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.

WASHINGTON - Late payments on credit card bills climbed in the first quarter of this year as elevated gasoline prices and rising borrowing costs squeezed some family budgets and made it hard for them to pay bills on time.

The American Bankers Association, in a quarterly survey of consumer loans, reported Tuesday that the percentage of credit card payments 30 or more days past due increased to 4.40 percent in the January-March quarter, up from 4.27 percent in the closing quarter of last year.

The increase came after some recent improvements; the delinquency rates on credit cards had fallen in the previous two quarters.

“Credit card loan payments are sensitive to financial pressures. As gas prices eased at the end of 2005, so did credit card late payments,” explained James Chessen, the association’s chief economist.

“But the favorable gas-price effect evaporated during the first quarter of 2006, and it’s no wonder why. The Federal Reserve continues to raise interest rates and high energy prices are taking a bite out of disposable income,” Chessen said.

Another factor in the higher delinquency rate is the extremely low savings rate of Americans. That gives them a limited financial cushion to deal with rising expenses, economists say.

The quarterly survey is based on information supplied by more than 300 banks around the country.

The survey offered a bright spot. The delinquency rate on a composite of other types of consumer loans, including popular home equity loans, dipped to 1.94 percent in the first quarter of this year. That was down from 2.02 percent in the final quarter of 2005.

NEW YORK - Q: Are store credit cards worth signing up for, and how do I keep from getting so overwhelmed by it all?

A: It seems that every time shoppers go to a store, they get bombarded by offers to sign up for a store credit card, and it can be so confusing.

Stores are gung-ho about their cards because they help create customer loyalty and can help track customer buying habits. They’re also a profitable business.

For customers, store credit cards offer extra savings and provide a heads up on special sales coming up. They can also be an easy way for shoppers to establish credit history. But they need to be used wisely, experts warn.

Above all, if consumers can’t pay off their balances in full, it’s best to avoid store cards since interest charges are higher those of bank cards. According to Greg McBride, senior financial analyst at bankrate.com, a typical store card is now charging interest of 19.8 percent, compared to a bank card, which currently charges around 13.5 percent.

Another issue to keep in mind is that taking out too many cards at once can actually hurt one’s credit score.

“They can definitely be a good deal, but they have to be used wisely,�? said Andrea Rock, senior editor at Consumer Reports.

Here are some tips on how to manage the store credit card issue:

Only sign up for store cards that give the best deals or immediate savings. For example, if a customer is buying a $2,000 couch, and can get 10 percent off upon signing up for a card, then he or she should consider the offer, according to Mallory Duncan, senior vice president and general counsel at the National Retail Federation, the retail industry trade group.

Duncan also noted that shoppers should focus on stores that they like and are most loyal to.

Don’t sign up for a slew of store credit cards, because such increased line of credit will hurt your credit rating. According to Rock, one should limit the number of store credit cards to one or two during a six- to 12-month period.

“What you don’t want is to open up a credit card in every store in the mall and leave a trail of credit inquiries in your wake,�? said McBride. That’s a sign of an active customer, and credit bureaus are going to look at that with reservations, he said

At the same time, consumers shouldn’t close their lines of credit from store cards either, particularly right before applying for a mortgage or a car loan. Credit scores are based in part on your debt-to-credit ratio.

Examine the policies of the card. That means looking at the grace period — from the end of the billing cycle to when the payment is due. McBride also notes that you should also look at the default policy — if customers miss one payment, the question is, is the interest rate going to climb up to 20 percent?

My mother’s relatives are having a family reunion in Puerto Rico next month. Being a typical procrastinator, I waited until the last minute, assuming my husband and I would have no problem getting a cheap fare and hotel room during the Caribbean’s typical off-season.

Boy, was I wrong.

The cheapest airfare I could find online was $750 per person. And no beachfront hotel in San Juan had a room below $130, a far cry from summers past when resorts offered double-digit rates in July and August, with a free piña colada thrown in. Now I have to consider the possibility of camping out at my grandfather’s house, where the guest room has one of those lumpy sofa beds with a bar that runs right across my back.

Either that, or spend the summer in my current residence of Fresno, located right in the heart of the triple-digit furnace of California’s Central Valley. These are my two vacation options right now.

And you other aspiring summer vacationers, who didn’t plan in advance and are now discouraged by the rising cost of gas, airfares and hotel rooms, you may feel your pickings are slim, too.

Randy Petersen, founder of the airfare bargain-finding website WebFlyer.com, does not beg to differ. “If you were really serious about summer travel, you should have started in January,�? he said.

