14 
A Study of Student Loans and 
some influence which would permeate all of American life, for such train- 
ing and guidance would soon be extended to all people whether they 
attended College or not. 4 * With such a background the Student would enter 
College better equipped than he does now. His relationship with the busi- 
ness Organization of higher education would further his training in the 
management of his personal affairs and would lead him to see what he 
must encounter in the outside world after he leaves College. Such a pro- 
cedure need not interfere with the academic program, but in fact should 
assist it, since the Student so trained in the management of his financial 
affairs will take such as a matter of course and can then give better atten 
tion to his academic life. 
What then becomes of the loans? The institution would find that it 
could deal with the Student on a business basis, for he will expect it and 
will resent in fact being dealt with in any other manner. This business 
basis means the application of the highest business principles in the business 
dealings which the institution has with the Student. The application of 
business principles to Student loans, however, does not mean that the 
peculiar characteristics of lending to students will not be taken into con- 
sideration. Adjustments will have to be made, but this will not prevent 
entering into a definite agreement with the Student and making him 
realize the responsibility which he undertakes. He is borrowing money 
for an economic venture and should, therefore, pay the commercial rate of 
interest. The term of the loan (except when it is an emergency loan), 
should correspond with the period of turnover in College, which is approxi- 
mately five years. The amount of the loan should be enough to be of 
substantial assistance to the Student. Once a loan has been made to a 
Student the institution should come to his assistance with further loans 
in Order to “see him through” unless it is found that he is no longer a good 
risk. It is unwise to require any security except a note of honor. The 
Student who needs the money most has no security to off er. If he has 
security or can get an endorser, there is no reason why he should borrow 
from the institution. If, nevertheless, some form of collateral or security 
is deemed wise, the group guarantee is then the best way in which to secure 
the funds. In this way the students accept collective as well as individual 
responsibility. However, those who constitute the group should have a 
voice in the selection of the risk. 
It is urgent that student loans be put on a business basis. Students 
who have borrowed where loans were administered in a business-like man 
ner express preference to borrow under such administration. They appre- 
4 The possibility of such a result was expressed in conversation with Mr. C. S. Danielson of 
Columbia University and Mr. O. C. Tester, Assistant Vice-President of the Bowery Savings Bank, 
New York City.