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 bank 
able 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 con- 
trary, 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.