HE explained: CAMPARI anyone?

Sometimes the old ways of doing things have a lot to recommend them.  As a junior banker, I was taught credit appraisal via a mnemonic and I have continued to use this in my own teaching.  Although this method of credit appraisal is time-consuming and subjective, it does spell out the key factors that more automated systems (such as credit scoring) can miss.  The mnemonic of choice is CAMPARI.  This is fully outlined in my reasonably priced book Retail Banking (4edn.):

I KNOW ITS A GLASS OF SCOTCH BUT AT LEAST I OWN THE COPYRIGHT

The letters in CAMPARI stand for:

Character

Ability

Means

Purpose

Amount

Repayment, and

Insurance (this means guarantee/security/collateral - belt and braces for the wary banker).

So, how do student loans stand up?

Factor	How do students fare?
Character	Some students are excellent, trustworthy, pillars of their student community who work and play hard and achieve their potential.  Some are not.  How to tell the difference?  "A" Level grades? Motivational statement? Interviews?  No wonder most Universities choose the easy route.
Ability	Here Ability means the skill and resources to carry out the project for which the funds are lent…and some students just do not have it.  But before Universities find this out students are already in more debt than their granny would approve of – and with no graduate job in sight, little means to repay.
Means	Hmmm.  Just what do students contribute, financially to their fees and University accommodation rent?  On offer is a 100% loan with up to 30 years to repay (remember Northern Rock anyone?).  OK so a student’s future is at stake, they give their time and energy, skill and parents support.
Purpose	At last – we have a very worthy purpose.  The education of the population.  Not just the young but also those 50 somethings that never went to University and want to see if their brain still works (it does, be assured).  So, some purposes are more worthy and better risks in an investment sense than others.
Amount	Take the undergraduate degree fee.  This may have started at £9,000 in your first year but then went up to £9,250 in your second, thanks to the TEF Gold that your University gained.  Who knows what your “year out” fee will be or your final year.  So, at the outset, we really do not know the amount of the basic loan, let alone the maintenance loan/grant you can receive.
Repayment	Ahh….At last, there is a formula.  If your name has a “Z” in it and your mother was Ukrainian then your repayments are scheduled to start 12 months after graduation as long as your salary (note, not disposable income – so tough luck if your job is in London) exceeds a certain amount that will be the average of what each political party promised at their last party conference.
Insurance	Haha!  What possible collateral, guarantee or security could there be?  Unlike some places, there isn’t even a military service obligation to combat the moral hazard risk.  Also – go and hide in New Zealand and the bet may be called off after a while.

So, that's alright then.....