SLB offers 3-month amnesty, targets billion-dollar intake
Published:Sunday | March 20, 2011 | 12:00 AM
Avia Collinder, Business Writer
The Students' Loan Bureau (SLB) anticipates collecting more than J$1 billion from delinquent borrowers during a three-month amnesty, which offers late-fee waivers as well as interest and insurance discounts if debtors close accounts in arrears or make them current.
Monica Brown, acting executive director at the SLB, said that if the response to the amnesty is as expected, the bureau would use the funds to defray interest payments on a US$20 million (J$1.7 billion) loan from the Caribbean Development Bank (CDB).
The bureau has already received the first tranche of US$5 million (J$425 million), and the first quarterly interest payment is due shortly, she said.
The amnesty, which began March 1 and ends May 3, offers a 100 per cent waiver of all late fees, a waiver of a percentage of insurance and interest, as well as an opportunity for borrowers to boost their credit rating.
"We would love to be able to collect most of what is owed, or even a reasonable amount," said Brown.
$2 billion budget
The acting executive director said the money collected from delinquents might also be used to supplement the expected budget of just over J$2 billion to fund new loan applications for the 2011-12 academic year.
More than 11,000 applications are expected for the new year.
For the current academic year, there were some 10,000 completed applications, out of which some 9,000 were approved for loans totalling just over J$2 billion.
The SLB has a loan portfolio of J$6.9 billion with delinquent accounts accounting for more than $1.1 billion, or in excess of 18.2 per cent.
Figures released at the end of the academic year in 2010 showed that of the 35,000 loans at the bureau, 3,400 were in arrears for periods ranging from 30 days to more than three years.
Brown said that while the SLB is a state-run agency, apart from a "small" grant issued by the Government on an annual basis, its funding comes from interest, and fee income from loans.
New funds for loans are also raised from other institutions and on lent to students.
The SLB's 12 per cent add-on interest rate - which amounts to an effective rate of about 21 per cent - is under review with a view to reducing the rate.
On November 1, 2010, the CDB agreed to lend US$20 million to the SLB. This includes US$4 million, or 20 per cent of retroactive financing of subloans approved by the SLB between May 18, 2009, and May 17, 2010.
The terms of the loan are that it be repaid in 52 equal and consecutive quarterly instalments commencing five years after the date of the loan agreement, interest payable quarterly at a rate of 2.5 per cent per annum on the portions sourced from the CDB's special fund resources, and 4.8 per cent per annum on those sourced from its ordinary capital resources.
There is also a commitment charge of 0.52 per cent per annum on the unwithdrawn portion, which will begin accruing 60 days after the date of the loan agreement.
From these funds, no student will be allowed to borrow more than US$45,000 (J$3.8 million) - except those enrolled in law and medicine programmes where the maximum subloan is the equivalent of US$55,000 (J$4.7 million).
The SLB is the largest financier of tertiary education in Jamaica. It began operating in 1970 and was made a statutory body in 1971. It issues loans for tuition fees to Jamaican students pursuing higher education.