Full text of Economic Review (Federal Reserve Bank of Cleveland) : April 1967

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IN

THIS

ISSUE

1966 Survey of High
School Seniors in
C uya h oga County . .

M unicipal Securities:
Recent Trends in
Bank Investment . . .

3

22

Fourth District Developments
in Bank Credit C ard and
Check-Credit P la n s. . 27

FEDERAL



RESERVE

BANK

OF

CLEVELAND

A dd itional copies o f the E C O N O M IC

R E V IE W m ay

be obtaine d from the Research Department, Federal
Reserve Bank of Cleveland, P.O. Box 6 3 8 7 , C leveland,
O h io 4 4 1 0 1 . Permission is gra nte d to reproduce a n y
material in this publication.




A P R IL 1 9 6 7

1966 SURVEY OF HIGH SCHOOL
SENIORS IN CUYAHOGA COUNTY

Seniors in the public and private high

continue their academ ic education.2

schools of Cuyahoga County were surveyed
on their post high school plans for the second

OVERVIEW OF ALL SENIORS

successive year in the spring of 1966.1 Both

A statistical profile of high school seniors

the 1965 and 1966 surveys were undertaken

in Cuyahoga County is presented in Table

in cooperation with the Cleveland Commis­

I-a. A total of 17,880 usable replies were re­

sion on Higher Education. Essentially the

ceived from 8,429 boys and 9,451 girls. The

same questions were asked in 1966 as in 1965

respondents were almost equally divided be­

of those planning to go on to college. The

tween 17 and 18 year-olds (8,199 to 8,310).

1966 survey, however, w as more comprehen­

As in the 1965 survey, the girls tended to be

sive as it also inquired into the plans of those

slightly younger than the boys. More than

students who intended to work, to enter the

half of all seniors in the County attended

armed forces, or to continue their education

suburban

along nonacademic paths. The findings of

remaining seniors almost equally divided

the 1966 survey are discussed as follows:
a summary of the responses of the college-

between

schools.3 There were more boys than girls

bound students and, where appropriate, a

only in the suburban schools, but the margin

comparison with the 1965 survey; and a dis­

w as less than 1 percent.

public
City

high

high

schools,

schools

with the

and

private

cussion of the plans of those students who

Nearly 43 percent of the seniors reported

did not intend, at least for the present, to

family incomes between $5,000 and $10,000.

1 For discussion of the results of the first survey con­

2 A number of those planning to enter the armed forces

ducted in May 1965, see Economic Review, Federal Re­

reported the intention to take ad van tage of various edu­

serve Bank of Cleveland, Cleveland, Ohio, November

cational programs (vocational or academic) made avail­

1965, and January and February 1966.

able by the services or to use military service funds to
finance their education after discharge. Since such plans

NOTE: This Bank acknowledges the cooperation and
assistance of the sch o o l su p erin ten d en ts, principals,
teachers, and students in Cuyahoga County.
Hopefully, the information provided in this article will

were volunteered information, the incompleteness of the
data and the time lapse that must occur before the reali­
zation of any such plans preclude their inclusion in the
statistical summary.

be of help to the individuals and groups who are con­
cerned with education in general and higher education

3 The term "private schools" as used in this article in­

in particular, in both the Cleveland area and the nation

cludes both the parochial and private preparatory schools

at large.

that participated in the survey.




3

E C O N O M I C R E V IEW

TAB LE l-a
Profile o f H ig h School S e n io rs in C u y a h o g a C o u n ty
A g e , F a m ily Incom e, C o lle g e A tte n d a n ce of Parents, a n d Post H ig h Sch oo l P la n s
B y Se x of S tu d e n ts* a n d Sch oo ls A tte n d e d
Spring 1966
Sex of Students and Schools Attended

City

Private
(including Parochial)

Suburban

Total

Boys
Total

Girls

Boys

Girls

Boys

Girls

Boys

Girls

Total

1,968

2,213

4,843

4,769

1,618

2,469

8,429

9,451

17,880

Age
8

14

12

25

27

62

47

101

148

690

16 and Under
17

995

2,070

2,370

772

1,302

3,532

4,667

8,199
8,310

18

965

1,025

2,323

2,214

732

1,051

4,020

4,290

1 9 and Over

256

151

349

112

60

42

665

305

970

N o Response

49

28

89

48

27

12

165

88

253

Family Income
Under $5,000

200

251

166

171

99

145

465

56 7

1,032

$5,000-$ 10,000

997

1,031

1,951

1,768

837

1,080

3,785

3,879

7,664

O ve r $10,000

218

153

1,731

1,238

412

424

2,361

1,815

4,176

Unknown or N o Response

553

778

995

1,592

270

820

1,818

3,190

5,008

Father Only

172

172

870

883

275

447

1,317

1,502

2,819

Mother O nly

117

148

314

268

91

157

522

573

1,095

81

90

885

882

202

365

1,168

1,337

2,505

1,598

1,803

2,774

2,736

1,050

1,500

5,422

6,039

11,461

10,421

College Attendance of Parents

Both
Neither or N o Response
Post High School Plans
College

845

812

3,365

2,781

1,264

1,354

5,474

4,947

Nonacademic

501

530

689

841

146

437

1,336

1,808

3,144

W ork

417

848

416

1,126

98

671

931

2,645

3,576

Military Service

205

23

373

21

110

7

688

51

739

* A total of 146 students did not respond to the question of sex; of these 46 were in the city of Cleveland,
80 in the suburban high schools, and 20 in the private schools.
Source: Federal Reserve Bank of Cleveland

Less lhan 6 perceni reported family incomes

had attended college, for the County as a

under $5,000 (10.8 perceni in ihe City, 3.5 per­

whole, only one senior in three is from a home

ceni in ihe suburban schools, and 6 perceni

with a college-educated parent. Relevant

in ihe private schools); 23.4 perceni reported

data on college aiiendance of parents for the

family incomes in excess of $10,000, and 28.0

iwo years are as follows:

percent either did noi know family income,
C ity

or did not reply to the question.
Although slightly more seniors in 1966 than

1965

1966

Sub urb an
1965

1966

1965

Both P a ren ts

3 .8 % 4 .1 %

in 1965 (35.9 percent as compared with 32.5

F a th er O nly

8.5

8.2

16.9

18.2

M other O nly

4.6

6.1

5.7

6.0

perceni) reported that one or both parents

N either Paren t 83.1

81.6

60.2

57.7

71.5

Digitized for4
FRASER


17 .3 % 1 8 .2 %

Priva te
(in clu d in g
P a ro ch ia l)

8 .1 %

1966

To tal
1965

1966

13 .6 %

1 2 .5 % 1 3 .9 %

14.9

17.2

14.6

15.6

5.5

5.9

5.4

6.0

63.3

67.5

64.5

A PR IL 1 9 6 7

The percent of all seniors who planned io

their education and the 9,148 who reported

continue their education is almost identical

having been accepted by one or more col­

for the classes of 1965 (74.6 percent) and 1966

leges. The 13,405 includes those who had

(75.9 percent). In the earlier survey, the stu­

been accepted, those who planned to go to

dents were not asked to indicate specifically

college but had not yet been accepted in

whether their post high school educational

M ay 1965, and those whose post high school

plans were academ ic in nature (as contrast­

plans called for some form of nonacademic

ed, for example, io vocational). For this rea­

education. The total number of seniors in

son, an exact counterpart to the 1966 figures

1965 with plans for some form of post high

showing 10,421 who planned to go to college

school education is almost the sam e as the

and 3,144 who planned some form of non-

total for 1966 (13,565).
The 1966 profile data in Table I-b reveal a

academ ic post high school training is not
available. The nearest comparable 1965 fig­

number of interesting patterns. A much higher

ures are the 13,405 who planned to continue

percent of students in suburban and private

T ABLE l-b
Profile of H ig h Sch ool S e n io rs in C u y a h o g a C o u n ty E xp re sse d in Percent Term s
City
Boys

Girls

Private
(including Parochial)

Suburban
Total

Boys

Girls

Total

Boys

Girls

Total

Total
Boys

Girls

Total

A ge
0 .4 %

1 6 and Under

0 .6 %

0 .5 %

0 .2 %

0 .5 %

0 .4 %

1 .7 %

2 .5 %

2 .2 %

0 .6 %

1 .1 %

0 .6 %

17

35.1

45.0

40.3

42.7

49.7

46.2

47.7

52.7

50.7

41.9

49.4

45.9

18

49.0

46.3

47.6

48.0

46.4

47.2

45.2

42.6

43.6

47.7

45.4

46.5

1 9 and Over

13.0

6.8

9.7

7.2

2.3

4.8

3.7

1.7

2.5

7.9

3.2

5.4

No Response

2.5

1.3

1.8

1.8

1.0

1.4

1.7

0.5

1.0

2.0

0.9

1.4

Family Income
Under $5,000

10.2

11.3

10.8

3.4

3.6

3.5

6.1

5.9

6.0

5.5

6.0

5.8

$5,000-$ 10,000

50.7

45.6

48.5

40.3

37.1

38.7

51.7

43.7

46.9

44.9

41.0

42.9

O ver $10,000

11.1

6.9

8.9

35.7

26.0

30.9

25.5

17.2

20.5

28.0

19.2

23.4

Unknown or N o Response 28.1

35.2

31.8

20.5

33.4

26.9

16.7

33.2

26.7

21.6

33.8

28.0

15.8

College Attendance
of Parents
Father O nly

8.7

7.8

8.2

18.0

18.5

18.2

17.0

18.1

17.7

15.6

15.9

Mother Only

5.9

6.7

6.3

6.5

5.6

6.1

5.6

6.4

6.1

6.2

6.1

6.1

Both

4.1

4.1

4.1

18.3

18.5

18.4

12.5

14.8

13.9

13.9

14.1

14.0

81.2

81.5

81.3

57.3

57.4

57.3

64.9

60.8

62.4

64.3

63.9

64.1

College

42.9

36.7

39.6

69.5

58.3

63.9

78.1

54.8

64.1

64.9

52.3

58.3

Nonacademic

25.5

24.0

24.7

14.2

17.6

16.0

9.0

17.7

14.3

15.8

19.1

17.6

W ork

21.2

38.3

30.3

8.6

23.6

16.0

6.1

27.2

18.8

11.0

28.0

20.0

Military Service

10.4

1.0

5.5

7.7

0.4

4.1

6.8

0.3

2.9

8.2

0.5

4.1

Neither or N o Response
Post High School Plans

Totals may not equal 100 percent due to rounding.
Source: Federal Reserve Bank of Cleveland




5

E C O N O M I C R E V IEW

schools planned to go to college than did

Table II.) In the middle group, the number of

students in the City schools (64 percent as

boys going to college is three-fourths as large

compared with 40 percent). The differences

as in the upper third; the number of girls in

between the percent of boys and the percent

the middle group with similar intentions is

of girls who planned to attend college are not

only half as great as in the upper third.

as large in the City schools as in the suburban

As shown in Tables II and III, the younger

and private schools (City schools, 43 percent

students in general tend to rank higher in

of the boys and 37 percent of the girls; subur­

their graduating classes and go on to college

ban schools, 70 percent of the boys and 58

in greater numbers. Of the 8,199 students

percent of the girls; private schools, 78 per­

who were 17 years old, 5,258 (64 percent)

cent of the boys and 55 percent of the girls).

planned to attend college; of these, 2,679

On the other hand, a higher percent of girls

were reported to rank in the upper third of

than boys in both the suburban and private

their class (51 percent). There were a similar

schools planned some form of nonacademic

number of 18 year-olds (8,310), but only 4,686

post high school training (see Table I-b).

indicated that they were college bound (56.4

As shown in Table I-a, twice as m any girls

percent); of these, 2,100 reported they were

as boys from the City schools planned to go

in the upper third of their class (44.8 percent).

directly to work after high school; in the

As might be expected, the higher the family

suburban schools, the ratio is nearly three

income the higher the percent of college-

to one, and in the private school category,
seven to one. The percent of boys planning

bound students. While slightly under half
of those who reported family incomes of un­

to enter the armed forces is substantially

der $5,000 planned on college, the percent

higher in the City than in either of the other

rises to 56 percent for those in the $5,000-

two groups (10.4 percent as compared with

$10,000 bracket, and to 77 percent for those

7.7 percent for the suburban and 6.8 percent

from families with incomes over $10,000.

for the private schools).

