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The Independence Foundation of Philadelphia announced last week that it is awarding $10.5 million in grants to 85 independent secondary schools nationwide to help them establish loan programs for students from low- and middle-income families.

Foundation officials say that the grants--ranging from $2,000 to $100,000 per year per school over a seven-year period--are intended to create a "self-replenishing" fund that will provide loans to students based on their families' ability to meet the cost of tuition and other fees.

The intent of the program, according to Independence Foundation President Robert A. Maes, "is to stretch the scholarship dollars of these academically strong schools, in effect permanently endowing part of their financial-aid programs, so they can continue to offer places and financial-aid packages to able students from lower income brackets."

"The greatest danger for independent schools--for the rest of this century, at least--is loss of diversity in their student bodies, if tuition continues to rise," Mr. Maes explained.

Co-Signing Loans

According to the foundation, parents or guardians would be required to co-sign a student's loan under the terms of the program. Loans would not exceed 50 percent of the total aid granted to a student in any given year, and would remain interest-free while the student remains in the school.

Afterward, interest charges would be readjusted on each anniversary date of the loan and would not exceed one-half of the current prime rate. Students, however, would be required to pay a minimum of 5-percent interest should the prime rate drop below 10 percent. Repayment of the loan would begin after the student completed college and would be due in full in no more than five years after college graduation. Only "a handful" of private schools, most notably Phillips Academy in Andover, Mass., and Northfield Mount Hermon School in East Northfield, Mass., have longstanding student loan programs, according to Richard C. Griggs, a private financial consultant and former financial-aid coordinator at Phillips Academy.

"Historically, financial aid at independent schools has been limited to scholarships and grants, sources of aid that constantly need to be replenished," Mr. Griggs said.

Most independent schools, he added, have been reluctant to introduce loan programs for their students. Many schools, he said, have assumed that parents and students would not be willing to incur a large level of debt for a secondary education, particularly when they could face the prospect of four or more years of additional indebtedness due to the high cost of a college education.

Inflationary Pressure

Mr. Maes added that many schools have also been reluctant to offer loans to their students in light of high default rates on federallyguaranteed loans to college students.

But within the last six years, Mr. Griggs said, inflationary pressure has driven education costs at independent secondary schools higher and higher, placing those schools out of reach for many families of modest means who are unable to obtain some form of financial assistance.

"As tuition increases, more and more families request financial aid, and more and more of them also qualify for it," he said. "Schools have no other choice but to look at alternative means of stretching their financial-aid dollars."

Mr. Griggs estimates that "at least 35 schools and perhaps as many as two dozen more" have begun offering loans to their students during the past five years.

"The schools realize that the worst that can happen to them is that no one will pay them back," he said. "In that case, however, they would be out exactly what they would have been had they offered only scholarships to students."

But loan-repayment rates at Andover, where students have been borrowing funds to cover education costs since the early 1960's, have been very high. According to Headmaster Donald W. McNemar, more than 98 percent of the school's student borrowers have repaid their debts.

Thirty percent of the school's students receive some form of financial aid, either in scholarships or loans or a combination of both, he said. In the current academic year, the school has lent $202,500 to students and an additional $190,000 to parents under a special program for middle-income families.

Successful Loan Programs

Successful loan programs such as the one at Andover helped persuade the trustees of Phillips Exeter Academy in Exeter, N.H., to institute a similar program of its own during the 1980-81 school year, according to Rheua S. Stakely, assistant director of admissions and financial aid at the school.

"For a long time it was thought that parents would balk at the prospect of loans; in fact, that probably was the major argument weighing against the program," Ms. Stakely said. "Other people were concerned that the student payback rate would be rather low. But experience indicated that those two negative points were not valid at other schools, so we decided to institute a loan program of our own." Approximately 30 percent of the school's students received some form of financial aid at the school at a cost of about $1.25 million last year, she added.

At right is a list of the schools selected to receive grants from the Independence Foundation.

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