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A Study of Student Loans and
The other factor in analyzing the Student as a credit risk is his ability
to cash in later. In extending credit to an individual or Corporation the
all important point is whether the borrower will be in a position to repay
the loan when due or be at least as good a financial risk as when the loan
was made. The first, character and definiteness of purpose, is but a basis
upon which to estimate the second. The Student, for instance, who has
no definite plan for financing himself and is doing nothing to help pay
his expenses could hardly be considered as a good risk.
Credit As Applied to Education
There are only a few institutions which have taken over business
credit principles in the administration of their loans. It has been their
experience that even though they were eager to apply such principles to
educational credit, it was not possible to do so directly. This is not
surprising. Business credit methods can only be drawn upon in working
out an educational credit System and not applied directly. They must be
attuned to fit the purpose. It must be recognized that though education
has a business side, it also has the academic side, which by its nature
must conform to other Standards than those merely of business. Further,
those seeking educational credit are young people, many of whom have
had few responsibilities and are not in an advantageous position to judge
the future. They have not yet learned to manage their personal affairs.
The Student, therefore, must be treated differently from the business
man when credit is being extended. But this treatment, for his own
good, cannot be lax or indefinite. He must be made to feel the responsibility
he is undertaking and assisted by proper administrative methods
to carry out his contract. The commercial business methods must therefore
be readjusted to the business of education; the analysis of the risk
must be made differently; the credit term must be longer; the methods
of payment and collections must be revamped.
Training To The Student
When credit is extended to a Student, the transaction, if properly
administered, has three values; it gives him a valuable business training;
it gives him a credit rating; and it assists him to make a good investment.
The average Student when he enters College has had very little experience
in dealing with others in a business capacity. The institution, therefore,
has an opportunity to give him a training in practical business which may
prove as valuable to him as his academic life. It follows that the placing
of Student loans on a business basis will have a double benefit. It will
give the Student a business training at the time he needs it most and it will
