The New York Times says the credit crunch is hitting students at two-year colleges and “other less competitive institutions” as some big lenders pull back loans completely and others make it more expensive to borrow.

The paper goes above the fold on page one with the story, reporting that if the trend continues “some of the nation’s neediest students will be hurt the most,” delaying or preventing them from going to school. The trend is being exacerbated by lower government subsidies to lenders. The Times says it could be a big problem:

Tuition and loan amounts can be quite small at community colleges. But these institutions, which are a stepping stone to other educational programs or to better jobs, often draw students from the lower rungs of the economic ladder. More than 6.2 million of the nation’s 14.8 million undergraduates—over 40 percent—attend community colleges. According to the most recent data from the College Board, about a third of their graduates took out loans, a majority of them federally guaranteed.

While some banks have been getting out of the student-loan business over the last year or so, the Times says it’s new that others, like Citibank, are “breaking the marketplace into tiers.” Those at high-quality (and/or expensive) four-year schools aren’t likely to have problems finding loans because they are more profitable for banks, because the loans are bigger and the borrowers there are more likely to repay.

Still, the cherry-picking strikes some as peculiar; after all, the government is guaranteeing 95 percent of the value of these loans.

The Times notes that Sallie Mae and Nelnet are still lending at any size or quality institution, and it doesn’t say exactly why students will be hurt as long as those two biggies are issuing loans.

A Bloomberg report shows why some lending has dried up. Brazos Group is paying 5 percent interest on auction-rate securities, up from 2 percent last year. Five percent doesn’t seem like a lot unless you have a huge portfolio of loans out that only earn you 4 percent.

“It’s an ugly situation,” (an) analyst said. “Every dollar coming in is going out to higher interest rates.”

Foreclosures just keep going, and going, and….

The number of foreclosures is soaring across the U.S., The Wall Street Journal reports on page three. Lenders and mortgage investors had taken over 660,000 homes as of April. That’s up nearly 170,000 from just three months earlier and nearly triple the number of January 2007.

And the worst is yet to come: projects the peak won’t be hit until the end of next year.

The Journal says as of April one in seven existing homes for sale in the country is in foreclosure. That’s despite lenders cutting prices to get rid of their rising inventory of homes. One Denver company says some banks are cutting the prices of homes that don’t sell every twenty days.

The paper and the Financial Times on page one note that mortgage rates soared last week, something the FT says is because investors are betting the Federal Reserve will have to start raising interest rates soon to combat rising inflation.

The FT says thirty-year fixed mortgage rates rose from 5.81 percent last week to 6.02 percent, the highest in nearly three months. That makes the housing crisis that much harder to pull out of.

Got to keep those family members happy

Bloomberg posts a story about companies who are paying more in dividends than they’re making in free cash flow, and notes that The New York Times Company is one of them.

The wire service writes that the Times Company paid out $125 million in dividends in 2007 at the same time it was a negative $270 million in cash. Reminds us of a certain company that helped spend its way into Rupert Murdoch’s hands with dividends.

Except in this case its Sulzbergers, not Bancrofts living off the non-existent fat of the company, which is slashing a hundred jobs—nearly 8 percent of its newsroom. Bloomberg reports that one media analyst is surprised they put reporters and editors on the chopping block before their thirty-one-cent dividend, which the company bizarrely raised by eight cents a little more than a year ago in what was the biggest increase in at least ten years.

Dividends are supposed to be for safe, cash-producing stocks, which in case its management and board has failed to notice, the Times is not anymore. That money would be better spent investing in the future of the company’s journalism, not lining the pockets of Sulzbergers and investors to prop up a sinking share price.

How to live beyond your means

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.