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The latest victim in the global credit crisis is utter turmoil in thestudent loan market. But how big of a deal is it at LSU?

Virtually none, at least institutionally, says Jim McCoy, LSU’s vice provost of enrollment services. That’s not to say individual students and families aren’t getting pinched in the pinch. But even while many lenders have pulled out of the student loan market, forcing the Fed to inject large amounts of cash to renew confidence and bring stability, getting a loan to attend school at LSU isn’t a problem.

“From an institutional standpoint, we’ve seen little, if any, impact,” McCoy says. “Our guarantors are solid. We have a very low default rate. We don’t see parents coming in trying to renegotiate their loans. We just haven’t seen the negative. We don’t want to see the negative.”

All the same, problems in the wider market have caused more than 60 lenders to pull out—at least temporarily—from the federally guaranteed student loan market. That number represents about 15% of the market. Pressure from the student loan industry and more than two dozen U.S. lawmakers prompted the Federal Reserve in May to inject cash into the market to bring stability.

It was a part of $150 billion in emergency reserves the Fed supplied to U.S. banks in May, up from $100 billion in April. The increase in reserves is meant to keep banks from becoming shy about loaning money to consumers and businesses, which would drag the economy down even more.

Federally subsidized loans for school are available through the Department of Education’s direct loan program and indirectly through banks and other private lenders. Paul Hassen, spokesman for the National Association of State Universities and Land Grant Colleges, says part of the reason so many private lenders have abandoned the market is because of big cuts in subsidy rates the government pays to banks to encourage their participation in the student loan program. In September, Congress slashed $20 billion from the subsidies it pays to private lenders.

“There are multiple things that are converging here,” Hassen says. “There is the impact of the reduction of subsidy rates, there is a mandated drop in interest rates over the next five years, and you have the credit crunch. You got a lot of different things coming together here.”

But Congress approved legislation in May that would allow the Secretary of Education to buy student loan debts from lenders, giving them more money to lend to students.

McCoy says LSU deals mainly with “the big boys” among loan guarantors as opposed to smaller guarantors, the likes of which have bailed out, or threatened to bail out, of the student loan market.

Amy Marix, assistant director of LSU’s financial aid office, says that in instances where students did have a lender back out on them, finding them another lender for them has been no big deal.

“Of course, it’s an inconvenience that the students have already gone through the process of selecting a lender and now have to do it all over again,” she says. “It’s not a major problem. It’s definitely something manageable. We just work with those students. It’s not that there’s no other funding for those students. It’s just they can’t use the specific lender they were with. There are numerous lenders offering Stafford student loans.”

If the credit crunch has created problems in terms of student loans, McCoy says, it’s on the individual level: students and/or families hit hard by the credit crisis. And while programs meant to help the most needy students—Pell Grants and Supplemental Educational Opportunity Grants, for instance—have received more funding, those programs have actually lost ground with inflation factored in.

“They don’t increase it as fast as the cost of education,” McCoy says. “Even though more money is in the pipeline, percentage-wise it’s less money. While the expenditures for federal financial aid have increased, the percentage of the bill being paid by federal support has decreased.”

In light of shortfalls at the federal level for funding sources, including decreasing funding for the Perkins Loan, he touts the success of Pelican Promise for helping the most financially challenged students pay for school. LSU launched the program two years ago for that very purpose.

Pelican Promise isn’t a loan. Rather, it guarantees the full cost of attendance, up to $18,000 a year, for those who are eligible and doesn’t have to be paid back. The funds come from federal and state sources, with LSU making up the difference, McCoy says. The program had 300 participants last year and has 400 this year.

“It’s a wonderful program,” McCoy says. “I think the story here is that we do not see any upheaval at LSU, and we take very seriously our commitment to provide aid to our students to be able to afford the university.”

Marix says LSU is moving ahead with Pelican Promise even though the federal government rolled out two new grant programs of its own: the Academic Competitive Grant and the National SMART Grant.

“We hope to be able to use additional funding that we had to cover some of the lack of student loan funding,” she says. “We still do have many programs to help students—especially needy students—grant program and current loan programs that are available.”