CHAPTER  IV

THE  STUDENT  AS  A  FINANCIAL  RISK
Education  as  a  Commercial  Venture
No  well  worked-out  policy  for  the  administration  of  Student  loans
can  be  arrived  at  without  examining  the  value  of  an  education  to  the  individual. ­
  The  easiest  way  to  measure  values  is,  of  course,  in  terms  of
money,  and  this  is  the  value  which  is  of  greatest  concern  to  those  making
the  loans.  In  a  general  way  it  may  be  said  that  no  bank  or  financial  house
of  any  kind  will  make  a  loan  without  some  estimate  of  the  ability  of  the
borrower  to  repay.  This  ability  is  measured  by  the  increased  earning
capacity  of  the  individual  or  Corporation  due  to  the  loan.  The  size  and
length  of  the  loan  is  proportioned  to  the  earning  capacity  of  the  concern
and  its  business  turnover.  Carrying  these  elementary  principles  of  lending
over  to  student  loans,  it  would  seem  that  the  amount  which  is  to  be  loaned
to  a  Student  and  the  length  of  time  of  the  loan  are  to  be  measured  by  the  cash
value  of  the  education  he  is  to  receive  and  how  soon  it  will  make  financial
returns  to  him.  When  a  bank  loans  to  the  XYZ  Corporation  it  has  a  fairly
accurate  estimate  of  the  additional  profits  which  this  loan  will  enable  the
XYZ  Corporation  to  make.  So,  too,  when  money  is  loaned  to  a  Student,
some  estimate  should  be  made  as  to  the  additional  earning  capacity  which
the  Student  will  receive  from  such  a  loan—or  the  cash  value  of  his  education. ­
  Care  must  be  taken,  however,  not  to  weigh  the  loan  against  the  entire
cash  value  of  the  education,  for  the  student  is  investing  other  funds  besides
what  he  borrows,  and  in  addition  to  this,  four  years  of  his  time  which
in  itself  has  a  monetary  consideration.
The  Cash  Value
The  cash  value  of  a  College  education  has  been  estimated  at  various
times  by  different  people.  The  most  careful  studies  are  perhaps  the  one
made  by  Dean  Lord  of  Boston  University  and  the  one  made  at  Northwestern ­
  University.  These  studies,  though  not  intended  at  the  time  as
a  basis  for  making  loans,  form  a  good  background  for  this  discussion.
Let  it  be  understood  that  each  university  would  have  to  make  such  a  study
for  its  own  use.  There  are  good  reasons  to  believe  that  the  cash  value
of  a  College  education  differs  in  the  various  institutions.  It  also  differs
in  the  several  schools  within  the  Institution  and  again  with  individuals.
  There  may  be  assigned,  therefore,  four  elements  which  go  to
make  up  the  cash  value  of  a  student’s  education:  (1)  the  individual,  (2)
the  field  of  learning,  (3)  the  Institution,  (4)  the  opportunities  which
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