Gov. David A. Paterson agreed yesterday to support a publicly financed, low-cost student loan program, saying New York has fallen behind other states in managing to make college more affordable for its residents. The program will be financed by means of tax-exempt bonds reachable by all undergraduate and graduate students who live and go to school in the state full time.

As credit markets become stricter and financial institutions that grant student loans are fewer, families find themselves taking under consideration paying higher interest rates, said the governor.

"We are the largest urban state that doesn't have these loans, the only large state in the union that doesn't have them, the only state in the Northeast that doesn't have them," said Paterson.

According to Paterson, his administration is taking under consideration whether the state would give loans straight to students, or if there would be private loans backed by the state. The program would pay for itself long term. This is because the interest and administration expenses could be transmitted to borrowers while still obtaining a lower interest rate than the private market.

The loan program, a version of which was authorized by the State Senate last month, is among the recommendations from the state Commission on Higher Education, which presented its report yesterday. Paterson supported those, loans included, that would cost the state little.

Although the interest students would pay it is unknown yet, the state's Higher Education Commission expectations are that it would be much lower than what many students and their parents pay by borrowing from private lenders.