In Table V the data show that only in the
lowest income bracket (under $5,000) did as

THE COLLEGE-BOUND STUDENTS

many girls as boys expect to attend college.

In the 1966 survey, 10,421 students indi­

College attendance between the sexes seem­

cated plans to attend college. Although there

ed to vary inversely with family income, that

were 1,000 more girls than boys among the

is, as income rises, boys are more likely to go

high school seniors in Cuyahoga County,

to college. One note of caution should be

over 500 more boys than girls reported they

exercised; a substantially larger number of

were college bound (see Table II).
A factor in the college plans of students is

girls than boys either reported income un­
known or did not respond to the question.

rank in class. Almost half (47 percent) of those

The fact that a student's parents attended

going to college reported being in the upper

college is no assurance he will attend. Of

third of their class, while 31 percent reported

the 6,419 seniors who reported that one or

being in the middle third. (Data are from

both of their parents had gone to college,

6




TABLE II
H ig h Sch ool Se n io rs in C u y a h o g a C o u n ty W ith P la n s to A tte nd C o lle g e
A g e , F a m ily Incom e, C o lle g e A tte n d a n ce of Parents, R a n k in C la s s
By Se x of Students a n d Sch ools A tte n d e d
Spring 1966
Sex of Students and Schools Attended
City
Boys

Girls

Total

845

Total

Private
(including Parochial)

Suburban

812

1,657

Boys

Girls

Total

3,365 2,781 6,146

Boys

Girls

Total

1,264 1,354 2,618

Total
Boys

Girls

Total

5,474 4,947 10,421

A ge
7

8

15

26

25

67

108

17

370

423

793

1,609 1,465 3,074

636

755 1,391

2,615 2,643

5,258

18

1,587 1,259 2,846

557

543 1,100

2,540 2,146

4,686

16 and Under

9

17

42

67

41

2 96

344

740

19 and O ver

53

27

80

111

16

127

26

11

37

190

54

244

N o Response

19

10

29

49

24

73

20

3

23

88

37

125

77

244

Family Income
85

111

196

95

172

64

66

130

$5,000-$ 10,000

476

438

914

1,235

934 2,169

641

541

1,182

O ve r $10,000

108

74

182

1,410

954 2,364

363

311

647

Unknown or N o Response

176

189

365

625

816 1,441

196

43 6

632

Under $5,000

254

498

2,352 1,913

4,265

1,881

1,339

3,220

9 97 1,441

2,438

College Attendance of Parents
2,034

Father Only

110

90

200

693

599 1,292

246

296

542

1,049

985

Mother Only

65

81

146

258

191

449

67

100

167

390

372

762

Both

64

70

134

800

781

1,581

184

295

47 9

1,048 1,146

2,194

606

571

1,177

1,614 1,210 2,824

767

663 1,430

2,987 2,444
;

5,431

Upper Third

367

409

776

1,389 1,637 3,026

530

603 1,133

2,286 2,649

4,935

M iddle Third

240

187

427

1,176

726 1,902

451

416

867

1,867 1,329

3,196

70

30

100

322

89

411

145

104

249

537

223

760

168

186

354

478

329

807

138

231

369

784

746

1,530

Neither or N o Response
Rank in Class

Lower Third
N o Response

Source: Federal Reserve Bank of Cleveland

TABLE III

only 4,990 planned to allend college. None­

H ig h School Se n io rs in C u y a h o g a C o u n ty W ith
P la n s to A tte nd C o lle g e
R a n k in C la ss

theless, nearly half the college-bound stu­

By A g e a n d Sex of Students
Spring 1966

Rank in Class

17

19
and
Over

18

at least one parent had been to college (35.9
percent of all seniors in the County had at
least one parent who had been to college).

A g e and Sex of Students
16
and
Under

dents (47.9 percent) are from homes in which

No
Response
To A g e

This reflects, in part, the correlation of income
Total

and education. It also reflects the fact that a
college-experienced person in the home does

Upper Third
Boys

30

1,195 1,003

31

27

2,286

help, whether it is in motivating the student,

Girls

45

1,484

1,097

10

13

2,649

or in making a more informed choice of a

Boys

5

894

861

78

29

1,867

Girls

15

686

597

20

11

1,329

M iddle Third

The data in Table VI reveal an interesting
point — namely,

Lower Third
Boys

2

196

291

33

Girls

1

115

104

3

15

53 7

-0 -

223

college-educated

parents

seem to place more value on the education
of women, particularly when both parents

Unknown or
N o Response
Boys

4

330

385

48

17

784

Girls

6

358

348

21

13

746

2,615 2,540

190

88

5,474

2,146

54

37

4,947

Total
Boys

college, preparing applications, etc.

41


Girls
67
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have been to college. Thus, when both par­
ents had been to college, the number of girls

T AB LE IV
H ig h Sch ool Se n io rs in C u y a h o g a C o u n ty W ith P la n s to A tte nd C o lle g e
R a n k in C la s s a n d Prospective C o lle g e
B y A g e a n d Se x of Students
Spring 1966
A g e and Sex of Students
1 6 and
Under

17

Boys

Girls

Boys

1 9 and
O ver

1
Girls

Boys

Girls

Boys

N o Response
To A g e

Girls

Boys

Girls

Total
Boys

Girls

Total

Upper Third
County Public
County Private
Other Public
Other Private
N o Response to College
Total

5

10

249

243

221

204

9

8

4

3

488

468

956

12

13

157

175

109

95

6

-0 -

1

-0 -

285

283

568

3

10

4 03

613

373

461

8

1

9

7

7 9 6 1,092 1,888

10

12

377

433

295

318

8

1

12

5

702

-0 -

-0 -

9

18

5

19

-0 -

-0 -

1

-0 -

15

30

45

1,003 1,097

31

10

27

15

1,195 1,482

7 6 9 1,471
37

52

2,286 2,649 4,935

M id d le Third
County Public

3

4

348

219

307

181

39

12

15

2

712

County Private

1

-0 -

50

24

50

36

3

-0 -

-0 -

1

104

-0 -

5

315

281

328

220

24

5

8

5

675

516 1,191

Other Public
Other Private
N o Response to College
Total

418 1,130
61

165

1

6

169

149

166

145

10

3

7

3

353

306

659

-0 -

-0 -

11

13

10

14

2

-0 -

-0 -

1

23

28

51

5

15

893

686

861

596

78

20

30

12

1,867 1,329 3,196

Lower Third
County Public

1

1

92

35

125

32

19

3

10

-0 -

247

71

County Private

1

-0 -

1

8

4

2

-0 -

-0 -

-0 -

-0 -

6

10

16

-0 -

-0 -

67

35

105

46

11

-0 -

3

-0 -

186

81

267
140

Other Public

318

Other Private

-0 -

-0 -

32

29

52

22

3

2

-0 -

89

51

N o Response to College

-0 -

—
0—

4

8

5

2

-0 -

—0 —

-0 -

-0 -

9

10

19

2

1

196

115

291

104

33

3

15

-0 -

5 37

223

760

657

Total

-0 -

Unknown or N o Response
-0 -

2

156

114

193

139

29

13

7

4

385

272

County Private

County Public

1

-0 -

22

23

19

18

2

1

-0 -

-0 -

44

42

86

Other Public

2

2

106

129

111

91

11

1

6

6

236

229

495

Other Private
N o Response to College
Total

1

2

42

76

51

83

6

4

2

-0 -

102

165

267

-0 -

-0 -

5

18

11

18

-0 -

2

1

-0 -

17

38

55

4

6

331

360

385

349

48

21

16

10

784

746 1,530

Source: Federal Reserve Bank of Cleveland

who planned to attend college exceeded the

who planned to attend private colleges with­

number of boys, 1,146 to 1,048. In contrast,

in Cuyahoga County are included, the num­

when neither parent attended college the

ber of those enrolled in a college in their

corresponding figures were girls 2,444, and

home community rises to 37.4 percent of the

boys 2,986.

total. Comparable figures for the class of
1965 were 805 who planned to attend Cleve­

WHERE ARE THEY G O IN G TO COLLEGE?

land State University and 1,300 Cuyahoga

Nearly 30 percent of the seniors in C uya­

Community College. The percent of all those

hoga County with college plans expected

who planned to attend college within the

to enter either Cleveland State University

County in 1965 was 33.8. These figures clearly

(1,788) or Cuyahoga Community College

point to the significance of the need for ade­

(1,273). (See Tables VH-a and VH-b.) If those

quate and varied college facilities in a large


8


T AB LE V
H ig h School S e n io rs in C u y a h o g a C o u n ty
W ith P la n s to A tte n d C o lle g e
F a m ily Incom e

metropolitan area. Surprisingly, a higher per­
cent of boys than girls planned to go to col­

B y A g e a n d Se x of Students
Spring 1966
A g e and Sex o f Students

lege within the County (boys, 33 percent in

16
and
Under

Cleveland public and 41 percent total within
the County; girls, 25 percent in Cleveland

Family Income

18

17

No
Response
To A g e

19
and
O ver

Total

Under $5,000

public and 34 percent total within the County).

Boys

1

112

115

13

3

244

The decision to attend a local college did not

Girls

4

131

112

6

1

254

appear to be heavily influenced by intentions
to work full time, as a great majority of both
sexes reported they were going to school full
time (91.6 percent of the boys and 89.1 percent
of the girls).
The intention to attend college as a full­
time student did not differ as much as might
be anticipated between the lower income
category (under $5,000) and the upper cate­
gory (over $10,000) — 84 percent and 95 per­
cent, respectively. (Not shown in tables.) An

$5,000-$ 10,000
Boys

19

1,140 1,079

75

39

2,352

Girls

38

1,056

788

20

11

1,913

$ 10,000 and Over
Boys

17

893

895

46

30

1,881

Girls

15

706

603

6

9

1,339

Boys

4

470

451

56

16

997

Girls

10

750

643

22

16

1,441

Unknown or
N o Response

Total
Boys

41

2,615 2,540

190

88

5,474

Girls

67

2,643 2,146

54

37

4,947

Source: Federal Reserve Bank of Cleveland

attraction of the local schools appears to be
the economies to be realized by living at
home. The number who planned to live at
home at all income levels closely matched

T AB LE V I
H ig h Sch ool S e n io rs in C u y a h o g a C o u n ty W ith
P la n s to A tte nd C o lle g e

the number who planned to go to college

C o lle g e A tte n d a n ce of Parents
By A g e a n d Sex of Students

within the County.

