For tens of thousands of Pennsylvania college students, turmoil in the financial aid sector will hit home this fall with average state grants that could be $500 smaller than last year, the head of the state's loan agency said yesterday.

James Preston, president and CEO of the Pennsylvania Higher Education Assistance Agency, discussed the recent state grant reduction and various issues related to the nation's student loan squeeze during a meeting with the Pittsburgh Post-Gazette editorial board.

Mr. Preston, appointed to the job in March, said PHEAA has set as its highest priority ensuring that students have continued access to loans under the Federal Family Education Loan Program, called FFELP, which includes Stafford Loans.

PHEAA, recently criticized for spending excesses of its own, is in the midst of an effort to eliminate unnecessary costs, he said.

Along with bond market turmoil that has fed a nationwide credit squeeze, federal law changes enacted after last year's private loan scandals have eroded the profit potential for private student lenders. A number of those firms stopped making some student loans or have indicated they will tighten lending requirements or raise interest rates.

More details in tomorrow's Pittsburgh Post-Gazette.