With lenders leaving the college loan market, some students face higher interest rates and a scramble to find new banks.
At the University of Pennsylvania, for example, as many as two-thirds of students who get loans had to select a new lender.
But college officials throughout the region say most students have been able to get the loans they need to pay August tuition bills. Problems were not as bad as predicted in the spring, they said.
"It's not that you're having tons of students unable to attain refinancing. They just have to hunt around for another lender," said Mark Kantrowitz, publisher of FinAid.org, a Web site offering financial-aid advice.
It will be more expensive for some students, too, as banks raise fees and interest rates, he said. He estimated that added fees could amount to hundreds or thousands of dollars in new costs for students over the life of their loans.
About 1 to 2 percent of college students nationwide may be unable to get loans, Kantrowitz said. Students at for-profit trade schools and community colleges and at institutions whose students have had high default rates likely will face the greatest challenge, he said.
Financial-aid experts, however, say the instability in the loan market is far from over - Wachovia Bank earlier this month announced its exit from the undergraduate private student loan market - and no one's sure what will happen when federal legislation passed in May to guarantee banks that loans would be covered expires next spring. Wachovia continues to handle federal student loans and continues to issue private loans to graduate and professional school students.
"It's certainly something that we're very, very concerned about and watching very closely," said David Baime, vice president of government relations at the American Association of Community Colleges.
Private student loans have grown from 5 percent of all undergraduate borrowing in the 1996-97 school year to 27 percent in 2006-07, according to figures reported by schools to the College Board.
Locally, students say problems have been minimal.
Kevin Rodden, 21, of Philadelphia, who will be a senior at Penn this year, was notified by e-mail earlier this year that he had to choose a new lender for his $5,500 loan.
"It was more intimidating before I did it, and then once I sat down and looked at it, I realized how simple it was," he said.
At the Community College of Philadelphia, most students interviewed said they were able to get loans.
"They were pretty good about letting us know what lenders they weren't using anymore," said Kathryn Knauth, 23, of Philadelphia, who got an $8,500 loan.
Zakia Coppage, 26, of Philadelphia, said she was denied a $1,000 loan that she tried to get last spring.
"They wouldn't do it without me getting a co-signer," she said. "I haven't tried again, but I would like to."
Local community colleges got a jolt earlier in the spring when banks announced plans to stop lending to their students.
Citizens Bank told Delaware County Community College it was stopping because of the seven percent default rate on loans, said Raymond Toole, director of financial aid at the school.
"It was going to be a very big problem for us," Toole said.
The bank abandoned its plan after getting a letter from U.S. Rep. Paul Kanjorski, a Luzerne County Democrat who was concerned that students wouldn't be able to get loans. He also cited the federal law that guarantees the loans.
Kanjorski wrote on June 6 that lenders "receive the benefit of a government guarantee, and the Congress worked to ensure that these lenders could continue to operate under the current economic stress."
He added that in return, lenders "have an obligation to serve students of all types, including those students who attend two-year community colleges."
In its June 19 response, Citizens said it decided to reverse its decision after reviewing the new law and seeing limited improvement in the liquidity of capital markets.
The bank said it decided to "resume providing educational loans to qualified students at all schools we had previously notified we would no longer be lending to." A spokeswoman confirmed the decision.
Wachovia left the undergraduate student loan business because of market conditions, officials said.
"At this point, we felt it was prudent," spokeswoman Ferris Morrison said, declining to comment further.
Problems were compounded by state agencies that decided to suspend their loan programs as the market tightened. The Pennsylvania Higher Education Assistance Agency earlier this year suspended its role as a lender of federal loans.
That prompted some colleges in the area to join the federal loan program or at least consider it. Joining the program also helped fill in for banks that were no longer lending.
"At Penn State, more than 90 percent of our borrowers lost their federal loan lenders since spring, after many banks and private lenders left the loan business," said Anna M. Griswold, executive director of student aid and assistant vice president of undergraduate education. "We knew we had to do something to guarantee the stability of federal loan funds for our students and parents."
The instability in the loan market has caused several other local schools, including Bryn Mawr, Drexel and Penn, to consider using the federal direct loan program.
"It's been so tumultuous this year," said Melissa M. Englund, Drexel assistant vice president of enrollment planning and retention services.
Bryn Mawr College officials recalled how one week banks would say there would be no fees for student loans and a few weeks later would reverse that position.
"It was just so unpredictable and volatile," said Jennifer Rikard, dean of admissions and financial aid.
Some schools had been reluctant to go into the federal program because private lenders were willing to charge students lower fees and lower interest rates.
Some colleges have taken other steps.
West Chester University, which estimated that about 2,500 of its students could need to find new lenders, stepped up its communication and education efforts on financial aid.
Some schools, such as Philadelphia University, Lehigh University and Penn, offer more aid to students as a result of higher fees and smaller grants from PHEAA, which has cut its maximum grant from $4,700 last year to $4,120 this year.