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BOSTON (WBZ) ― Tens of thousands of college students are now wondering how they'll pay for their tuition bills due next month after a popular state lending authority said it has no funds.

The Massachusetts Educational Financing Authority, MEFA, announced it would not be able to provide private loans to students this semester. This comes after MEFA's announcement in April, saying it could not provide federal loans.

About 40,000 students will be affected.

MEFA Executive Director Thomas Graf told WBZ MEFA is still trying to secure financing. He said the agency has been in frequent e-mail contact with customers and financial aid directors, warning that funding was not yet available. They sent the e-mail yesterday to make sure students and families were looking elsewhere, while there was still time to get the bills paid.

Graf said while he knows many parents counted on MEFA for the loan with the lowest interest rate, he thinks most parents and students were aware of the situation and have been working with financial aid offices.

"This is a wakeup call to make sure families do their homework and talk to schools," said Bernie Pekala, Director of Student Financial Strategies at Boston College.

He said they saw something like this coming months ago, and already have other lenders on standby to help students.

MEFA officials blame the turmoil in financial markets for the problem.

They say right now this applies only to loans for next semester. They are hoping to have funding available for the spring term.

Myles Kaeding of Peabody was getting ready to start his senior year at UMass Amherst, only a month away, when he learned MEFA could not give him a student loan because of the nation's credit crunch.

"I didn't know what to do. That's my ability to stay here and get the higher education I need to go on in life," he told WBZ's Ron Sanders.

Myles contacted Suzanne Peters, financial aid director at UMass Amherst where about 10 percent of the school's 20,000 undergraduates are in similar situations.

"They now actually have to scramble to find different alternative financing options that may be available; so, they're in a time crunch," said Peters.

The first suggestion she offers students' families is to look at federally-backed parent-plus loans, made in the parents' names, based on the parents' credit, with a fixed interest rate. They can apply immediately by visiting the UMass Web site but there is little time left before school.

Myles Kaeding says he's looking at sacrificing some academics this semester just to make the bills. "I'm working three jobs. I work at least ten hours a day; it's just, what comes next?"

"When you add this on top of an already stressful situation for families, this is just compounding that," said Peters. While financial aid officers at UMass Amherst and elsewhere say there will be other loans available to students being turned away by MEFA, they also say those loans will be harder to find.

"I was shocked when I first heard of it," said Deanna De La Cruz of San Jose California. She's working two jobs, getting ready to start her senior year at UMass Amherst. "It's just my mom and I currently paying for it.

We don't really have the funds on our own to cover it." Deanna also went to see Suzanne Peters. Deanna says her financial situation is challenging but better now than her freshman year. "If it was two or even one year ago and this happened, I don't know what I would do for financial aid."

While UMass Amherst officials say 90 percent of their students have found financing, there is a possibility that some of the 2,000 who were counting on help from MEFA won't be able to go there now.

Not as many UMass students, about 400, took out MEFA loans last year. But Teresa Jardon, Senior Associate Director of Financial Aid said her school's low cost, plus an increase in loan limits has helped. "The federal loan limits did increase by $2,000," she said. "So that's a good benefit that will offset this lack of availability of funding from MEFA."

Financial aid officials say a student's first step should be to contact the college immediately to find out his or her options. Some lenders can approve a loan in 24 hours.

MEFA has set up a hotline to advise students and families: 1-800-809-0571.

If you would like to contact MEFA directly about student loans, call 1.800.449.MEFA (6332). For questions on how to proceed with federal aid, visit the Department of Education's Federal Aid First Web site.

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