Their Relation to Higher Educational Finance
67
mean the accommodation of a larger number of students with loans if the
funds are efficiently administered.
The value of properly administered loans in establishing a credit
rating for the Student is not to be overestimated. If he is made to meet
his öbligations on time and in accordance with his agreement, he not only
creates for himself a credit rating, but comes to realize the importance of
such a credit Standing in his dealings with others. There are few College
people who are able to do this without a certain amount of moral pressure.
This is where loans to students are bound to differ somewhat from business
loans. The Student is not a business man as yet and therefore must be
assisted to grow up to sound business principles rather than have these
principles applied to him directly during his College career. This does not
mean more laxity than in business, but a sympathetic sort of firmness.
The third element of value which loans have in the training of the
Student, namely, assisting him in making a good investment, carries with
it an economic benefit which far surpasses the value of the loan. The
institution is helping him to invest in a product that will constantly increase
in value and which will net him not only cash returns, but other returns
as well. It assists him to make the best use of his time and trains him
to exchange present pleasures for greater future pleasures.
In the administration of Student loans, therefore, the institution has
an opportunity to render the Student a four-fold Service: selling him a
valuable product on easy terms, making him realize the full value of his
purchase, assisting him to purchase this product in an honorable way, and
giving him a training in business methods.
Student Security
The administration of Student loans differs from commercial loans
in still another respect. The Student does not have a fixed line of credit,
but has possibilities which are difficult to evaluate. He can get endorsements,
but not always bankable endorsements; he has no collateral, and
his character is not yet definitely formed. Though these are the fundamentals
of credit, still the very foundation of credit is faith in another
and this is the very element upon which the Student can claim credit and
upon which credit must be extended to him. This is the one security
which he has to offer—a promise to make good and not to break the trust
placed in him. The one security, then, which the Student has to offer is
himself. 32
In granting credit to a large Corporation, character plays a minor part,
the finances of the Corporation must be separated from individualities.
32 . . credit precedes and exists independently of the instrument; contracts, written or
Pärol (oral), characterize a credit economy and may well be regarded as an essential attribute of
p e djt, but emphasis on this feature is likely to becloud the more fundamental element—confidence."
K. B. Westerfield, Banking Principles and Practice, Vol. 1, p. 36.
