Fee hike looms
Published:Monday | May 2, 2011 | 12:00 AM
Gov't mulls giving more money to SLB at expense of tertiary institutions
Nedburn Thaffe, Gleaner Writer
The government is contemplating the slashing of subvention to tertiary institutions.
Education Minister Andrew Holness said consideration is now being given to transferring the portion of subvention taken from tertiary institutions to the Students' Loan Bureau (SLB).
The minister, however, has conceded that tertiary institutions may hike fees to offset the cut in subvention.
"... Of course, this could increase the cost students would have to bear, but at the same time this could lead to the Government significantly reducing the interest rates, and lengthening the period for loan repayment."
Holness, who was speaking at First Global annual awards ceremony held at The Jamaica Pegasus Saturday night, said the Government may go that route if it fails in its bid to secure investments to expand the lending base of the SLB in the near future.
"The Government is faced with a tough decision; the demand for tertiary education is increasing, but we simply cannot fund everyone at the same rate at which we fund students today," Holness said.
The Government currently pumps approximately $10 billion in subvention into tertiary institutions.
"There is a way in which the Government could take some of that money, and instead of funding the institutions, we could fund the students through the Students' Loan Bureau. We could take a certain percentage of the non-revolving subsidy and place it in the SLB. That would immediately increase funds for loans," Holness said.
The SLB is Jamaica's premier student-loan financing organisation which is mandated to provide loans to needy Jamaican students pursuing tertiary education.
Last week, Finance Minister Audley Shaw, in opening the Budget Debate in Parliament, announced a reduction in SLB interest rates, moving it from 12 to nine per cent.
Shaw also announced a extension in the repayment period from 10 to 15 years.
Shaw told Parliament that the revised measures are interim ones and that by the end of August, he would be in a position to outline further arrangements which would come into effect next school year.
long-term model
He said the bureau is in the process of implementing a new sustainable, long-term model which would provide more affordable financing to students and that the interim measures would be in place pending the results of an actuarial review now in progress.
Meanwhile, Holness said the Government would seek to protect its investment "by taking the loan payment at source and treating it as tax taken out at source when (one) starts working".
However, in an effort to avoid such measures, Holness repeated calls for private-sector bodies to invest in the student-loan scheme.
"The current asset base of the SLB, in terms of its loan portfolio in circulation, and what it has in reserves, does not exceed $4 billion. We will need to, in short order, triple the asset base," he said.
"We will not be able to do this overnight, and we certainly will not be able to do this from the Consolidated Fund. We will need private-sector support; we will need banks to take a very serious look at placing funds in the student-loan scheme, while operating a student-loan scheme themselves."
While citing the risk associated with such investments, he says the Government is already examining ways to ensure the investments are secure. One such measure outline is the establishment of a credit bureau.
"It's a very risky enterprise but there are ways the Government can protect investments. We already have at least two applications for the establishment of a credit bureau in Jamaica. In fact, we intend to collaborate with other credit bureaux overseas to ensure that if students migrate, their debts follow them on their credit reports," Holness said.
The governing Jamaica Labour Party (JLP) had committed in its 2007 election manifesto to "issue government-guaranteed education bonds to significantly increase the loan amounts available to tertiary students through the Students' Loan Bureau at reduced interest rates subsidised by annual budgetary provisions".