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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 including
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 fulfilled,
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. Repayment
begins in the fifth year after the loan is issued and runs in installments
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 contributions
of the members and donations, which are to be distributed in
loans; the payments of the students in German universities, which constitute
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