Spring 1966

Incom e

Attend College
W ithin County

U nder $5,000
$5,000-$10,000

Liv e
at Home

268

262

2,067

1,961

Over $10,000

725

661

U nknown or No Response

835

817

A g e and Sex of Students
College
Attendance
of Parents

16
and
Under

17

18

19
and
Over

No
Response
To A g e

Total

Father Only
Boys

That the number with plans to attend col­
lege within the County exceeds the number
with plans to live at home reflects the fact
that the private colleges welcome freshmen
in the dormitories whenever space is avail­
able, as the colleges believe "living on cam ­
pus" can be a valuable pari of the total
educational experience.
As might be expected, family income is
an important factor that influences the choice



10

533

463

27

16

1,049

Girls

14

563

399

3

6

985

Boys

2

184

183

15

6

390

Girls

3

187

179

2

1

372

Mother Only

Both Parents
Boys

10

532

463

21

22

1,048

Girls

17

611

502

11

5

1,146

Neither or
N o Response
Boys

19

1,366 1,431

Girls

33

1,282

126

44

2,986

1,066

38

25

2,444

Total
Boys

41

2,615 2,540

190

88

5,474

Girls

67

2,643 2,146

54

37

4,947

Source: Federal Reserve Bank of Cleveland

9

TABLE V ll-a
H ig h Sch ool Se n io rs in C u y a h o g a C o u n ty W ith P la n s to A tte nd C o lle g e
P rospective C o lle g e
By F a m ily Incom e
Spring 1966
______________ Prospective College________________
C uyahoga County
Family Income

Total

Public

Private

Other
Public

No
Private

Response

Under $5,000
B o y s ..............................................

244

103

26

64

47

4

G i r l s ..............................................

254

118

21

59

48

8

B o y s ..............................................

2,352

1,040

202

699

391

20

G i r l s ..............................................

1,913

641

185

694

354

39

B o y s ..............................................

1.881

355

143

784

609

26

G i r l s ..............................................

1,339

140

87

58 7

505

20

$5,000 to $10,000

O ve r $10,000

Unknown or N o Response
B o y s ..............................................

99 7

334

68

382

199

14

G i r l s ..............................................

1,441

330

103

578

384

46

Total
B o y s ..............................................

5,474

1,832

439

1,893

1,246

64

G i r l s ..............................................

4,947

1,229

396

1,918

1,291

113

T o t a l ..............................................

10,421

3,061

835

3,811*

2,5 3 7 f

177

* O f those with plans to g o to public colleges outside C u y a h o g a County, 3,228 planned to attend a public college elsewhere
in O h io and 583 an out-of-state public institution.
f O f those with plans to g o to private colleges outside C u y a h o g a County, 1,016 planned to attend a college elsewhere in Ohio,
and 1,521 an out-of-state private college.
N O T E:

Total O h io
Total Public O h io
Total O ut of State

8,140
6,289
2,104

Source: Federal Reserve Bank of Cleveland

between a college located within the County

The percent of those going to the private

or outside the County. More than half (53.8

colleges within the County is the most stable

percent) of those with reported incomes under

figure in all income brackets. For those going

$5,000 planned to go to college within the

to public colleges outside the County the

County. The figure drops slightly (to 48.5

percent increases steadily (about 8 percent­

percent) for those in the middle income range,

age points for each income bracket), while

and then significantly (to 22.5 percent) for

the percent attending private colleges out­

those who reported family incomes of over

side the County does not rise until the over

$

$10,000 income bracket is reached. All this

10,000 .

Income
Under
$5,000

$5,000$10,000

Over
$10,000

County P u blic

4 4 .4 %

39 .4 %

County P rivate

9.4

County Total

is quite consistent with known relative costs
U nknown or
No Response

of attendance at schools in the various cate­

15.4%

2 7 .2 %

gories. The fact that a higher percent of those

9.1

7.1

7.0

5 3 .8 %

4 8 .5 %

2 2 .5 %

3 4 .2 %

with family incomes under $5,000 than those

Other P u blic

2 4 .7 %

3 2 .7 %

4 1 .5 %

3 9 .4 %

in the middle bracket reported intentions to

Other P rivate

19.1

17.5

34.6

23.7

No Response

2.4

1.3

1.4

2.7

attend more costly colleges (private colleges

100.0%

100.0%

100.0%

within and without the County) reflects the

100.0%


10


TABLE V ll-b
H ig h School Se n io rs in C u y a h o g a C o u n ty
W ith P la n s to A tte nd Local Public C o lle g e s
By F a m ily Incom e
Spring 1966

Family Income

Cleveland
State University

C uyahoga
Community
College

ties, a reversal of the pattern for the Ohio
colleges and universities.

Under $5,000
Boys

53

50

Girls

59

59

$5,000-$ 10,000
Boys

650

390

Girls

371

270

HOW IS THE COLLEGE EDUCATION
TO BE FINANCED?
The response to the question, "How do you
expect to finance your further education?"

Over $10,000

reveals that the financial burden remains

Boys

211

144

Girls

74

66

Boys

194

140

selves.

Girls

176

154

(7,836) look to their parents for all or part of

Boys

1,108

724

Girls

680

549

N o Response

largely with parents and the students them­
Three-fourths

of

the

respondents

their college expenses, and nearly a fourth

Total

Source: Federal Reserve Bank of Cleveland

of those (2,479) rely exclusively on parents.
A majority of the respondents expected to
make some contribution of their own either

influence of financial assistance.

from accumulated savings or earnings while

Approximately two-thirds of those who

in college. About one in ten expected to fi­

were to attend college expected to enroll in

nance his education individually (951 stu­

a public institution; of this number, 6,289

dents indicated sole reliance on earnings and

(more than 90 percent) were going to a col­

274 on accumulated savings). A majority of

lege in Ohio. More boys than girls planned

the students (6,392) gave multiple responses,

to attend a public institution (68 percent of
the boys and 63 percent of the girls). Although

which indicate a combination of the various
financing sources.

the precise reason for this difference cannot
be determined, it m ay reflect the alleged

A second significant point revealed by the

difficulty of girls being admitted to resident

financing data is that the number of students

public universities because of lack of living

(or their parents) with intentions to borrow

accommodations or a preference on the part

exceeds the number who received scholar­

of girls to attend smaller (private) institutions.

ships by about five to four. The data in Table

The total number of students who planned

VIII summarize the size and sources of

to attend Ohio colleges and universities (pub­

scholarships and loans. More boys than girls

lic and private) amounts to 8,140 or 78 percent

received scholarships, and more of the larger

of the total. Of those who intended to go to

scholarships (over $1,000) went to the boys

college in Ohio, 77 percent were planning to

(283 compared with 142). Sources were simi­

enter a public college or university. However,

lar for both sexes. On the other hand, more

more than 72 percent (1,521) of the students

girls (or their parents) borrowed, but the

who intended to go to college out of state

amounts borrowed by boys and girls were

were entering private colleges and universi­

approximately equal. Government and banks




11

E C O N O M I C R E V IE W

and other financial institutions were more fre­

tions, m ay not be particularly large, but they

quent sources of loans for girls, while schools

are often considered as indicators of a c a ­

m ade more loans to boys. A total of 1,249

demic excellence. In turn, colleges seek such

individuals received scholarships from a total

students,

of 1,508 sources. Similarly, 1,571 students bor­

scholarship aid is needed by the student.

rowed in the amounts indicated from a total
of 1,798 sources.

and

offer

whatever

additional

There is a strong inverse relationship be­
tween family income and scholarships and

W hat might be called "package financing"

borrowing. While 24 perceni of those who

of a college education is becoming more and

planned to go to college from homes with

more common according to reports of the

family incomes below $5,000 received schol­

college administrators who provide financial

arships and 30 percent borrowed, the corre­

assistance. When a student applies for ad­

sponding figures drop to 16 perceni and 20

mission and indicates a need for financial

percent, respectively, for those from homes in

assistance, the application is processed in

the $5,000-$ 10,000 group and to 8 percent for

the usual way. If the student is accepted, the

scholarships and borrowing at the over

request for financial aid is reviewed in the

$10,000 level. (The figures for those with fam­

light of potential academ ic

ily income unknown or not reported are 8

performance

along with ability for self-help, family con­

percent and 12 percent, respectively.)

tribution, and resources at the disposition of
ihe school (either its own or government
funds made available through the school).

The size of the scholarship aw ards also
appears to bear a close relationship to family

Frequently, the offer is a combination of part-

income (despite the vagaries of a few of the

time employment, an outright grant or schol­

older, special scholarships). Eight percent of

arship, and a loan.4 From the results of the

those from families with incomes below

survey, it w as found that 814 students were

$5,000 reported scholarships worth $1,000 or

awarded scholarships only, while 1,136 stu­

more. In the middle income bracket, the fig­

dents borrowed to help finance their educa­

ure is slightly over 5 percent, and for incomes

tion and received no scholarship help, and

over $10,000, 3 percent. For those who did

435 both borrowed and received scholarship

not report family income or marked it un­

aid. Some scholarships, especially those

known, the corresponding figure is 2 percent.

awarded on the basis of national compeii-

Not only did students from the lower in­

4 A grant, at least at the undergraduate level, indicates

ihe larger scholarships, but they also found

come families receive a higher percent of
financial need coupled with ability to perform at an a c ­
ceptable academ ic level. A scholarship implies a higher
standard of academ ic performance and m ay or m ay not

it necessary and were more inclined to go
into debt. Six percent of those from the under

involve actual need. Because of ihe multiplicity of stan­

$5,000 income category borrowed $1,000 or

dards that govern the various financial aw ards, the

over, which com pares with 3 percent in the

guestion in the survey w as phrased in the simple and

middle income group and only 1 percent in

popularly accepted w ay a s "scholarship."

the upper income bracket.


12


A PR IL 1 9 6 7

TABLE V III
H ig h School Se n io rs in C u y a h o g a C o u n ty W ith P la n s to A tte nd C o lle g e
Size a n d Source of S c h o la rsh ip s a n d Loans
By F a m ily Incom e a n d Sex of Students
Spring 1966
Family Income and Sex of Students

Under $5,000
Boys

Girls

$5,000-$ 10,000

$10,000
and Over

N o Response
or Unknown

Total

Boys

Girls

Boys

Girls

Boys

Girls

Boys

Girls

Total

Scholarships
Under $5 00

11

24

74

135

45

47

15

54

145

260

$5 0 0 -$ 9 9 9

16

23

97

100

40

22

17

33

170

178

348

$1,000-$ 1,999

16

10

101

63

36

21

29

15

182

109

291

$2,000 and Over

6

9

50

20

37

4

8

-0 -

101

33

134

N o Response

1

3

16

14

14

4

9

10

40

31

71

50

69

338

332

172

98

78

112

638

611

1,249

Total Receiving

405

Scholarships by Source*
Alumni

1

4

15

14

9

7

2

-0 -

27

25

52

School

36

48

250

241

111

73

58

81

455

443

898

Government

194

16

14

57

63

16

8

7

13

96

98

Business

2

1

18

19

16

2

8

6

44

28

72

Private Corporations

6

20

39

31

15

14

10

12

70

77

14 7

N o Response

5

3

35

39

25

15

6

17

71

74

145

66

90

414

407

192

119

91

129

763

745

1,508

Under $5 00
$ 5 0 0 -$ 9 9 9

19
27

35
33

133
194

162
199

39
62

43
44

38
43

52
78

229
326

292
354

521
680

$1,000 and O ver

20

11

59

56

25

17

14

21

118

105

223

1

5

19

32

19

13

17

41

56

91

147

67

84

405

449

145

117

112

192

72 9

842

1,571

37 7

Total Scholarships
Loans by Size

N o Response
Total Borrowing
Loans by Source*
School

17

21

110

89

47

24

31

38

205

172

Government

47

62

199

269

48

47

46

97

340

475

815

Banks and Other Fin. Inst.

