Student Loan Fund Tenth Anniversary
The Issue As smaller private colleges are primarily sustained by tuition, the increased fees were impacting enrollment and severely straining their financial condition. California faced a potentially drastic reduction in the number of students receiving the unique educational experience private colleges provide.
A Solution
It was envisioned that a loan fund would maximize the Foundation's investment by assuring that 100% of its support directly aided both students and colleges.
Chapman University, Claremont McKenna College, University of LaVerne, Loyola Marymount University, Mount St. Mary's College, Occidental College, Pepperdine University, Pitzer College, Pomona College, University of Redlands, University of San Diego, Scripps College, Westmont College and Whittier College. At the inception of the Weingart Student Loan Fund, the Foundation agreed to make a series of loans to the colleges, over a 10 year period, for a total of $28 million, interest free. The colleges would in turn make loans to students on an interest free basis. Beginning in the second year of the program, the colleges were encouraged to match these funds by raising $56 million. When accomplished, the Foundation would then forgive its original loans and contribute an additional $28 million to the colleges for the Student Loan Fund. As of June 30, 1997, the end of the ten year period, the colleges had raised $56 million in matching funds. When combined with the $56 million provided by the Foundation, the total Weingart Student Loan Fund has now achieved the $112 million mark. With deferred gifts to the colleges, the Fund total should achieve or exceed $115 million.
How It Works The student loans bear no interest and are repayable in even monthly installments over a ten year period beginning six months after graduation. Utilizing their own scholarship criteria, with the exception of the residency requirement above, the colleges administer the program. This process relies upon the existing student aid administrative staff thereby giving the colleges latitude to solve their own unique problems with the loan program and establishes the college as the lender and provider of the student aid. To qualify for matching funds, the Foundation's agreement with the colleges requires a 0% default rate on loans made to students. To accomplish this, schools are required to make payments into the trust for students who are in default. This provides a strong incentive for the colleges to keep the actual default rate low and represents another reason for giving the colleges control over the administration of the loans.
Results Student default rates have remained quite low at approximately 7%.
Participating colleges report that these loan funds have been directed primarily to students from middle-income families who need additional financial assistance but are not eligible for state or federal loans under prevailing rules. College student aid officers state that without the Foundation-sponsored loans, these middle-income parents would not have been able to finance the education of their sons and daughters at the private colleges. A substantial amount of the funds have also been used to grant loans to students from lower-income families to supplement their loans from government sources.
The Foundation emphasizes that the loans to students under this program are not identified as Weingart loans but are designated by each college as a loan from that school. As a result of the interest-free loans received from their colleges, it is hoped and expected that students will develop a sense of loyal support and an obligation to give as generously as possible to their alma maters throughout their lifetimes.
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The Weingart Foundation Student Loan Fund represents the largest single allocation of grant funds in the history of the Foundation. A $112
million interest-free loan fund, of which Weingart has contributed $56 million, is now in place and reflects the conviction of the Weingart Board of Directors that strong private colleges are essential to a sound competitive system of higher education.
Fourteen member colleges of the Independent Colleges of Southern California were selected to be Beneficiaries of the program. Funds were allocated to each college based upon their undergraduate enrollment. The schools in the program are
as follows:
The colleges make loans available only to graduates of California secondary schools who are U.S. citizens enrolled in a four year undergraduate course. This requirement intends to increase the availability of a college education for California high school students and to further the prospect that college graduates will stay and contribute their talents locally.
Since 1987, loans to students by the colleges total $76,966,819 with each student receiving an average of $5,845.