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 alterna 
tive 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 guar 
antee 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.