9

11

97

119

51

47

32

60

189

237

426

N o Response and Other

8

6

45

41

17

12

25

26

95

85

180

81

100

451

518

163

130

134

221

829

969

1,798

Total Loans

*The total number of students who received scholarships and educational loans is not equal to the total number of sources
because of multiple scholarships and loans.
Source: Federal Reserve Bank of Cleveland




13

E C O N O M I C R E V IEW

Schools are the most frequent source of

(3,576) and to prepare for specific careers by

scholarship aid, accounting for 898 of the

taking nonacademic post high school pro­

1,508 awards. (See Table VIII.) It should be

gram s (3,144). Background information on the

noied, however, that an immeasurable part of

nonacademic group is presented in Table X.

the funds reported by the students as coming

The plans of the nonacademic group m ay be

from the schools is government money made

summarized as follows:

available through the schools. The govern­

Program

G irls

. . .

131

519

IBM s c h o o l...................................................

scholarship aid only in the case of grants re­

Boys

B u sin e ss s c h o o l ........................................

ment is credited by the students as a source of

. . .

97

246

. . . . . .

525

98

4

228

11

244

Trad e or technical school .

P ra ctica l n u r s i n g ..................................

.

A pprenticeship program

awarded to children of veterans. In the case

. . .

Cosm etology...................................................

ceived directly, for example, scholarships

. . .

403

14

. . .

165

459

1,336

1,808

Other

of loans, the most frequent source is the

. . . .

...............................................................

T o t a l ....................................................................

. .

. . . .

government, with banks and other financial

The age distribution and distribution by fam­

institutions second, and schools, third.

ily income of students who chose nonaca­

The pattern of scholarship aw ards and
loans in relation to age is of considerable in­

demic programs differ from those students
who were college bound, as shown below;

terest (see Table IX). While the number of
Age

17,880), the proportion with college plans is

A ll
S en io rs

16 and Under

seniors 16 and under is small (148 out of

*

17

46%
47

18

high, or 73 percent (108 out of 148). In that
age bracket, 34 percent of the students re­

19 and Over

5
1

No Response

ceived scholarships and 30 percent borrowed

College
Bound

Nonacadem ic
Program s

~ T%
50

*
42%

45

47

2
1

2

8

Fam ily
Incom e

College
Bound

Nonacademic
Program s

U nder $5,000

to help finance their education. For 17 year-

A ll
Sen io rs

$5,000-$10,000

6%
43

~ 5%

olds, 13 percent received scholarships and

41

7%
45

Over $10,000

23

30

13

15 percent borrowed and in the 18 year-old

U nknown or
No Response

28

24

34

group, 11 percent were awarded scholarships

* L e s s than one percent.
T o ta ls m ay not equal 100 p ercent due to rounding.

and 14 percent borrowed. Of the 19 year-olds
with college plans, only 5 percent received

While 41 percent of the college bound re­

scholarships, but 18 percent valued further

ported being in the middle income bracket

education enough to borrow to help achieve

($5,000-$10,000), 45 percent of the nonaca­

it. Six percent of those who did not respond

demic group so reported. However, 30 percent

to the question of age reported they had re­

of the college-bound students as contrasted

ceived scholarships and 14 percent borrowed.

to

SENIORS W HO PLANNED TO CONTINUE
THEIR EDUCATION IN
NO NACADEM IC PROGRAMS

$10,000 income group.

13 percent

of the

nonacademic

pro­

gram students reported being in the over
Two other important characteristics of the
nonacademic group are the college attend­

As shown in Table I-a, nearly equal num­

a n ce of p a ren ts and rank in c la s s of the

bers of seniors decided to go directly to work

student. P ercen t distributions of college-

Digitized 14 FRASER
for


A PR IL 1 9 6 7

TAB LE IX
H ig h School Se n io rs in C u y a h o g a C o u n ty W ith P la n s to A tte n d C o lle g e
Size of S c h o la rsh ip s a n d L o a ns
B y A g e a n d Sex of Students
Spring 1966
A g e and Sex o f Students
1 6 and
Under

17
Girls

Boys

Girls

Total

Girls

Boys

Girls

190

54

88

37

1

1

-0 -

145

260

405

2

1

1

170

178

348

1

3

—0 —

182

109

291

2

-0 -

1

-0 -

101

33

134

14

-0 -

-0 -

—0 —

-0 -

40

31

71

231

9

4

6

1

638

611

1,249

521

Girls

41

67

Under $500

3

12

74

155

64

92

3

$5 0 0 -$ 9 9 9

4

5

85

109

78

61

2

$1,000-$ 1,999

4

3

97

59

76

46

2

$2,000 and Over

3

1

45

14

50

18

N o Response

1

1

15

16

24

15

22

316

353

292

2,615 2,643

N o Response
To A ge

Boys

Boys
Total Students with
College Plans

Boys

19 and
O ve r

18

2,540 2,146

Boys

Girls

Total

5,474 4,947 10,421

Scholarships

Total
Loans
Under $500

2

8

107

162

103

116

12

3

5

3

229

292

$ 5 0 0 -$ 9 9 9

6

9

161

183

146

151

11

5

2

6

326

354

680

$1,000 and Over

1

5

63

53

47

45

7

1

-0 -

1

118

105

223

1

-0 -

30

52

19

38

6

-0 -

-0 -

1

56

91

147

10

22

361

450

315

350

36

9

7

11

72 9

842

1,571

N o Response
Total

Source: Federal Reserve Bank of Cleveland

educated parents for all seniors in Cuyahoga
County, the college bound, and the nonaca­
demic group are as follows:
Attended
College

A ll
Stu de nts

College
Bound

F a th er Only

16%

19%
7

post high school plans of students.5
Perhaps ihe most surprising figure is the 34
percent of those with plans to follow nonacadem ic programs who reported family in­

Nonacadc
13%
6

come unknown or did not respond to the
question. It m ay be th at the problem s of

M other Only

6

Both P aren ts

14

21

6

N either or
No Response

financing a college education bring a greater

64

53

75

aw areness of family income in college-bound

While the chances are about 50-50 that the

students, or that socio-economic restraints in­

college-bound student had at least one parent

creased the no response or unknown reaction

who attended college, the odds are only one

to this question. (See the discussion in the

in four for the group with plans for some form

third of the series of articles based on the 1965

of nonacademic post high school training. In

survey.)6 The latter possibility m ay also re­

fact, the odds for the latter are less than that

flect the relatively larger number of girls than

for the group as a whole (one in three).
The comparisons with family income and

5 Statistical analysis is in progress to determine the rela­
tive significance of these factors and other variables, and

parents' education raise a fundamental ques­

will be reported upon in a later article.

tion as to the relative influence of the two on

6 Economic Review, Febru ary 1966, op. cit.




15

E C O N O M I C R E V IEW

TABLE X
H ig h School Se n io rs in C u y a h o g a C o u n ty W ith P la n s to C o n tin u e Their
Education — N o n a c a d e m ic
A g e , F a m ily Incom e, C o lle g e A tte n d a n ce of Parents, a n d R a n k in C la ss
By Sex of Students a n d Schools A tte nd ed
Spring 1966
Sex of Students and Schools Attended

City

Private
(including Parochial)

Suburban

Total

Boys
Total

Girls

Total

Boys

Girls

Total

Boys

Girls

Total

501

530

1,031

689

841

1,530

146

43 7

583

Boys

Girls

Total

1,336 1,808 3,144

A ge
4

5

1

2

2

8

10

4

14

18

17

141

223

364

248

403

651

61

245

306

450

871

1,321

18

824 1,489

16 and Under

1

3

264

251

515

333

394

727

68

179

247

665

19 and Over

81

45

126

93

32

125

8

3

11

182

80

262

N o Response

14

7

21

14

10

24

7

2

9

35

19

54

135

234

Family Income
Under $5,000
$5,000-$ 10,000
Ove r $10,000
Unknown or N o Response

59

73

132

29

34

63

11

28

39

99

232

215

447

354

345

699

79

202

281

665

762 1,427

52

30

82

144

137

281

20

40

60

216

207

158

212

370

162

325

487

36

167

203

356

704 1,060

423

College Attendance of Parents
Father Only

32

47

79

96

144

240

14

70

84

142

261

Mother Only

32

37

69

32

38

70

11

35

46

75

110

185

Both

11

11

22

42

58

100

10

50

60

63

119

182

426

435

861

519

601

1,120

111

282

393

Upper Third

75

114

189

53

193

246

16

110

126

144

417

M iddle Third

168

153

321

243

258

501

59

139

198

470

550 1,020

Neither or N o Response

403

1,056 1,318 2,374

Rank in Class

Lower Third
N o Response

561
430

79

58

137

123

75

198

32

63

95

234

196

179

205

384

270

315

585

39

125

164

488

645 1,133

Source: Federal Reserve Bank of Cleveland

boys who elected to pursue nonacademic post
high school courses (19 percent as compared
with 16 percent of all seniors).

A ll
Stu d e n ts

College
Bound

U pper Th ird

34%

47%

18%

M iddle T h ird

31

31

32

Lo w er Th ird

11

7

14

U nknown or
No Response

24

15

36

C la ss
Rank

N onacadem ic

In the nonacademic group, 1,133 students

Since many nonacademic programs are

(36 percent) either did not know or did not

not without cost or m ay be expensive, it is

answer the question of class rank; this com­

interesting that scholarship aid and borrow­

pares with 1,530 (15 percent) of the college

ing are factors in nonacademic programs.

bound. The com parable percent distributions

Thus, 53 stu d en ts (21 b oys and 32 girls)

on class rank are as follows:

reported receipt of scholarships, while 165


16


A PR IL 1 9 6 7

students (47 boys and 118 girls) reported bor­
rowing to finance their post high school train­
ing. Responses to these questions are sum­

A ll
Se n io rs

Age
16 and U n d e r ....................................................
1

M ilitary
S e rv ice

18

*

—0—

46%

7

27 %

47

50

....................................................

5

20

No R e s p o n s e ...................................................

1

2

19 and Over

marized below:

♦ L e ss than one percent.
T o ta ls m ay not equal 100 percent due to rounding.
Sch o la rsh ip s

Boys

U n d e r$500 ..............................................................

4

$500-$999

5

..............................................................

G irls
14

11

$1,000-$1,999 ........................................................

4

$2,000 and O v e r ...................................................

3

-0-0-

No R e s p o n s e .........................................................

5

7

T o t a l ....................................................................

21

32

represented less than 1 percent of all seniors,

Sch o larship Sources

but accounted for about 6 percent of those

(m u ltip le responses)
A lu m n i.........................................................................

Those en terin g m ilitary service who re­
ported being in the top third of their class

2

S c h o o l ..........................................................................

