Their Relation to Higher Educational Finance
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in which the loan is made. The period of turnover in education is neither
one nor ten years, but is in fact five years and loans to students must be
made on this basis to be successful. The Student must not be given terms
with which it may be concluded in advance, he will not be able to comply.
Five years from the date of the loan is the best period. What he
borrows in his freshman year he will not be able to pay before one year
after graduation. On the other hand, if he is planning for a successful
career he must manage to pay his freshman loans within two years after
graduation. The obligations which he incurs during his sophomore year
likewise can and should be paid at the end of three years after graduation.
So, too, loans made in the junior year can be paid four years after graduation
and those contracted for in the senior year paid five years after
graduation. If the Student is planning a College course of more than
four years, the term of the loan should be adjusted accordingly. Some
will need six year loans, some seven year loans, and perhaps a few will
require loans for a longer period. In all cases the term of the loan is not
to depend on the institution, but on the number of years that the Student
will remain in College and how soon he will begin to “cash in” on his
training after leaving College. This will depend on what profession or field
of endeavor he enters.
By far the largest number of loans are long term loans, but it is also
necessary that institutions be prepared to help the students over emergency
periods of a few weeks or months. A short term loan can be handled in
the same manner as a commercial loan, its duration being no longer than is
necessary for the Student to obtain funds to cancel the note. In no case
should it extend over one semester. If the money is needed for a longer
period than this, it would be well to consider it a long term loan and
handle it as such.
Methods of Repayment
The policy of institutions on the question of repayments has been
varied. Much laxity is to be found in this respect and especially is
there a lack of definiteness as to how and when the loans are to be paid.
Three reasons may be assigned for this: first, sheer neglect of entering
into a definite agreement; second, entering into agreements which will be
impossible for the Student to carry out; and third, not understanding how
collections can best be made, or not making such knowledge efifective.
Of one hundred and five institutions answering an inquiry sent out
by the Student Loan Information Bureau in regard to methods of making
repayments, sixteen institutions reported that payment was required in
full when the loan became due, sixty reported the installment method of
