The Loan Crunch

An upward revision in the interest rate charged to students receiving Harvard loans caused some misunderstandings this week, but the higher rate represents only a redirection of goals in the University's progressive new loan program.

Previously all Harvard loans were written with a 3 per cent interest rate, a rate at which Harvard was actually subsidizing borrowers.

By upping the loan rate, the financial aid office hopes to improve the turnover rate of loaned money and direct the loan aid to people in real financial need.

The new loan program includes a plan for graduated repayment over a period of ten years after the student has completed his studies. The program also includes a "forgiveness clause" releasing students from their repayment obligations after 13 years.

Under the new plan, no graduate will be asked to pay more than 6 per cent of his income in any one year. R. Jerrold Gibson '51, director of the Student Loan Office, said yesterday.

Gibson explained that the loan program is being redirected to help lower income students instead of subsidizing loans to students from a whole range of family incomes.

Students from families with an adjusted gross income under $15,000 will have their interest paid for them by Federal funds while they are enrolled in college or engaged in military service.

Students from families with adjusted incomes over $15,000 will pay the full 7 per cent interest rate, from the time they receive the loan, on any outstanding balance.

The loan program will receive a pleasant boost on Monday when the Ford Foundation releases its study of student loans. A task force headed by Bruce Johnstone, now assistant to the President at the University of Pennsylvania, supports the Harvard program in almost all respects.

The other loan plan receiving national interest recently is the Yale Plan which calls for repayment of debts over a 35-year period. Graduates of Yale pay a set percentage of their income every year for 35 year, thus those who benefit most financially from their education pay the loans share of the education costs.