2

B u s i n e s s ....................................................................

5

Private C o rp o ra tio n s ........................................

entering the service. Distribution of family

7

G o v e rn m e n t..............................................................

6

income approximates that of all seniors, with
6 p ercen t under $5,000, 47 p ercen t in the

O t h e r .........................................................................

1

No R e s p o n s e ........................................................

2

middle income range, and 19 percent over

T o t a l ....................................................................

25

$10,000 (the remaining 28 percent either did

U nder $500 ..............................................................

23

43

$500-$999

..............................................................

13

47

$1,000 and O v e r ...................................................

5

13

No R e s p o n s e .........................................................

6

15

reported that one or both parents had been to

T o t a l ....................................................................

47

118

college, compared with 36 percent for the

S c h o o l ..........................................................................

4

17

G o v e rn m e n t..............................................................

16

52

B a n k ...............................................................................

17

46

O t h e r ..........................................................................

7

9

Loans

not know or did not answer). Only 19 percent
of the group planning to enter military service

Loan Sources

total respondent

(m u ltip le resp o nses)

group.

Relatively

more

students from City schools planned to enter
military service than from the suburban or

No R e s p o n s e .........................................................

5

2

private schools. While it is difficult to make

T o t a l ....................................................................

49

126

general statements from the small sample, it
appears that age at graduation, rank in class,
and a noncollege home background are more

SENIORS W HO PLANNED TO ENTER
MILITARY SERVICE

important than family income as factors
which influence a student to fulfill his military

Students with plans to enter military ser­

obligation immediately upon graduation from

vice represented slightly more than 4 percent

high school. Income, however, has to be of

(739) of total respondents, and included 688

some influence. Of the students entering mili­

boys and 51 girls. Background information

tary service, 47 percent reported family in­

on these students is presented in Table XI.

come in the $5,000-$10,000 bracket, as com­

The age distribution of the military service

pared with 43 percent for the entire respond­

group differs somewhat from the total re­

ent group; in the over $10,000 income bracket

spondent group due partly to age require­

the corresponding figures were 19 percent

ments associated with the services.

and 23 percent, respectively.




17

E C O N O M I C R E V IEW

TA B LE X I
H ig h Sch ool Se n io rs in C u y a h o g a C o u n ty W ith P la n s to Enter M ilit a r y Service
A g e , F a m ily Incom e, C o lle g e A tte n d a n ce of Parents, a n d R a n k in C la ss
B y Se x of Students a n d Sch ools A tte n d e d
Spring 1966
Sex of Students and Schools Attended

City
Boys
Total

Girls

205

Private
(including Parochial)

Suburban
Total

Boys

23

228

Total

Girls

Total

Boys

Girls

Total

373

21

394

110

7

117

688

51

73 9

-0 -

Girls

Total

Boys

Age
-0 -

-0 -

-0 -

-0 -

-0 -

-0 -

-0 -

17

16 and Under

49

10

59

95

11

106

34

18

104

9

113

190

5

195

47

2

49

78

5

83

5

2

7

10

-0 -

1 9 and Over
N o Response

-0 -

-0 -

-0 -

-0 -

1

35

178

22

200

60

3

63

354

17

371

16

3

19

141

10

151

10

-0 -

-0 -

-0 -

15

2

17

Family Income
Under $5,000

14

1

15

13

3

16

11

-0 -

11

38

4

42

$5,000-$ 10,000

96

11

107

170

8

178

59

4

63

325

23

348

O v e r $10,000

25

2

27

87

3

90

21

-0 -

21

133

5

138

Unknown or N o Response

70

9

79

103

7

110

19

3

22

192

19

211

71

College Attendance
o f Parents
Father Only

15

2

17

44

1

45

6

3

9

65

6

Mother O nly

4

3

7

11

1

12

10

-0 -

10

25

4

29

Both

4

-0 -

4

28

1

29

5

-0 -

5

37

1

38

182

18

200

290

18

308

89

4

93

561

40

601

Neither or N o Response
Rank in Class
Upper Third

16

6

22

14

5

19

7

-0 -

7

37

11

48

M iddle Third

68

6

74

108

6

114

40

3

43

216

15

231

Lower Third

38

3

41

81

5

86

32

-0 -

32

151

8

159

N o Response

83

8

91

170

5

175

31

4

35

284

17

301

Source: Federal Reserve Bank of Cleveland

SENIORS W HO PLANNED TO WORK

bution of family income is also similar to the
group which entered the service. The concen­

As indicated earlier, about the sam e num­

tration is slightly higher in the middle income

ber of students planned to go directly from

bracket than for the entire senior class (45

high school to a job (3,576) as planned non-

percent compared with 43 percent), lower in

academ ic post high school training (3,144).

the over $10,000 income category (11 percent

Background information on the group which

compared with 23 percent), and higher in the

planned to work is presented in Table XII.

unknown and no response category (36 per­

The age distribution of the group, like that

cent compared with 28 percent). The percent

entering the service, is dominated by stu­

of those with family income under $5,000 in

dents 18 and 19 years of age and over. Distri­

the ''going-to-work'' group is virtually the


18


APR IL 1 9 6 7

TABLE X II
H ig h Sch ool Se n io rs in C u y a h o g a C o u n ty W ith P la n s to W o rk
A g e , F a m ily Incom e, C o lle g e A tte n d a n ce of Parents, a n d R a n k in C la ss
By Se x of Students a n d Sch ools A tte n d e d
Spring 1966
Sex of Students and Schools Attended

City
Boys
Total

Private
(including Parochial)

Suburban

Girls

Total

Boys

4 17

848

1,265

416

Girls

Total

Total

Boys

Girls

Total

Boys

,126 1,542

98

671

769

931

Girls

Total

2,645 3,576

A ge
16 and Under

-0 -

2

2

2

6

8

-0 -

12

12

2

20

22

17

130

339

46 9

118

491

609

41

301

342

289

1,131

1,420

18

1,303 1,764

201

421

622

213

556

76 9

47

326

373

461

1 9 and Over

75

77

152

67

59

126

10

25

35

152

161

313

N o Response

11

9

20

16

14

30

-0 -

7

7

27

30

57

Family Income
Under $5,000
$5,000-$ 10,000
O ve r $10,000
Unknown or N o Response

42

66

108

29

57

86

13

51

64

84

174

258

193

367

560

192

481

673

58

333

391

443

1,181

1,624

264

395

33

47

80

90

144

234

8

73

81

131

149

368

517

105

444

549

19

214

233

273

1,026 1,299

College Attendance of Parents
Father Only

15

33

48

37

139

176

9

78

87

61

250

311

Mother Only

16

27

43

13

38

51

3

22

25

32

87

119

2

9

11

15

42

57

3

20

23

20

71

91

384

77 9

1,163

351

907 1,258

83

551

634

818

Both
Neither or N o Response

2,237 3,055

Rank in Class
Upper Third

40

157

197

23

237

260

8

112

120

71

M id d le Third

135

235

370

98

321

419

32

270

302

265

826 1,091

506

577

Lower Third

89

95

184

25

102

127

34

118

152

248

315

N o Response

153

361

514

170

4 66

636

24

171

195

347

998 1,345

563

Source: Federal Reserve Bank of Cleveland

same as the percent of all those so reporting.

the service,, and the work group -— did not

A striking fact is that in the group with

know class rank or did not answer the ques-

work plans only 15 percent were from homes

tion, which is more than twice as m any as in

in which one or both parents had gone to col­

the college-bound group.

lege, compared with 36 percent for all seniors.
In class rank, the work group matched the
group which planned nonacademic training;

CONCLUDING COMMENTS
The major distinction between the 1965 and

each group accounts for 15-16 percent of

1966 surveys of high school seniors in Cuya­

all seniors in the upper third of their class,

hoga County is that the recent survey in­

and 30-32 percent of those in the middle third.

cluded information on the noncollege-bound

One-third or more of those in each of the non­

as well as the college-bound students. In the

college-bound grou p s — the nonacademic,

college-bound group, there are no striking




19

E C O N O M I C R E V IEW

differences in the findings of the iwo surveys.

r e c e i v e d s c h o l a r s h i p s a n d b o rro w e d

Plans io attend college are closely related to
age, rank in class, family income and college

amounted to 435.
Another category eliminated in the 1966

education of parents. Younger students, par­

survey was multiple acceptances. This was

ticularly those who rank well academ ically

on the advice of both college admissions and

and a re from m iddle and upper incom e

high school guidance officers, who indicated

homes, tend to go to college in greater num­

that the day when multiple acceptances were

bers. Beyond a certain income level, college

"collected like scalps" has passed. Students

education of parents seems to influence the

are now urged to apply for college admission

college plans of children, particularly in the

early, selectively, realistically, and usually

case of girls. However, slightly less than 80

to not more than three schools. Multiple appli­

percent of those who are from homes where

cations are also discouraged by college prac­

one or both parents had attended college

tices such as substantial, nonreturnable fees

planned to attend themselves, which indi­

that must accom pany each application, and

cates that other factors, such as aptitude,

"early admissions" where the applicant is

rank in class, and age, are also important.
More than 58 percent of the 17,880 students

restricted to a single school. A third consid­
eration leading to elimination of the multiple

who responded in the 1966 survey were going

acceptance category is the large percent who

on to college. Of that group, about 60 percent

attend public colleges within the State; such

planned to go to a public college in Ohio

students are assured of admission although
not alw ays to the school of first choice.

(6,289) and nearly half of these(3,061)planned
to enroll in one of the two public colleges in

The number of students who planned to

Cuyahoga County. An additional 583 stu­

take post high school training of a nonaca­

dents were going to out-of-state public col­

demic character (3,144) was nearly equal to

leges, with the remaining 2,537 students go­

the number who planned to go directly to

ing to private colleges (about 40 percent in

work (3,576). A much smaller number planned

Ohio and 60 percent out of state).

io enter military service (739). In general,

The information on scholarships from the

these seniors tend to be slightly older, rank

1966 survey is more precise than in 1965

lower in class (and in greater numbers to be

b e c a u s e the question s w ere restricted to

unaware of class rank), to come from homes

grants actually accepted by the students,

with a smaller percent of college-educated

rather than grants offered. "Multiple schol­

parents (19 percent as compared with 36 per­

arships" was dropped as a special category

cent for all students), and are more likely to

because college and university officials re­

be from homes in the middle income range

ported that more student financing is taking

(45.6 percent as compared with 42.9 percent

the form of a package that includes funds

for the total respondent group).

from several sources. As in 1965, more girls

One final note concerns the college plans

than boys borrowed in order to finance their

of the classes of 1965 and 1966 in those high

education. The number of students who both

schools in the city of Cleveland with predom­

2 FRASER
Digitized for0


A P R IL 1 9 6 7

inantly non-while enrollments. From these

of the total, as did the number with plans to

schools, a larger percent of the graduating

attend private colleges within the County.

seniors in 1966 planned to go to college than

The number of those who elected to attend

in 1965 (41.9 percent as compared with 33.5

Cuyahoga Community College, however, de­

percent). College attendance plans are as

creased both absolutely and relatively. As a

follows:

result, there was a relative decrease in the
1965

Cuyahoga C o u n t y .............................................

1966

. . .

6 0 .7 %

5 4 .4 %

. . .

16.4

19.7

Cuyahoga Com m unity College . . . . . .