‘Stuck in the middle’
You can still get a reservation, but higher fuel surcharges (adding an extra $250 to $300 for a trip to Europe) and reduced numbers of flights means you’ll be paying more for a mediocre seat. “You definitely won’t have a row all to yourself, and single travelers, you’ll be stuck in the middle,�? said Petersen.

The same bad news goes for hotels, across the U.S. as well in the former summer-snoozer areas of Mexico and the Caribbean. Why? Family reunions are a big reason, says Petersen. “They’re going beyond the typical places like Las Vegas and Orlando.�?

Post-September 11 travel patterns are another factor, he adds. “A lot of people still feel uneasy traveling outside the U.S. But to them, the Caribbean is just a little farther south than Florida, and they remember it as a safe, easy place to go. Same with Mexico. So even though high-end hotels there still drop their rates, the rest don’t discount because they have good traffic.�?

I mull over putting the Puerto Rico trip on my credit card so I can avoid the bed of torture in my grandfather’s guest room, but Diane McCurdy, a financial planner based in Bakersfield, Calif., warned against it.

“You shouldn’t go into debt just for a summer vacation,“ she says. “Running it up on credit cards means the relaxation you gained during your vacation will immediately evaporate after you return, making you even that more stressed.�?

So what to do for people like me in our near-stranded situations? We deserve a place in the sun too; we just need to find more creative ways to afford it. Below are a few ways you can take that vacation, near or far, without spending more than you should — but still having a summer blast.

Purchase a package deal
Get around sky-high prices with a vacation package that includes a hotel or rental car with your flights. “Typically, you’ll save more on a bundle of air plus hotel than purchasing them separately,�? says Petersen.

You can find these bundled bargains at Site59.com which specializes in last-minute getaways, as well as at more standard reservation-booking sites like Expedia and Travelocity, which offer good deals. Frommer’s Budget Travel magazine also updates its “Best Deals�? Web site daily.

When I searched for a four-night hotel stay in mid-July at the ritzy beach town of La Jolla north of San Diego, plus round-trip airfare from Fresno to San Diego, Expedia quoted me a package deal of $418. The fare for the same flights on United Airlines’ Web site cost $406 per person, without the hotel.

You don’t even have to use all the elements of a package, says Petersen. “For a cheaper alternative to last-minute airfare, just look for an inexpensive package and don’t use the land part.�?

The Bahamas, Jamaica and the Virgin Islands are still popular this summer, but many travelers there either ignore or are unaware that many Caribbean islands are located in the “hurricane belt�? — and hurricane season is now in full swing until November 1. Instead, look at southern Caribbean islands located outside that belt, near Venezuela, and considered to be relatively safe from storms. They include Barbados, Trinidad and Tobago, and the “ABC�? islands of Aruba, Bonaire and Curacao, off the tip of Venezuela.

Adrian Glover, senior online editor of Frommer’s Budget Travel magazine, recently spotted a super deal to Barbados, with round-trip airfare and seven nights’ hotel starting at $359 per person, whereas the lowest airfare from Miami to Barbados during that time was $402. “ And Barbados hasn’t been hit by a hurricane for the past 15 years,�? said Glover.

Consider, ‘O Canada’
The Canadian exchange rate isn’t as favorable as it has been, but it still goes a long way compared to the euro. Plus, there’s plenty of varied geography to explore, and it’s far less crowded than similar topography in the U.S.

Glover picks Quebec City as a hotspot since the former French trading post is quickly approaching its 400th birthday. Petersen loves Toronto for its lakes and for plays and entertainment that matches New York City’s bounty. “If Canadian flights are too expensive, look at flying into Buffalo or Detroit instead,�? he said.

Look at the hotspots’ next-door neighbors
A lot of people flock to Hollywood and Disneyland for a dose of Southern California cool, but forget about the beach culture of Orange County and San Diego just to the south. That’s one example of hidden gems in the U.S. that lay nearby but are often overlooked by their more well-known – and more expensive — neighbors “If you leave a hotspot and go in any direction, you’re bound to find someplace just as cool but hardly as crowded,�? said Petersen.

His “up and coming�? pick is Oregon. “Its wine industry is booming and although it’s nowhere near as built-up as the Napa Valley or San Francisco, it has a lot of unique geography, it’s relatively inexpensive to get to, and it has a range of climates. Perfect for the outdoors lover.

Glover’s pick is Santa Fe, rich in arts and history, but often overlooked by those on their way to Las Vegas and the Grand Canyon. She also suggests visiting smaller U.S. cities that offer arts, culture and the outdoors for affordable prices. “You can get around them by foot, boat and train, instead of just by car.�? Good picks are Denver; Burlington, Vermont.; Madison, Wisconsin; Portland, Maine, and Wilmington, North Carolina.

