Loan Program for Middle-Income Students Created

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WASHINGTON--A group of banks and colleges here has created a student-loan program that will help middle- and upper-income students who are ineligible for subsidized federal aid meet college costs.

"Resources are badly needed,'' said Robert J. Casey, a tax lawyer who helped establish the program. "Often, all the available resources for tuition finance do not equal the cost of education.''

Under the program, known as ConSern, students will be able to borrow up to $15,000 a year at relatively low interest rates, currently 9.5 percent, to pay for tuition; room and board; and other educational expenses, such as books, computers, and transportation, according to Mr. Casey.

Loans will be available for students in independent schools as well, he said. But a student may only borrow up to a total of $60,000.

By paying a "nominal'' fee, colleges and universities, independent schools, businesses, and local governments can offer loans to their students or employees through the program, Mr. Casey said.

Such sponsoring organizations can tailor loans to their own needs, he added. For example, a participating nursing school offered subsidized loans to its students, he said, and then retired the loans as a benefit for working in a local hospital.

To participate, students enrolled in college at least half time must pay an application fee of $45 and a discount fee of 5.5 percent of the loan amount. Repayments begin 30 days after the student receives the loan and can last up to 12 years. Students may elect to pay only interest while they are enrolled in school.

To qualify for a loan, students must demonstrate that they are "credit worthy,'' or have a credit-worthy cosigner. The program defines a credit-worthy person as one whose fixed monthly payments, including the student loan, is less than 40 percent of his or her income.

But students from any income level are eligible for the program, unlike the federal Guaranteed Student Loan program, which requires students to undergo a "needs analysis.''

Recipients of federal aid are also eligible for the program, which will make up the difference between the aid and college costs, according to Mr. Casey. "We are not in competition with any federal, state, or local program,'' he said.

The new national program is the outgrowth of a local program serving District of Columbia students, operated for three years by a consortium of colleges and universities here. It will be administered by University Support Services Inc., a newly created nonprofit corporation. Financial backing for the loans comes from Shearson-Lehman and the Continental Insurance Corporation.

Loans will be originated by the National Bank of Washington, and will be serviced by Wachovia Services Inc. of Winston-Salem, N.C.

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