Loans for Learning

A year of college education can cost as little as an automatic dishwasher or as much as a sports car. But though both dishwashers and sports cars can be bought on credit, loans have long been hard to get on so undispossessable a thing as an education. In 1960 a group of businessmen and educators, chiefly in Indiana and California, founded the United Student Aid Funds Inc. in an effort to make student loans easier to get and pay off.

USAF's idea was to create a reserve fund with which to guarantee student loans otherwise unbacked by collateral.

"Banks are willing to lend money to a student on the diminishing value of his secondhand car," says USAF President Allen D. Marshall, a former executive of General Electric and General Dynamics. "They should be more willing to lend it on the increasing value of his education." Under USAF's plan, a student may borrow up to $4,000 from any bank in the organization's expanding network. While regular bank loans can cost up to 8% in true interest, nonprofit, tax-exempt USAF can secure loans repayable at as little as 5% and in no case more than 6% simple interest. And the student does not have to begin repaying the loan until five months after graduation.

Last week, as the school year got under way, USAF had endorsed some 1,800 loans, bringing its total to more than 20,000 and $10.6 million. To date, only 21 borrowers have defaulted--three because of death. USAF's network has expanded to include more than 530 colleges and 3,600 banks in 44 states. Assets, which are provided by grants from foundations, corporations, colleges and universities, now total $4,000,000, and USAF can bring forth $12.50 in bank loans for every $1 in its reserve.

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