DALLAS — The credit crunch is squeezing virtually every part of the consumer world, including one group that can ill afford a shortage of funds — college students.

As families are applying for college financial aid or are receiving financial aid packages from schools, they face a landscape of uncertainty and more effort to find funds to pay for their children’s education.

There is still money available to students, but you need to know how and where to look.

“We’re seeing a severe contraction in the amount of funds available,” said Chet Kimmell, chief executive of Neighborhood Credit Union in Dallas. “We’ve seen a lot of lenders that have backed out of student lending just because the profitability is not there.”

The subprime mortgage meltdown and the ensuing credit crunch have slowed lending and cooled investor interest in securities, including those backed by student loans. Thus, it has become more difficult for some lenders to raise money for loans.

In addition, the federal government has cut billions of dollars in subsidies to lenders that make federally guaranteed student loans.

As a result, some lenders, including Waco, Texas-based Brazos Higher Education Service Corp., have stopped offering federally backed loans. Others are scaling back discounts.

“We regret this decision was necessary,” said Murray Watson, Brazos chief executive. “We hope this situation with the capital markets changes in the near future to let us re-enter student lending.”

That’s not expected to happen soon.

“The crystal ball is pretty murky right now just because there has been so much activity in the capital markets,” said Dan Weaver, assistant commissioner of student services for the Texas Higher Education Coordinating Board.

If the credit crunch continues, he said, “it’s our belief that it doesn’t take much of a hiccup in the FFELP (Federal Family Education Loan Program) to have a pretty substantial impact on the students in Texas just because we’re so dependent on that to finance education.”

All this doesn’t mean that financial aid money has totally dried up.

“It means that they have to hunt around a little bit more,” said Mark Kantrowitz, publisher of FinAid.org, a student loan information Web site.

Here’s what students looking for aid need to know:
• It’s crucial that you fill out the Free Application for Federal Student Aid form, also known as the FAFSA.

The form is the starting point for applying to almost all student financial assistance programs and determines eligibility for federal financial aid. Many schools also use it as part of their application for nonfederal aid.

“The FAFSA form opens all of their potential funding needs for school,” Weaver said. “You have to get into the system in order to get considered for those.”

• Apply early because there’s often a finite pool of financial aid funds. The sooner you get your family in the system, the better.

“Even if you don’t need the money until August, start shopping now because the landscape is changing quickly, and you don’t want to leave it a week before the tuition is due,” said Kevin Walker, chief executive of SimpleTuition, a student loan comparison Web site. “Leave yourself extra time.”

• Apply for federally backed student loans first before searching for more expensive private loans offered by banks and other financial institutions.

“The federal education loans offer fixed interest rates that are lower than the variable rates offered by most private student loans,” Kantrowitz said. “Federal education loans also offer better repayment and forgiveness option.”

• Seek scholarships and grants first.

• If you already have a loan, go back to the same lender if you need to borrow again.

“If you had a loan last year, I would check with the lender you worked with before and see what they’re saying,” Walker said. “See if they’re still making federal student loans.”

Southern Methodist University doesn’t anticipate funding problems for its students, said Marc Peterson, director of financial aid.

“There have been some companies that have left the student loan business, but we do anticipate that there are quite a few companies still providing FFELP loans, and that won’t be a problem for students,” he said.

But lenders are tightening credit standards for private student loans, and many have raised rates and fees, college financing experts said.

Parents should consider PLUS, which stands for the federal Parent Loan for Undergraduate Students. It lets parents borrow money to cover any costs not already covered by the student’s financial aid package, up to the full cost of attendance.

Make sure you have strong credit before applying for a PLUS loan. Kantrowitz noted that, “if you have an adverse credit history like a foreclosure or repossession in the last five years, you’re denied a PLUS loan.”

If you can’t get a PLUS loan, your student can get an increased limit on an unsubsidized Stafford loan - the main federal loan for students - which will have a 6.8 percent rate for the upcoming academic year. An unsubsidized loan requires you to pay all the interest, although you can have the payments deferred until after graduation.

Banks have said they are committed to making student loans.

“Their loan programs (are) an important part of their service to their customers,” Joe Belew, president of the Consumer Bankers Association, said in a letter to college financial aid administrators.