered by some of the other, lower-cost schools that accepted you. Options to consider include universities in the state where you are a resident. Also, consider two-year schools, such as community colleges. Keep in mind that you can work toward the goal of transferring to your dream school later. After all, the diploma you hang on the wall will not say “transfer student."

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