C leveland S ta te U n ive rsity

. . . .

P r i v a t e ....................................................................

40.8

30.0

. .

3.5

4.7

. . .

23.8

27.9
21.6

Ohio
(e xc lud in g Cuyahoga C o un ty) . . . .
P u b l i c ....................................................................

. . .

19.0

P r iv a t e ....................................................................

. . .

4.8

6.3

O utside O h i o .........................................................

. . .

15.5

17.7

100.0%

100.0%

The number of non-white students who

number of non-white students who planned
to attend college within the County (from 60.7
percent in 1965 to 54.4 percent in 1966), and
who planned to attend public college within
the County (from 57.2 percent in 1965 to 49.7
percent in 1966). There were corresponding
increases, absolutely and relatively, in the
number of non-white students who planned
to go to school elsewhere in Ohio, or out of

planned to attend Cleveland State University

the state. The number who planned to attend

increased both absolutely and as a percent

out-of-state colleges increased by 50 percent.




21

E C O N O M I C R E V IEW

MUNICIPAL SECURITIES:
RECENT TRENDS IN B A N K INVESTMENT
This Bank's latest semiannual Survey of

reporting banks. The accumulation of muni­

Holdings of Municipal Securities, conducted

cipals has continued into 1967, and total

as of December 31, 1966, revealed the third

holdings have passed peak levels reached

successive reduction in municipal holdings

in 1965.

by the 26 participating banks within the Fourth

During the second half of 1966, total hold­

Federal Reserve District. As a result, by the

ings of municipal securities dropped substan­

end of 1966 respondent banks' holdings of

tially at reporting banks in the Fourth District

municipals were only slightly larger than

as a group; but, a majority of the responding

three years earlier. In other words, reductions

banks reported that they actually increased

in municipal holdings during the three most

their investment in municipals during the third

recent half-year periods virtually erased ad­

quarter. This w as also true for m any of the

ditions in the three previous half-year periods.

nation's largest banks.2 The total holdings

Chart 1 illustrates that the amount and rate

of municipal securities by the nation's 100

of decline in municipal holdings accelerated

largest banks showed a net decline for the

during the latest six-month period, as hold­

July 1 to September 30 period, but the ten

ings of municipal securities dropped $185.2

Fourth District banks included in the 100 lar­

million or approximately 8.2 percent. Chart 1

gest banks accounted as a group for more

also shows the weekly behavior of municipal

than the total decline of the entire group (see

holdings at Fourth District weekly reporting

Table I). (The ten banks are also included in

banks.1 Two aspects are readily apparent.

the Fourth District survey of 26 banks.) On

First, the abrupt liquidation of municipals

balance, the remainder of the nation's 100

w as primarily confined to the first eleven

largest banks increased their holdings of

weeks of the July-December 1966 period.

municipal securities, indicating that a small

Second, during November 1966, the down­

number of Fourth District banks dominated

ward trend w as halted and munipical securi­

the national statistics during the third quarter.

ties were again added to portfolios by weekly

In the fourth quarter, the nation's 100 largest
banks, on balance, liquidated holdings of

1 Thirly-one banks within the Fourth Federal Reserve
District participate in the weekly reporting series. The
26 banks in the Survey of Holdings of Municipal Securities

municipals, while, in contrast, the ten Fourth
2 "Obligations of State and Political Subdivisions Held

are all included in the weekly reporting group. The data

by 100 Largest Banks," The W eekly Bond Buyer, Novem­

used in Chart 1 have been adjusted to approximate the

ber 28, 1966, Section Two, p. 6 and February 14, 1967,

behavior of the 26 banks alone.

Section Two, p. 6.


22


A PR IL 1 9 6 7

C h a r t 1.

H O L D IN G S of M U N IC IP A L S E C U R IT IE S
Fourth District R e p o rtin g B a n k s

Bi l l i o ns of d o l l a r s

Bi l l i o n s of d o l l a r s

I

6/29
66

6 / 3 0 12/31
63
63
NOTE:

6 / 3 0 12/31
64
64

6 / 3 0 12/31
65
65

6 / 3 0 12/31
66
66

I

12/28
66

I

3/29
67

6/30
67

W e e k l y f i g u r e s o n m u n i c i p a l h o l d i n g s h a v e b e e n a d j u s t e d fo r n u m b e r of b a n k s a n d fo r d i f f e r e n c e s
in a c c o u n t i n g p r o c e d u r e s .

S o u r c e of d a t a :

F e d e ra l Reserve Bank of C le v e la n d

District banks as a group increased their

had been into the longest term maturity group

holdings but not sufficiently to dominate the

(over ten years), the shift during the most

national statistics.

recent period was primarily aw ay from the

MATURITY DISTRIBUTION

intermediate-term area (1-5 years) into the
shortest term. Thus, the percent of municipals

The maturity distribution of municipal hold­

maturing in over ten years w as almost un­

ings in the Fourth District showed an interest­

changed from the previous survey, although

ing change from the previous survey (see

the dollar commitment in these issues was

Table II). Municipal securities maturing with­

reduced by $94.3 million or 10 percent.

in one year were added in large amounts,
increasing by $48.8 million or almost 20 per­

QUALITY RATINGS

cent. As a percent of the total investment in

The percent distribution by quality ratings

municipal securities, this maturity grouping

(according to Moody's bond ratings) of the

rose to 14 percent, returning to a distribution

municipal securities portfolio of the surveyed

common before 1965. W hereas the previous

banks indicated a slight movement into the

shift aw ay from the under one-year maturity

Baa grouping, the lowest quality grouping




23

E C O N O M I C R E VIEW

normally purchased by banks. Although the
Baa rating does not necessarily imply a high­
ly speculative or risky situation, it conceiv­
ably represents less-marketable issues than
o -o
o —

those of A quality or higher. It is possible that

o

during a period of substantial liquidation —
as experienced by some banks in the Fourth
District in the second half of 1966

—

these

issues are retained somewhat involuntarily
because they are more difficult to sell. Future
surveys will clarify any policy changes that

O

«

o °o -7

do^o

m ay have occurred in the area of portfolio
quality.
c

O0
0
o —
r-

o

K

OQ

o

n o1
?
T- <
-* D
■- I
45
>

clined slightly in the period covered by the
O
O

latest survey.
3 "W here no rating has been assigned or where a rat­

cn

o
+

n ' °2 N
O 'Orn
> o cn i
O KO
* N
'
CN CO
•—

w ay be taken a s a reflection on the quality of a bond.

c

CN *—

I

ing has been cancelled, that fact alone must not in any

I+

Z

"W here no rating has been assigned to a bond the
reason is usually one of the following:
"1. The bond belongs to a group of securities which are
not rated as a matter of policy, viz. real estate bonds,
obligations of investment trusts and of financial com­
panies, bonds of educational and philanthropic or other
'non-profit' organizations, bonds payable in currencies

a
>

to

other than American dollars, and bonds of European

o
a _o
“ o

debtors.
"2. Excluded from the rating system are many bonds

c -a

which were sold privately or in which there is only a

S

minimum of public interest; also bonds of many small
debtors, because experience shows it is impossible to
rate every issue and an arbitrary line has to be drawn.
For example, beginning with the 1949 issues of Manuals,
Moody's has pursued a policy of rating no class of debt
of any corporation or governmental subdivision where
such class of debt is outstanding in an amount less than
$600,000.
"3. Bonds are not rated in the absence of data deemed
lo be essential for a sound judgment on the investment
quality of the issues." Moody's Bond Record (New York:
Moody's Investors Services Inc., 1967), p. 2.


24


°

<
/>

o
i/l
O
)
ui £

“
O
o
3
o

"
OQ

■£

2

£ £

<O o
n 3
m■ U
D£ )

in the 100 largest banks in the U. S.

banks' holdings of "below B aa" issues de­

1 banks are included
0

issues that are not rated by M oody's. 3 District

These

The "below B aa" category includes bond

T A B L E II
H o ld in g s of M u n ic ip a l Secu rities
Fourth District Reporting Banks

1960-66
Percent Distribution by
Quality Rating (M o o d y Ratings)

Percent Distribution by
Maturity

Outstanding by Maturity
______________________ (in thousands)_____

Under
1 yr.

1
to
5 yrs.

5
to
10 yrs.

10 yrs.

Aaa

Aa

A

Baa

Baaf

1 3 .4 %

3 5 .6 %

2 8 .9 %

2 2 .1 %

2 3 .0 %

3 1 .9 %

3 1 .7 %

7 .9 %

5 .5 %

2.80 %

967,696

19.7

31.9

24.0

24.4

21.8

32.8

32.8

7.6

5.0

2.83

414,065

1,616,451

19.0

33.3

22.1

25.6

21.4

26.8

36.2

8.1

7.5

2.73

464,878

504,806

1,923,029

15.5

34.1

24.2

26.2

21.4

25.1

38.9

7.1

7.5

2.64

646,390

503,275

539,515

2,066,272

18.2

31.3

24.4

26.1

19.3

28.7

34.8

8.0

9.2

2.68
2.73

Date

Under
1 yr.

1
to
5 yrs.

5
to
1 0 yrs.

10 yrs.

1 2 -31-6 0

$ 1 06,0 47

$2 82,1 64

$228,782

$175,148

12-31-61

191,150

308,344

231,874

236,328

12-31-6 2

307,251

538,439

3 56,696

6 -3 0 -6 3

297,958

65 5,38 7

12 -31-6 3

377,092

Over
Total*
$792,141

Below

O ver

Average
W eighted
Yield

6 -3 0 -6 4

290,825

6 7 1,00 7

532,563

621,845

2,116,240

13.7

31.7

25.2

29.2

20.0

25.2

36.2

8.5

10.1

12 -31-6 4

326,570

655,865

564,451

713,015

2,259,901

14.5

29.0

25.0

31.5

16.2

27.7

37.0

10.2

8.9

2.83

6-3 0 -6 5

244,292

677,640

5 72,279

819,896

2,314,107

10.6

29.3

24.7

35.4

15.8

30.6

34.4

8.8

10.4

2.90

12 -31-6 5

242,195

623,91 6

57 7,03 9

860,576

2,303,726

10.5

27.1

25.0

37.4

16.7

30.2

32.1

10.2

10.8

3.01

6 -3 0 -6 6

246,564

5 4 5,02 0

550,853

926,879

2,269,316

10.9

24.0

24.3

40.8

17.6

30.6

30.0

10.1

11.7

3.13

12 -31-6 6

295,391

45 0 ,7 2 7

505,342

832,624

2,084,084

14.2

21.6

24.2

40.0

17.1

29.8

30.1

12.6

10.4

3.23

*ln clu des hold in gs of Public H ousing Authority bonds.
t A ll unrated securities are included in the "B e lo w B a a " quality category, This grou p in g is arbitrary and
is not intended as a reflection of the quality of unrated issues.
Source: Federal Reserve Bank of Cleveland

U
i



ECONOMIC REVIEW

YIELDS

banks can make this course of action highly
desirable.

