116
A Study of Student Loans and
assist the Student to finance himself through school and therefore repayment
in the near future cannot and should not be expected. If the loan
is to be successful and the terms of the contract complied with, it is necessary
that such terms be in conformity with the period of turnover in the
business where the loans are made. The period of turnover in education is
five years and loans to students must be made on this basis to be successful.
Five years from the date of the loan is the best period.
By far the larger number of loans are long term loans, but it is necessary
that institutions be prepared to help the students over emergency
periods of a few weeks or months. These loans can be handled in the
same manner as commercial loans. The term not to be longer than is
necessary for the Student to obtain funds to cancel the note. In no case
should it extend over one semester.
19. Methods of Repayment
Out of 105 institutions, 16 reported that payment was required in
full when the loan became due, 60 reported the installment method of
repayment, and 29 reported that it was optional with the Student.
There is no reason for different institutions to adopt divergent
methods of repayment. Any workable method that is best for one institution
is usually best for others. When an institution requires payment in
full at a specified time, it is requiring the impossible unless the note falls
due four or five years after graduation.
The installment method of repayment is by far the best, and it need
not entail as much accounting as some suppose. There is, however, more
than one kind of installment payment plan, and it is necessary to adjust
the one used to the student’s peculiar needs. The amortized form is no
doubt the best. After leaving College the Student will be able to work off
increasingly larger payments as he becomes better established and his
income increases. The filterest on the loan can thus be included in each
payment and will not fall due in a large amount at an inopportune time.
Since the Student will be able to make continuously larger payments it is
right that he be required to do so in Order that the money be released
sooner to be reloaned to new students.
It may seem involved to attempt such a method but with the working
out of suitable tables it could become practically automatic and involve
very little bookkeeping. It would be highly commendable that the amounts
loaned be made in multiples of $10 in all institutions. The adoption of
such a unit would simplify matters considerably and the institutions could
then co-operate in the printing of tables, record blanks, and necessary
forms for the carrying out of such a System. Using ten dollars as the
