Published: Monday, 24 Nov 2008 | 9:17 PM ET

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By: Carlo Dellaverson
Web Producer

If you or your children are planning for college in the near future, you’ve surely already noticed that the credit freeze has begun to hit the student loan industry. Chances are that you won’t be paying for a college education in cash, so where do you find the loans you need when lenders are less likely to lend?

In a special interview, U.S. Secretary of Education Margaret Spellings said that she recognizes that the economic downturn, coupled with increasing tuition and burgeoning enrollment has led to a ‘perfect storm’ of sorts for borrowers. The federal government is working on ways to increase access to federal student loans, Spellings said, which include providing liquidity in the marketplace, simplifying the lending process and creating tools and web sites to help guide parents and students through the process.

Congress recently granted the Department of Education the authority to put special measures in place. Spellings said one of the ways the DOE is providing stability is by purchasing loans ($500 million in loans each week), extending programs, and introducing a private sector conduit to provide liquidity to lenders, which is at the heart of the credit crisis. DOE is also making direct loans to students, she said, and it is up to colleges and universities if they want to participate in that program.

Spellings also reiterated the importance of financial literacy in our education system. Reading and math – the two skills at the heart of the government’s No Child Left Behind program – are the cornerstones of financial education, Spellings said. But in addition, the different institutions and programs of the government need to be in lockstep with regard to explaining and simplifying the lending process for everyone.

>>Web Extra: Education Sec'y Answers Your Questions

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