Beginning in January District residents can apply for city-government-sponsored loans of up to $12,000 a year to pay for their children's college education.

The bulk of the $50 million loan fund has been earmarked for District students attending six universities located in the city. A smaller portion has been set aside for city residents attending out-of-state schools.

Eligible parents or students can borrow from $2,000 to $12,000 in each academic year for tuition, room, board, books and other school related costs, according to Gail McCarthy, director of the loan program that is operated by the Consortium of Universities of the Washington Metropolitan area.

The program is designed primarily to help middle-class families, she said. "The federal money that is now available for student loans is geared toward low income persons only," she said. "So the middle and high income families have much less access to any loan programs."

The city sold bonds last month to raise the money for the new program. The consortium is preparing the application forms, which should be available sometime in January at all the participating colleges, public libraries and city offices. Completed applications are to be returned, with a $45 nonrefundable fee, to the college's financial aid office.

The city has laced the program with a series of requirements in an attempt to ensure a high rate of repayments. For example:

The eligibility requirements include a "credit worthiness" formula which states that an applicant's monthly bills cannot exceed 45 percent of the monthly family income. This means that a family earning $2,500 a month ($30,000 a year) can not have monthly debts exceeding $1,125.

Students or their parents must first apply to other federal and local student loan and financial aid programs.

Applicants can have no delinquent or defaulted student loans.

Repayment of the loans, which carry a 9 percent interest rate, can begin 30 days after a loan is made. But an applicant can choose to pay only the interest while the student attends four years of college. All money must be repaid within 12 years of the time the loan was made.

American University, Catholic University, George Washington University, Georgetown University, Mount Vernon College and Trinity College are participating in the loan program. Howard University and the University of the District of Columbia decided not to participate.

Kenneth L. Howard, UDC's acting director of financial aid, said the UDC and Howard did not join because all participating schools would be liable for repaying up to 17 percent of the delinquent student loans.

The consortium has dropped that requirement. Howard University officials could not be reached for comment.