The average weighted yield on the com­
bined portfolios of municipal securities at

CONCLUDING COMMENTS

the District reporting banks continued the

Changing credit conditions in the second

upward trend established in the survey of

half of 1966 generally forced banks to make

December 1963, attaining a level of 3.23

major adjustments in their investment port­
folios. During the second half, municipal

percent at the end of 1966. The most recent
advance of ten basis points in the weighted

securities holdings of Fourth District reporting

yield is indicative of generally rising interest

banks were reduced, average maturity short­

rates during the last half of 1966. Those banks

ened slightly, and average weighted yield

that added to their municipal holdings during

increased. However, as more detailed data

this period received record high returns —

show, the semiannual figures conceal the

sometimes approaching 4 percent on bonds

pattern during the half-year period — first, a

of the highest quality. Another aspect of the

sharp reduction in municipals and then, a

higher av erage yield is that banks which

recovery into 1967 that has moved municipal

found it necessary to liquidate municipal

holdings past previous peak levels. Future

holdings disposed of their lowest coupon

surveys will determine whether there has

bonds whenever it w as advantageous. Since

been a change in bank policy concerning the

the price of a bond moves in the opposite
direction to the interest yield, as interest rates

management of municipal portfolios. At this
juncture, it appears more likely that develop­

climb generally, market prices on the lower

ments during the second half of 1966 were

coupon issues will fall the most, providing

only a reflection of a period characterized by

banks with an opportunity to take capital

bank adaptation to credit restraint in the first

losses for income tax purposes. Federal in­

half of 1966 and then, to an easing of restraint

come tax provisions relating to commercial

late in the second half of the year.

Digitized for 6
2 FRASER


A P R IL 1 9 6 7

FOURTH DISTRICT DEVELOPMENTS

IN BANK CREDIT CARD
A N D CHECK-CREDIT PLANS

The rapid spread of credii card and check-

conducting a comprehensive study of bank

credil plans among banks in all paris of the

credit card and check-credit plans, as an­

country represents a major innovation in

nounced on March 1.

consumer credit — one with implications not

It is estimated that about 1,000 banks have

only for banking, consumer spending, and

credit cards or check-credit plans today, a

saving, but also for the basic payments

tenfold increase in one year. Most of the

mechanism of the United States economy. It

growth, however, has been confined to credit

has been suggested, for example, that credit

cards, rather than check-credit plans, and to

cards m ay be the first step toward a checkless
society. The Federal Reserve Bank of Cleve­

banks in Illinois, Indiana, Michigan, and

land recently conducted a survey to deter­

changeable cards in those slates has been

mine the extent and nature of credit card and

an important factor in increasing participa­

check-credit plans of member banks in the

tion in the plans.

Fourth District. This article is a summary and

Wisconsin. The spread of multiple and inter­

The history of bank credit cards and check-

brief analysis of the District survey.

credit plans is not long, dating only to the

BACKGROUND

organizations and service companies existed

early 1950's. (Credit cards issued by retail
The District survey comes at a time when

m any years prior to that time.) The first bank

commercial banks in general are expressing

credit card w as introduced by the Franklin

great interest in credit cards and check credit.

National Bank in New York in 1951-52. In

There have been a number of articles and

1952-53 banks in Michigan, California, and

inquiries in banking magazines, and the

Florida followed suit, but the number of addi­

American Bankers Association is conducting

tional banks w as small. By the end of 1954,

a study of credit cards. The Board of Gov­

only about 50 banks had plans in operation.

ernors of the Federal Reserve System is also

In fact, many of the banks that were early




27

E C O N O M I C R E V IEW

T A B LE I
N u m b e r of C red it C a rd a n d C heck-C red it P la n s
Fourth District Mem ber Banks
M arch 1967
1956
to
1957

Special checking account o n l y .........................
Overdraft on regular checking account

. . . .

Combination o f both a c c o u n ts .........................
Franchised p l a n s ..............................................
Credit c a r d s ........................................................
Franchised p l a n s .............................................

........
1
........ - 0 ........ - 0 ........ - 0 ........ - 0 ........ - 0 -

1960
to
1961

1962
to
1963

1964
to
1965

1966
to
1967

Total

11

Type o f Plan
Check c r e d it ........................................................

1958
to
1959

1

1

2

7

23

8

1

1

2

2

15

-0-

-0-

-0-

-0-

4

4

2

-0 -

-0 -

-0 -

1

3

-0 -

-0 -

-0 -

-0 -

3

3

1

-0 -

1

2

2

6

-0 -

-0 -

-0 -

—0 —

2

2

N O T E: Items may not ad d to totals because not all banks answered all survey questions.
Source: Federal Reserve Bank of Cleveland

entrants into the field discontinued their pro­

the problems inherent in the use of cards and

gram s within a few years, perhaps due to

this seems to have attracted renewed bank
interest.

overly optimistic projections of volume and
profitability that did not materialize.
Credit cards preceded check-credit plans

FOURTH DISTRICT EXPERIENCE

by a few years, but the two programs seem

The responses to this Bank's survey indi­

to have been developed independently in

cate that in the Fourth District check-credit

the early 1950's. The first major growth period

plans are more numerous and have a longer

for both types of credit plans began in 1958,

history than credit card plans. Thus, develop­

when Chase Manhattan Bank — the nation's

ments in the District have been somewhat in

second largest commercial bank — intro­

contrast to the pattern in the nation as a

duced its own credit card. In 1959 the Bank

whole. The first check-credit plan in the Dis­

of Am erica (the largest bank) began its credit

trict w as started in 1956, by a bank in Lexing­

card program in California. These moves
stimulated an increase in the number of

Pittsburgh. (See Table I.) In 1959 ten banks

banks offering credit cards and check-credit

in the District introduced check-credit plans.

plans. Both the Bank of America and Chase

It is significant that four of the ten are located

ton, and the second in 1958, by a bank in

M anhattan had difficulties with their pro­

in the Pittsburgh area, and four other banking

grams, and in January 1962 Chase sold its

offices are situated in or near Youngstown,

credit card business. Evidently, this expe­

Ohio, a city close to the Pennsylvania border.

rience discouraged m any smaller banks, and

The District's first credit card program be­

the "troubles at C hase” are still cited by

gan in 1959, organized by the bank with the

banks that do not offer credit card services.

first check-credit plan. The early w ave of

The Bank of Am erica w as able to overcome

bank credit cards that occurred in the middle,

Digitized for 8
2 FRASER


A PR IL 1 9 6 7

eastern, and southern parts of the United

T Y P E S O F C R E D IT C A R D P L A N S 1

States in the 1950's seems to have passed

Most consumers are accustomed to various

by the Fourth District; legal constraints dis­

credit cards, particularly those for large

cussed later in the article m ay have been a

department stores and gasoline companies.

factor.

Bank credit cards are similar, as they provide
a means of charging retail purchases for later

The second period of growth in credit plans

payment. A bank card has some special ad ­

in the District began in 1965 when the two

vantages for the consumer, retailer, and bank.

largest banks in Pittsburgh introduced their

The consumer has less need to use cash, since

own credit cards, accompanied by wide pub­

bank cards usually are acceptable in a large

licity. (Both banks had offered check-credit

number and different types of stores, with

plans for several years.) These moves m ay

most of the credit purchases centralized in

have led to increased interest on the part

one billing. The retailer no longer has to fi­

of other banks, for in the next 15 months, nine

nance his accounts receivable, because he

more banks entered the credit plan field. In

receives immediate credit for all credit card

1966-67, an additional motivating factor was

charge

slips turned into the bank. The

involved— a number of credit card and check

bank has the opportunity of increasing its

plans had become national in coverage

customers.

through systems of local franchises. These

In general, credit cards issued by banks in

franchises included American Express cards,

the Fourth District can be used to charge a

BankAmericard, Carte Blanche, and Bancard-

wide variety of goods and services at stores

chek, among others. As shown in Table I,

that have adopted the banks' programs. The

five District banks received franchises in

only frequent exception is the purchase of

1966-67, accounting for over half of the total

food for home consumption. The handbook

plans put into operation in the District in that

of member merchants honoring the credit

period. Moreover, this Bank's survey revealed

card of the largest Fourth District bank re­

that at least one additional bank has signed

veals that one could charge such diverse

a franchise contract to take effect later this

items as foot care, airline tickets, wallpaper,

year, and several other banks have been ap­

drafting lessons, and wigs. However, most

proached by franchise organizations.

credit card charges involve purchases of
clothing and household products. Bank credit

The development of franchises and card

cards also can be used to obtain cash ad­

systems that are nationally interchangeable

vances on the line of credit that each card

m ay lead to a sharp increase in bank partici­

represents;

pation in the near term. The survey disclosed

loans") can be obtained at any banking office

advances

(or

"instant

small

that almost 50 banks in the Fourth District
are considering offering credit cards or check-

1 For a description of the types of plans in operation in
New England, see "Bank Credit Card and Related Plans"

credit plans within a year or two, with some

by Robert W. Pullen in New England Business Review,

conducting market research on the services.

Federal Reserve Bank of Boston, December 1966.




29

E C O N O M I C R E V IE W

that honors the card held by the would-be
borrower.

varying from a flat $10 to 5-10 percent of the

None of the six District banks with credit

outstanding balance. Of the three District

card programs limits issuance to depositors.

banks that reported the information, average

Applications for cards are judged individ­

length of maturity of outstanding credits

ually, just as if the consumer were applying

ranged from 6*72 to 12 months.

for an instalment loan. In an attempt to limit

set a minimum repayment that is acceptable,

Four of the six banks charge a retailer en­

credit risks, one bank issues cards only to

trance fee for participation in the credit card

individuals with annual incomes of $10,000

plan, and some levy a service charge on sales

or more. (This type of screening within the

slip volume. The majority of the banks do not

District contrasts to the "shotgun" issuance

offer volume discounts to their retailers. Al­

of some bank cards, as described recently in

most every credit card plan makes use of

the financial press.) There is a ceiling on the

special equipment to imprint the card infor­

total amount of indebtedness permitted on

mation onto sales slips, and four District

each card; the ceiling varies widely among

banks rent imprinting machines to retail out­

the District banks, ranging from $100 to $5,000.

lets honoring their cards. In the early days of

In addition, three of the credit card plans have

bank credit cards, merchant fees and p ay­

a ceiling or "floor limit" on the dollar value

ments were expected to be the major source

of each separate purchase. All six banks have

of income to banks issuing cards. This is not

similar but larger ceilings on individual cash
advances, but in practice the average dollar

necessarily ihe case now and interest charges
on cardholders' credit balances are providing

amount of advances has been substantially

a larger share of ihe income.

below the ceilings.
Four of the District banks schedule their

lated directly to the size of each bank's card

cards to expire automatically within a year

program. Credit card plans in the Fourth Dis­

of issuance. This gives the banks an oppor­

trict show a wide size range, from about a

The distribution of income by source is re­

tunity to discontinue credit privileges that

quarter of a million cardholders to less than

have been abused, as well as to eliminate in­

one hundred. These numbers, in turn, reflect

active cards. Survey responses suggest that

both ihe size of ihe banks involved, their

no more than half of ihe cards issued are

market area, and the length of time that the

active; the average proportion is about one

programs have been in operation. The bank

third.

with less than one hundred cards only began

Cardholders usually are given a "g ra c e ”
period for repaym ents before

a

issuing them early this year.

