Paydirt: Student loan locator

Paying for college is a brow-furrowing challenge. But it's particularly confusing this year. From interest rate resets to loan providers exiting the market, there's so much going on that you could spend your summer sifting through the news. Instead, allow me. Colleges going direct: Despite all the news about turmoil in the student loan markets, Joe and Jane College should be able to find the money they'll need. No question it's been a tough market for financing student loans, and because there are fewer incentives for lenders to offer federally guaranteed loans, 119 outfits have exited or taken breathers from the business in recent months, according to Finaid.org Publisher Mark Kantrowitz's tally. But financial aid directors are doing everything in their power to ensure that students aren't left loanless.

The turmoil has renewed interest in the Direct Loan Program run by the federal government. Locally, Macalester College and the University of St. Thomas in St. Paul are making the switch to government loans to guarantee that students will have access to funds. Without the switch, almost four in 10 borrowers returning to Macalester would have needed to switch lenders for the coming school year. At St. Thomas, more than half the students would have been in the same boat.

New Web tools for loans: Students in need of private loans have a growing list of resources at their fingertips. Greennote.com lets students borrow money from their social network at a rate rivaling federally guaranteed loans without needing a cosigner or a credit check. The loans have a competitive fixed rate of 6.8 percent; borrowers also pay $49 or a 2 percent "document fee." Lenders earn 5.8 percent on their money after Greennote takes a 1 percent administration fee. Virgin Money USA's Student Payback service (www.virginmoneyus.com) allows parents to borrow money for college from their preferred sources and then sets up a formal agreement for the students to pay back all or part of that debt. File an application with Tuitionbids.com, and lenders will bid on your loan. Simpletuition.com lets you compare various loan types for the best terms.

As always, look to federally guaranteed loans before shopping for alternatives. And read the fine print, even though you don't want to.

Big changes

On Tuesday, a host of changes went into effect that should perk up the ears of students heading to school or making loan payments.

Rates went down: The fixed interest rate for new subsidized Stafford loans dropped Tuesday, from 6.8 to 6 percent; the unsubsidized rate stays the same, courtesy of the College Cost Reduction Act passed by Congress last year. The act cuts the rate in half over the next four years.

Stafford loans taken out before July 1, 2006, have variable rates that reset each year. This year, the rate dropped 3 percentage points, to 4.2 percent. This means it's a fine time to consolidate. If you don't, that sweet rate could go up in July 2009. If you do, you'll lock in at 4.2 percent. Recent graduates within their six-month grace period can lock in at 3.6 percent.

There aren't as many lenders offering consolidation loans because of the unfavorable student loan market and borrower benefits for paying on-time or allowing e-payments have pretty much dried up. But you can consolidate directly with the government, through www.loanconsolidation.ed.gov.

Student loans? You're forgiven: Consolidating through the direct loan program is the road to loan forgiveness for students planning at least a decadelong career in public service. The list of details is lengthy, so do your homework The Project on Student Debt -- www.projectonstudentdebt.org -- is a good place to start.

The College Cost Reduction Act also provides upfront tuition assistance for students who commit to be teachers in high-need areas. Visit studentaid.ed.gov and look for TEACH Grant info. The same site also has a wealth of information about much of what I've covered here.

And speaking of free money, Pell grants for low-income students also increased, from $4,241 to $4,731. This is the first of five increases for the Pell.