Their Relation to Higher Fducational Finance
123
In developing the guarantee plan the Service Charge was rejected as
being not only too expensive for the Student, but also too arbitrary. Col-
lateral and endorsement were not considered for the reason that they are
too difficult for the average Student to obtain, and they involve psychologi-
cal and other elements which are generally less effective for this purpose
than either life insurance or group guarantee. Life insurance is applicable
only in the case of death, which has been shown will be the reason for only
a negligible number of defaults.
It can be seen that while the actual risk is almost negligible, the
borrower if forced to take out life insurance would have an additional
fixed Charge on his loan and at the same time would not be covering the
whole gamut of possible losses. The group guarantee as arranged in
this plan is insurance at actual cost. No losses, no insurance. Further-
more, the group guarantee is desirable because the borrower is made to
feel not only an Obligation to his creditor and himself, but, also, there is
the additional check that failure to repay will work a hardship on his fel-
low borrowers, with the result that he will be openly branded as untrust-
worthy. If the individual concerned has not within himself moral stamina,
the group guarantee, properly administered, can be a vital factor in build-
ing up the weak places in his character. Borrowers do not like to have
the officials at their Colleges know that they are delinquent, and more par-
ticularly the fellow members of their group. Correspondence shows this
most definitely.
In undertaking its program in the field of Student financing, the
Harmon Foundation has three principal objectives toward which it started
and is still working: (1) helping needy and deserving students over
the top of the educational ladder; (2) cultivating habits of providence and
inculcating a proper attitude toward and observance of business principles;
(3) making a comprehensive and progressive contribution to our educa
tional System by proving that it is possible in equity to place on the shoul-
ders of the Student an increasingly larger proportion of the institutional
cost of his education than now prevails, particularly among those whose
earning power is greatly increased because of the training.
The fact that Philanthropie organizations, men of means, newly
established funds, clubs, fraternal groups, civic bodies, etc., are not only
watching the progress of this experiment, but are seeking helpful sug-
gestions and ad vice in the light of experience for the constructive admin-
istration of their own Student aid along business lines, gives some idea
of the value of demonstrating the soundness of Student paper, not only* for
the sake of students as a dass, but as an aid to the College in solving at
least a part of its financial problem. With a workable System of making
Student loans in harmony with business principles, and yet without bürden-
