About 27,000 Kentucky college students counting on a loan from the state’s student financial aid agency may have to find another lender.

The Kentucky Higher Education Student Loan Corp., better known as The Student Loan People, announced Friday in a press release that it was suspending loans to first-time borrowers beginning May 1.

Cindy Burnette, director of financial aid at Western, said 80 percent of Western’s student loan volume is with The Student Loan People.

The national credit crisis has caused a primary source of funds – the securities auction bond market – to dry up, the Student Loan People said.

“I’ve heard it said that loan agencies feel like a by-stander in a drive-by shooting,” said Jo Carole Ellis, the state agency’s vice president for government relations and student services.

The agency will continue to make loans for previous borrowers based on the availability of funds, the release stated.

Burnette said she wants students to understand that the loan suspension is just for first-time borrowers.

She said the biggest misconception is that there won’t be any student loan money for school expenses.

Ellis said the Student Loan People are confident the situation will be resolved soon.

Legislators are seeking ways to find funding for students, she said.

She said that U.S. House Bill 5715, while not addressing the funding issue directly, encourages the Secretary of the Treasury and the Secretary of Education to make sure there are funds available for students.

Every member of Kentucky’s congressional delegation sent a joint letter to the same agencies asking for funds for Kentucky’s students, Ellis said.

“We’ve heard rumors that a joint announcement will come from the Treasury and Education departments that monies will be made available,” Ellis said.

Ellis encouraged students seeking loans to take it one day at a time and not throw up their hands in despair.

“It’s the middle of April so students entering college this fall still need to fill out the FAFSA application to apply for federal and state financial aid,” she said.

Even if The Student Loan People cannot find new sources for loan funding, Burnette said there are other loan alternatives.

Western maintains a list of preferred lenders that offer the best benefits such as lower interest rates, and options such as deferment, Burnette said.

This list can be found under the financial aid link on Western’s Web site.

Western also offers a payment plan that can be divided into four payments during the year.

She advised students to take responsibility for their financial situation by working during the summer and exploring all avenues for scholarships and grants.

There are local foundations, churches and civic clubs that offer grants, she said.

Both Burnette and Ellis said they feel optimistic that students will be able to find funds for the fall semester.

“I don’t feel the bottom has dropped out yet,” Burnette said.

Reach Larry Rowell at news@chherald.com.