John Monro, one of the leaders in this field, has proposed a College Financial Assurance Corporation to deal with these problems. He would put upon the colleges the responsibility for making loans to individual students, and for collecting repayments, and would allow the colleges to borrow from the corporation without interest, or at low interest, to fulfill its obligations. It is not, however, too clear where the money is to be had.
In an interesting paper, Roth has also proposed a similar type of student loan: foundations would provide the subsidy which would make it possible to attract a certain amount of equity capital, possibly with a government guarantee or insurance. Particularly impressed by the failure of the colleges to enlist the support of credit as other sellers of services have, Roth, who thinks there are great possibilities in moving along these lines, points out:
Student loans today are in a primitive state. This is as if each of hundreds of automobile dealers had his own finance plan, some lending 10 per cent of the purchase price, others 20 per cent, and so on, and as if term conditions were equally variable. One can well imagine the chaos that would exist in automobile financing under such conditions.
Roth also suggests that with adequate insurance or guarantee it might be possible to enlist the support of pension funds, endowments, and other investors.
In recent years a number of plans on a smaller scale have also emerged. For example, there are various tuition plans which apportion payments evenly over one year and frequently cover the full four years of college. Sometimes these plans go on to provide insurance, with payments over a period of six or eight years. These are becoming increasingly popular.
At Queens College in Charlotte, North Carolina, a program has been arranged with the local bank under which the student can finance his tuition and part of his other college expenditures over a period of six to eight years. The local bank allows the student to start the monthly payments while the youngster is attending high school. By paying from $50 to $65 a month, the smaller sum over eight years, the larger sum in six years, a substantial part of the total costs of going to college, namely, $4,800, can be thus financed.9 A genuine mushrooming of plans has occurred in recent years. Some would use loans as a means of getting tuition up; others would use them as an instrument for improved instruction. The larger the loan outstanding, the greater the stake of the institution in the success of its graduates10 The reader should also recall the Prudential and Home Life insurance companies mentioned in the last chapter.