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Harvard's New Loan Plan

For Those Caught in The Middle

In an effort to relieve the financial squeeze on middle-income families who are not eligible for financial aid but who are still hard-hit by rising college costs, Harvard announced a new loan program this week.

The program, developed by R. Jerrold Gibson '51, director of fiscal services, and called the Parent Loan Program (PLP), allows families with incomes from $15,000 to $50,000 to spread out four years' tuition, room and board bills over a six- to eight-year period.

The annual interest on the PLP loans will be 8 per cent, and the payments will be $250-$275 per month. Most loans from the federal government to students are at 3 per cent per year, but they are not usually available to students whose parents' income is over $15,000.

Most University loans to students who qualify for financial aid are at 7 per cent interest. Gibson figures, however, the PLP loans are at the same effective rate, because parents can use the interest as an income-tax deduction.

The only loans otherwise available to students who do not qualify for financial aid, are from banks--which charge 11 or 12 per cent--and employees credit unions--which charge 7 or 8 per cent, but whose funds are restricted to credit-union members.

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Gibson began working on the loan program after the admissions office feared that they were losing middle-income students to less-expensive state universities.

Figures showed that fewer students applied from the $20,000-$40,000 income bracket than from any other income level. And the percentage of students from that income bracket who eventually decided to attend Harvard after being admitted was less for that group than for any other.

Gibson said yesterday that the Richard C. Knight Insurance Company of Boston--which now handles tuition payment insurance for Harvard--will take care of the paperwork on the parent loans, and also provide the insurance.

Knight will process the loan payments for Harvard at a "very modest cost," Gibson said, because they want the parents' insurance business. If enough parents elect to use the loan program, Knight will process the loans at "essentially no cost," Gibson said yesterday.

Gibson is also developing a loan program that could be used by other private universities to aid middle-income students. He says that the procedures the Knight company is setting up could easily be expanded to include more than one university. Gibson said he hopes that other schools will want to join Harvard if the PLP is a success next year.

The admissions office will send out information on the PLP with its letter of admission on April 17, and Gibson hopes that he'll know by early May whether anyone is interested in Harvard's installment plan.

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