service

There is a distinct impression within ihe

charge is applied to unpaid balances. The

banking community that credit cards are not

"g race " period frequently mentioned in the

feasible for small banks in small communi­

survey was 25 days. After the "g ra ce " period

ties; that is, that volume is essential for suc­

expires, a charge of 1-1Vz perceni a month is

cessful operation. The survey by the Federal

applied to any unpaid balances. All banks

Reserve Bank of Cleveland does not com­

Digitized for 0
3 FRASER


A PR IL 1 9 6 7

pletely confirm this impression. A Fourth Dis­

long. These generalizations should not be

trict bank with less than $5 million in demand

accepted as established fact until further

deposits and $10 million in total assets has

study of cost factors is undertaken, as the

had its own credit card plan for almost five

Federal Reserve System hopes to do. In other

years. (The other banks issuing cards range

parts of the country, credit card programs

in size, as measured by demand deposits,

have had problems in enrolling retailers and

from about $50 million to over $ l J billion.)
/2

arranging fees, but these difficulties were

It is true that a credit card plan could prove

mentioned by only a few Fourth District

to be very expensive for smaller banks, which

banks.

m ay explain why several banks reported in

A small but articulate group of banks has

the survey that they were still searching for

not issued credit cards simply because they

a plan appropriate for their size.

do not approve of them. They label this

With so few District banks operating credit

type of consumer credit as difficult to control,

card programs, it is interesting to note why

too risky, and not in the best interests of com­

some banks are not issuing cards. One reason

mercial banking or consumers' financial well­

mentioned freguently w as that the respon­

being. It should be remembered that many

dent bank and its market area were too small.

smaller banks are more in the nature of sav­

Quite often, this meant that staff and equip-

ings banks than multi-purpose financial insti­

menl limitations prevented an expansion in

tutions. These smaller banks are concerned

bank services. Another reason cited by a

about their function as advisers to their cus­

large bank w as that it is in the process of

tomers about sound financial practices. As

changing its computer system and cannot

one banker responded in the survey, "It is our

undertake additional accounting burdens un­

opinion that people look to banks for leader­

til after the transition period. Several banks

ship in financial m anners." The use of credit

felt that there was no demand or "need" for

cards will have to become much more wide­

credit cards in their communities. The lack

spread and the advantages thoroughly docu­

of demand could also mean that there was

mented before all banks come to accept this

no competitive pressure to offer a credit card

relatively new development.

program.

Finally, in the State of Ohio, there appear

Some concern w as expressed by respond­

to be legal obstacles to credit card programs

ents about the costs and profitability of bank

for state-chartered banks. Bank usury laws

credit cards, partly in relation to legal limits

and a question as to whether the offering of

on interest charges. Generally, the initial costs

credit cards constitutes ordinary lending

of adopting a credit card plan are large if ad­

activity have caused the Ohio Division of

vance promotion has to be spread over a wide

Banks to consider such services illegal. Ohio,

geographical area and if special eguipment

as well as a few other states, requires all

must be purchased, either for the participating

banks to set up hypothecated time deposits

merchants or for the bank itself. As a result,

for each consumer instalment loan. Repay­

the period prior to "breaking even” m ay be

ments on each loan must be treated as credits




31

E C O N O M I C R E V IE W

to the corresponding time deposit. When the

TYPES OF CHECK-CREDIT PLANS

amount of the deposit equals the amount of
the loan, the loan is repaid, and both the loan

As mentioned earlier, check-credit plans

and the deposit are erased through account­

were introduced in the Fourth District before

ing

were

bank credit cards and have been adopted by

established by an Ohio banking statute so

a much larger number of banks. Several ex­

that banks would not break the state's usury

planations for the growth of check-credit

entries.

Hypothecated

deposits

laws in making instalment loans. Under the

plans are possible. Check-credit plans ap­

Ohio procedure, interest charges alw ays are

parently are less costly to operate than

based on the principal amount of the loan;

credit card programs. The risk factor can

otherwise, loan repayments would become

be lowered because of the opportunity to be

equal to a growing proportion of the principal,

more selective in extending credit facilities.

and the effective rate of interest might well

Less bookkeeping m ay be involved, resulting

exceed the state's maximum of eight percent.

in less dependence on sophisticated data pro­

The Ohio legislation is not binding on na­

cessing equipment. Perhaps, most import­

tional banks operating in the state. The Comp­

antly, check-credit plans often can be tailored

troller of the Currency has ruled that national

to certain types of customers, both within the

banks m ay charge interest rates as high as

bank and its community.

any of their competitors, including small loan

As a result of this last characteristic, the 23

companies, and further, that hypothecation

check-credit plans in operation in the District

is not necessary. The Comptroller's office has

in March 1967 represented a number of varia­

extended

tions of instalment credit connected to a bank

through bank card (and check credit) plans

checking account and (as opposed to credit

taken

the

position

that

credit

constitutes ordinary bank lending activity.2
As a result, the banks in Ohio that offer

cards) not affiliated with retail outlets. The
most common variation in the District (see

credit cards (and check-credit plans) are all

Table I) establishes a revolving line of credit

national banks. This is not the case in the

for a customer after a suitable credit investi­

Fourth District areas of Pennsylvania and

gation. The line of credit is extended through

W est Virginia. The legal constraints in Ohio

a special checking account, set up separately

m ay have played an important part in hold­

from the customer's regular account and

ing down the growth of all types of credit

drawn on only by special checks. By writing

plans relative to other sections of the country.

one of the special checks, the customer acti­

2 At least one state has challenged the Comptroller's po­
sition. See "Oregon Attorney General Says Interest on

vates his line of credit. Interest is charged on
the unpaid balance of this loan, and accord­

2 Bank Credit Cards Is Usurious," Am erican Banker,

ing to some plans, the borrower/ depositor

March 14, 1967, p. 1.

also must pay either the bank's usual deposit

A ruling on these matters by the Attorney General of
Ohio is pending, and the proposed new banking code

service charge or a flat fee per check. Interest

for Ohio (now being considered by the state legislature)

charges on District plans generally range

would legalize both credit cards and check-credit plans.

from Vz-2 percent per month on the unpaid

32



A PR IL 1 9 6 7

balance. Infrequently, an annual "mem ber­

checking account, with the line of credit acti­

ship" fee is required; more often, the cost of

vated by writing special checks.

a life insurance policy is passed on to the
account holder.

The size of check-credit programs, m ea­
sured by the number of accounts, is much

A second variation, which is more preva­

smaller than the size of credit card plans, a c ­

lent at banks outside the Fourth District, rep­

cording to the District survey. Check-credit

resents a line of credit in the form of an over­

accounts range from less than 20 at banks

draft allowed on a regular checking account.

just starting this service to over 20,000. The

No special account is established, although

average number of accounts for all 23 banks

the customer m ay be issued special checks

is about 1,800; and when the two largest plans

used only for overdrafts. (This means that the

are excluded, the average drops to approxi­

depositor must know the balance in his a c ­

mately 500. Credit ceilings are higher on

count in order io determine when to use the

check-credit accounts, ranging in the Fourth

special checks in contrast to his regular

District from $500 (on the franchised plans) to

checks.) Very often, the special checks are

about $10,000. In several cases, the ceiling is

pre-denominated and are guaranteed by the

determined by the account owner's credit­

issuing bank. This has led them io be called

worthiness or by his monthly income.
Banks responding to the survey also were

"travelers' checks" and this version of check
credit, a "travelers' check plan." Only a few

asked to explain why they have not intro­

District banks offer plans using the "travelers'

duced check-credit plans. Many of the com­

checks," and most plans represent a fran­

ments were identical to those listed for credit

chise of the national Bancardchek system.

cards, with some differences in emphasis.

In the Bancardchek system, accounts can be

There seemed to be relatively less concern

overdrawn by writing either regular checks

about start-up costs and the length of time

or the special "travelers' checks." In other

prior to the break-even periods, and more

overdraft plans, there are no special checks,

concern about the risk of loss and the banks’

and in some plans, special but nonguaran-

comparative lack of control over the credit

leed checks are issued io depositors. Obvi­

extended. Apparently, m any bankers were

ously, there is a great deal of flexibility in

not willing to give their borrowers the amount

designing check-credit plans. A bank m ay

of credit discretion implicit in both credit card

even limit the availability of these plans to

and check plans. The most frequently men­

certain customers or io specific branch offices,

tioned reason for not offering check credit

as is the case with one District bank.

was that there was no demand for this service
by the bank's customers or within its market

The third variation reported by banks in the

area.

Fourth District is characterized by a revolv­

The survey disclosed that legal constraints

ing line of credit attached to a regular check­

against bank credit card plans in Ohio also

ing account. Essentially, in this plan a special

exist for check credit. As one large Ohio bank
responded in the survey, the "hypothecation

loan account becomes associated with a



33

E C O N O M I C R E VIEW

requirement for state-chartered banks . . . vir­

good credit risks. The pre-selection of check-

tually rules out the offering of this service.”

credit customers has resulted either in mini­
mal losses or a profit for many of the banks.

EVALUATION OF PLANS

Automation of data processing also has con­
tributed to the success of the plans. Oppor­

The Fourth District member banks with cre­

tunities to generate new business were also

dit card or check-credit plans were asked to

mentioned and several banks plan to promote

evaluate the results of their plans. While the

their check-credit programs more strongly in

responses were by nature subjective and
qualitative, they still provide some interesting

the future.
In contrast, three of the banks with check-

insights. Four of the six banks with credit card

credit programs stated they were not satisfied

programs stated that they were quite satis­

with the results of their plans and another

fied with the operation; one bank felt it did

bank discontinued its program because of its

not have enough experience as yet to pass

unfavorable experience. At one bank, "the

judgment, and the sixth did not respond.

volume is so small, it does not warrant han­

Some of the comments indicated that the pro­

dling this type of loan." A second bank de­

grams were profitable and had been success­

cided that many borrowers are incapable of

ful in generating new deposit accounts for

managing an open line of credit.

both merchants and individuals; these con­

In view of these fairly typical evaluations,

tacts in turn enabled the banks to introduce
other bank services to the new customers.

both pro and con, it is perhaps surprising that

The survey also revealed that two District

in commercial banking recently. One possible

banks had had credit card programs and dis­

answer reoccurred in the Fourth District sur­

continued them. One small bank had tried

vey; namely — banks believe the existence

to install a card operation in 1959, but "could

of these plans gives them a competitive edge

not acquire sufficient volume to w arrant" the

to sell financial services. Several respondents

service. Another larger bank discontinued

mentioned that no other banks in their areas

its plan "because of cost factors and an un­

offered credit plans, thus enabling them to

all types of credit plans have become popular

usually high percentage of delinquencies."

attract customers who might not otherwise

Obviously, the course of credit cards is not

be available. In some cases, this achievement

alw ays smooth for the issuing bank.
The individual banks' evaluations of check-

was considered to be important enough to off­
set a low rate of profitability. The influence of

credit plans m ay be more significant because

competition was also apparent in the location

of the larger number of banks involved.

of the bank and the spread of credit cards and

Twenty of the 23 banks with a program pro­

check credit in the area. If a large city bank

vided an evaluation, and 17 reported that

introduced one of these services, other banks

they were satisfied with their plans. A large

in the city and in the surrounding market

part of the satisfaction reflected the fact that

area seemed to respond with plans of their

their check-credit accounts were limited to

own.


34


A PR IL 1 9 6 7

It would be interesting and useful to weigh

balance between profitability and competi­

quantitatively the factors that determine

tion. That these are unanswered relationships

whether or not a bank will provide credit cards

emphasizes ihe need that exists for further

and check credit, as well as to determine the

study in the rapidly developing field.




35




Fourth

Federal

Reserve

District