Consider ‘independent’ lodging
Because accommodations are often the most expensive part of a trip, non-hotel lodging such as private bed-and-breakfasts, hostels and inns can save you a bundle. “Alternative lodging can also be cool for family reunions and romantic getaways,�? said Glover. “You can’t get much more romantic than staying in a lighthouse.�?

Also consider trading houses. If you live in a popular spot, you’ll especially find it easy to swap your residence with someone staying in a place you’ve always wanted to visit. That’s how my friend with an apartment in San Francisco’s funky Mission District got to spend two weeks in Copehagen – with her swapmate’s car thrown in for free to drive around Denmark. The Budget Travel Web site has links to alternative lodgings.

See it in September
Consider waiting until after Labor Day to see the sights. When kids are back in school, many popular places — especially the national parks — are less crowded, less expensive, and the weather is just as good, if not better, than the dog days of August.

NEW YORK - Rising interest rates and higher gasoline prices are putting the squeeze on consumers’ budgets, and many are finding it harder to keep up with their bills.

Credit counseling agencies say that consumers are coming in in droves seeking help.

“My phones are going crazy,�? said Howard Dvorkin, president of the nonprofit Consolidated Credit Counseling Services Inc. in Fort Lauderdale, Fla. “Consumers are carrying an exorbitant amount of debt — and they don’t have any savings to fall back on if things don’t go right.�?

An important measure of consumer financial distress, late payments on credit cards, ticked up in the first quarter, according to figures from the American Bankers Association. The Washington, D.C., based trade group said the percentage of bank cards 30 or more days past due increased to 4.40 percent in the January-March quarter from 4.27 percent in the final quarter of 2005.

The Federal Reserve’s decision last week to raise short-term interest rates for the 17th consecutive time will boost yet again borrowing costs for consumers, likely prompting more delinquencies on credit card bills — as well as on auto loans and mortgages.

The slowing economy also is depressing income growth, so a greater percentage of take-home pay is going toward necessities and less is left over for debt payment.

Among the consumers who recently put a call into Dvorkin’s counseling center was Andreia Marshall, an assistant project manager for a builder in Delray Beach, Fla.

Marshall said that after she broke up with her boyfriend, her paycheck wasn’t big enough to cover her apartment rent, higher gasoline prices and other day-to-day expenses. Soon she started falling behind on her credit card bills.

“It got to the point where the credit card companies were calling,�? she said. “It’s overwhelming, you feel as if you’re drowning and you feel bad about yourself.�?
With help from a credit counselor, Marshall is working out a budget and whittling down her $13,000 in card debt, which she figures could take 3 1/2 years.

“I have to think about everything I spend,�? she said. “Sometimes in the grocery, I have to say to myself, ‘Do you really need to buy this?’ And I’m looking at things like, how can I not spend $80 on dry-cleaning.�?

Marshall said that instead of feeling deprived, she’s feeling good about it.

“I’m proud about what I’m doing,�? Marshall said. “I’m paying that debt and getting educated, and I know I won’t make the same mistake again.�?

Catherine Williams, a credit expert with Money Management International, a Houston-based financial counseling and education agency, said rising costs for gasoline and utilities were only part of the explanation for rising credit card delinquencies and increased consumer financial stress.

“People refinanced (their mortgages) six months or a year ago, so the ‘house bank’ is empty,�? Williams said. “Most can’t go back and tap their home equity again.�?

In addition, she said, consumers can only juggle debt payments for a while. As she put it: “You let the car payment go one month, then the house payment. Then you make a lot of little creditors happy for one month, maybe for two months. Then it becomes obvious that you have to catch up on car payments, and everything else slides.�?

Williams called it “a dangerous strategy�? because consumers who let accounts go delinquent risk harming their credit ratings. A poor credit rating makes it harder for consumers to get loans and can force them to pay higher rates on the loans they do get.

Consolidated Credit’s Dvorkin pointed out that millions of Americans rushed to declare bankruptcy before the law change last fall made it harder for them to discharge unsecured debts. The high level of bankruptcy filings temporarily depressed the delinquency statistics and other measures of consumer financial distress, he said.

“Now we’re seeing a new crop of people starting to get into trouble,�? he said. “They can’t keep up. They’re the ones most affected by increased gas prices and higher rates.�?

He said juggling payments is one of the “leading indicators�? that a consumer is in trouble. He added that other telltale signs are:

You only make minimum payments month after month.
You’re taking cash advances on one credit card to make the minimum payments on others.
You delay — or are late, with important payments, such as the monthly mortgage.
You put off necessary activities, such as doctors’ appointments.

