70
A Study of Student Loans and
The next most widely used guarantee is the personal note of the
Student. This places him on his own honor. He accepts it as a moral
Obligation to the institution and feels that he is dealing on a very
high plane. The institution places confidence in him that spurs him on
to do the right thing. If he fails to pay, he has broken a high trust. This
is a more powerful and honorable weapon to hold before him than the
threat (which he knows will not be carried out) of collecting from his
endorser. The note of honor where properly used has been the most
effective way of administering loans.
The other forms of guarantee in the tabulation above are not in
sufficiently wide use to be given much space in this discussion. The same
objectiotis can be lodged against a band with signatures as against a bankable
note. All such forms of guarantee are too burdensome and insincere
to be used by institutions of a high type. Life insurance is too expensive
and smacks of being out of place. It is good only in case of death. The
death rate among students is very low and it is extremely questionable
whether collections should be attempted under such circumstances. The
Student who borrows to go through College has no assets and a loss due
to death should be charged off. This does not mean that young people
should not be encouraged to carry insurance when able to. To the contrary,
insurance is valuable, but it may be unwise for a young man to
take on this additional bürden when he is already financially handicapped.
This is not the place for insurance. It is not suited as collateral for a
Student loan, because it is too expensive and because the same objections
may be raised against this as against endorsements—it is required only
as a pretense.
Group Guarantee
The group guarantee plan of lending money to students has not been
extensively used nor has it been used for any length of time. It has been
used outside the educational institution by organizations which affiliate
with the universities and Colleges and do not lend directly to the students
until they have been so affiliated. There are two organizations which
have loaned successfully and extensively under this plan. 35 This System,
as all Systems, obviously has advantages and disadvantages. It is perhaps
best to see whether there is a purpose to be served by such a plan and then
to see how near this plan comes to serving the purpose.
Purpose To Be Served By Group Guarantee
It would perhaps be possible to accept it as a foregone conclusion
that there is a need for money loaned under the group guarantee plan.
85 The Harmon Foundation of New York City and Geschäftsbericht der Darlehnskasse der
Deutschen Studentschaft in Germany. For description of these, see Appendices A and B of this
publication.
