74

A  Study  of  Student  Loans  and

about  pressure  to  force  payment.  It  therefore  causes  the  delinquent  to  sit
up  and  take  notice  and  brings  him  to  the  full  realization  of  his  duty  to  his
social  group  and  in  turn  to  society.  It  is  believed  by  the  proponents  of  the
practice  of  the  group  guarantee  that  two  or  three  per  cent.  premium  is
sufficient  to  protect  the  principal  of  the  fund.

The  Guarantee  Fund
As  may  be  found  in  Appendices  A  and  B,  the  guarantee  fund  isderived
from  a  surcharge  to  students  who  borrow.  When  the  several  participants
of  the  group  have  all  paid,  as  under  the  Harmon  plan,  a  refund  is  made
deducting  losses  and  paying  six  per  cent.  on  the  funds  which  have  been
paid  in  as  a  surcharge.  Under  the  German  plan  every  Student  is  made  to
contribute  to  the  guarantee  fund.  The  objection  that  can  be  raised  to  the
Harmon  plan  is  that  the  group  is  too  small.  In  case  of  a  default  or
accident  to  one  or  more  members  of  the  group  the  other  members  are  too
severely  punished.  It  is  contrary  to  sound  principles  for  the  distribution
of  losses.  However,  cognizance  must  be  taken  of  the  fact  that  an  alternative ­
  is  difficult  to  find  while  the  funds  are  so  limited.  As  more  funds  are
loaned  the  risk  should  be  spread  over  a  larger  number  of  individuals.
This  can  come  only  with  time.
Under  the  German  plan,  on  the  other  hand,  we  find  the  opposite
extreme.  All  students  are  made  to  pay  into  the  guarantee  fund  whether
they  borrow  or  not.  This  is  no  doubt  unwise,  since  it  places  the  bürden  of
loss  on  those  outside  the  borrowing  group  and  should  be  objectionable
even  to  the  borrowers.
There  is  no  doubt  but  that  the  principles  underlying  the  group  guarantee ­
  plan  are  sound.  This  is  in  harmony  with  social  institutions  and
human  activity.  All  losses  must  be  borne  by  some  one  and  the  sound
method  should  be  to  have  a  group,  community,  or  generation  bear  its  own
losses  when  such  losses  are  the  result  of  its  own  activities.  The  objection
to  be  levied  against  the  plan  is,  therefore,  not  against  the  group  guarantee
itself,  but  against  the  grouping  for  such  guarantee  and  the  selection  of  the
risk.  Without  attempting  to  show  the  faults  of  the  present  grouping  and
selection  of  individuals,  it  should  be  in  order  to  discuss  a  more  favorable
form,  and  thus  make  self-evident  the  shortcomings  of  the  present  grouping
and  selection.
To  obtain  the  best  results  it  would  seem  that  a  grouping  by  classes
within  the  College  would  be  the  best  form.  Use  the  dass  as  a  group.  This
should  prove  effective  because  there  is  already  existing  a  certain  bond  in
the  dass.  The  members  of  the  same  dass  spend  four  years  in  College
together  and  perpetuate  this  grouping  in  their  alumni  association.