? i'-' 
Their Relation to Higher Educational Finance 149 
The branch is divided into two parts; a management division which 
directs all the activity of the branch, and a decision board which decides 
on the proposals of the committee and, after a personal conversation with 
applicants, as to the extension of loans. 
Method of Granting Loans 
In general, loans are extended only to students finishing their academic 
studies, that is, those who are within a year of their final examinations in a 
German University. Proof of successful scientific work and scholastic 
achievement are often required. Those students who have earned a large 
part of their funds through work during vacations or at other times are 
usually given preference when loans are extended. 
If a Student wants to secure a loan, he must file an application for it 
with the branch. In this application he must submit his complete vita in- 
cluding a review of his past educational training, his experience in working, 
his health, his family relations, and his economic position. As a rule there 
is a personal conversation with the borrower in regard to his prospects in 
academic and Professional life. If all the necessary requirements are ful- 
filled, the central office remits, upon request from the branch, the full 
amount of the loan. The loan made is never lower than the minimum 
amount of funds necessary for subsistence in the community where the 
Student is located. The borrower signs a contract with the branch in which 
he obligates himself to present security, repay the loan in installments and 
interest semi-annually, and to send in to the branch a yearly report of his 
economic and Professional Status. The interest payment on the loan is 
two per cent for the first five years, after which it is five per cent. Repay- 
ment begins in the fifth year after the loan is issued and runs in install 
ments for five years. In case of premature repayment three per cent 
interest is discounted after the fifth year. 
Origin of Funds and Uses 
The money used in loans is derived from three sources; the con- 
tributions of the members and donations, which are to be distributed in 
loans; the payments of the students in German universities, which consti- 
tute an insurance fund to cover losses through non-payment; and the 
interest from these two sources, which is used to pay the expenses of the 
business management of the association. 
Internal Organization 
The original plan was that the capital of the Loan Association should 
be increased to a sum large enough to provide for loans over a period of