NEW YORK - Life cycle funds that are becoming increasingly popular are meant to make retirement planning easy. But that’s not how investors have been using them, mutual fund companies say.

The funds are aimed at a specific retirement year. Fidelity Investments’ life cycle Freedom Funds for instance, start with a fund for people who retired before 1998, then progress to a fund for people who plan to retire in 2050.

The funds are an aggregation of many other mutual funds, sometimes as many as 25. The idea behind life cycle funds is that investors tend to do a poor job of diversifying and rebalancing their portfolios as they approach retirement, so the fund will do it for you, starting with an aggressive mix of equities and bonds in the decades before retirement and rebalancing, often daily, to maintain diversification.

The funds become more conservative as retirement nears, selling stocks and buying bonds; they’re meant to be an all-in-one solution for retirement, offering complete diversification in a single fund.

248 percent growth over 3 years
It’s an idea many investors have found appealing. In 2004, the last year for which numbers are available, about six in 10 employer plans run by The Vanguard Group Inc. offered life cycle funds. Fidelity’s Freedom line of life cycle funds have grown 248 percent over three years, to $45.9 billion as of Jan. 31.

The problem, according to the Vanguard study, “How America Saves 2005,�? is that while the funds offer complete diversification in one investment vehicle, “actual participant behavior is at odds with this goal, with many participants using life cycle funds as just another part of their overall portfolio.�?

The larger problem is that people continue to do really foolish things with the rest of their portfolios. Vanguard found in its study that 13 percent of participants in its defined contribution funds had their entire accounts in fixed-income securities and 21 percent held all-equity portfolios. Forty-four percent of participants in plans that offered company stocks held concentrated holdings exceeding 20 percent of their account balances. The big idea behind life cycle funds is that they are one way to save investors from themselves.

But that doesn’t appear to be happening. Vanguard found that 29 percent of people who invested in the funds as part of their company’s retirement benefits used the funds as intended, as an all-in-one investment. Another 49 percent invested in a life cycle fund and one or more stock funds.

‘Naive approach’
The third group of life cycle fund investors appears to take what Vanguard calls “a naive approach,�? investing in multiple life cycle funds. In 2004, 22 percent of Vanguard participants with access to life cycle funds owned multiple life cycle funds and some also invested in other funds, too.

One possible explanation is that participants view the life cycle funds as a low-risk option, Vanguard’s report said. Another explanation is that participants don’t understand the diversity of holdings in a single life cycle fund, so they buy funds with multiple retirement dates in an effort to diversify.

“Ironically, one of the principles of sound investing that Americans have taken to heart may also pose a hurdle to life cycle funds: the notion that one should never ‘put all their eggs in one basket,’ �? a description of the funds on Fidelity’s Web site said. “With additional education, investors should be able to understand that this clearly doesn’t apply to a life cycle fund that may include dozens of underlying mutual funds holding hundreds or even thousands of individual securities.�?

The problem, as Fidelity explains it, is that “life cycle investing can only really do the job for investors if it is used as the core strategy for most of the assets being earmarked for a given goal. Allocating a small portion of assets to a life cycle investment program will neither provide the diversification nor the age-appropriate risk exposure that is so critical to this way of investing.�?

Fidelity’s advice for investors in life cycle funds is to invest the bulk of their assets in a fund targeted for their retirement group, then use the small portion left to play with.

Consider a mutual fund tracker
If you’re investing in a life cycle fund through your 401 at work, you may have only one family of funds to pick from. But if you’re looking into mutual funds independently and you’re interested in life cycle funds, its worth considering a study by mutual fund tracker Lipper that came out late last month. Lipper studied life cycle funds from AllianceBernstein, Fidelity, T. Rowe Price and Vanguard.

The companies’ life cycle funds used stocks, bonds, as well as, in some fund families, cash, inflation-protected securities and real estate investment trusts. Using a simulation of the companies’ different allocation schemes, how each is expected to change over a life cycle fund’s lifetime and 40 years of market returns, the simulation found that AllianceBernstein’s offering was the leader.

One of Lipper’s theories why AllianceBernstein’s funds did so well in simulation: They included fewer investment classes in their allocation scheme. In short, their allocations were simpler.

If you’re reading this, you may be sophisticated enough as an investor that you don’t need the simplicity of a life cycle fund. But if you know anyone who is making any of the classic mistakes — too much company stock, buying only stock funds, or putting everything into an asset class that has already peaked — the idea of putting almost everything in a life cycle fund, then playing around with the change may be a simple solution that makes sense.