Students' Loan interest rate cut long overdue
Published:Monday | May 2, 2011 | 12:00 AM
We join the thousands of university graduates, undergraduates and prospective students in welcoming the reduction in interest rates on Students' Loan Bureau (SLB) funds.
The burden of student loan repayment has been like an albatross around the necks of persons who have successfully attained higher education. The double-digit interest rate which customers of the SLB had been faced with has been like a silver tick, sucking the lifeblood from young professionals, many of whom are hardly able to repay the loan because they have either been unable to get good paying jobs or have not been able to secure jobs.
Not only finance minister Audley Shaw played a master political stroke in lowering the interest rate from 12 to nine per cent but also his decision to extend the repayment period from 10 years to 15 years suggests an understanding of the challenges SLB debtors face in honouring their loan obligations.
We are tempted to embrace Shaw and say to him, well done, good and faithful servant. However, we will not get carried away. The minister was pellucid in saying the measures are interim ones. For us, that is a way of saying to SLB debtors, present and future: "don't put the champaign on ice just yet, I may have reason to change my mind".
hidden agenda
The minister has indicated that by the end of August he should be in a position to outline the revised arrangements which will come into effect next school year. He said the bureau is in the process of implementing a new sustainable, long-term model which will provide more affordable financing to students, and that the interim will be in place pending the results of an actuarial review now in progress.
The timing of the move by Shaw, however, has had us thinking. Could it be that Shaw, mindful that a general election is not far away and that the youth vote is critical to the re-election of the Jamaica Labour Party is just dangling carrots before our eyes?
Certainly, we would be very disappointed if Shaw, after his pain-deferred, no-new tax, election-wrapped budget changes his mind about the new policies he announced, saying the actuarial review suggests it is not financially feasible. Though this announcement, we believe, would naturally come after the election, we believe reverting to high interest rates on SLB would be one of the cruelest sins any minister or government could commit.
We urge Shaw, if he has not yet done so, to refer the SLB board of the commitment made by Prime Minister Bruce Golding's promise to peg interest rates on loans to national priority. In 2009, Golding told the House of Representatives that students pursuing studies in certain disciplines would be the beneficiaries of a four per cent interest rate from the SLB.
critical skills
"It is our intention to give special concessions to students pursuing studies in specific disciplines for which a chronic shortage exists within the public sector," Golding said in his contribution to the 2009-2010 Budget debate.
A month earlier, the prime minister told Parliament that the Government would steer the SLB in a direction where it would be inclined towards areas of study deemed to be critical to national development.
'We are going to offer preferential terms for those areas of study that we feel are in national demand, and we are also going to improve access to those funds," Golding said.
The prime minister had pointed to the areas of agriculture and health as being in need of critical skills.
We also hope that the SLB's board has been instructed to find alternatives to the current guarantor system, which though intended to provide security for repayment of the loan, has served to disqualify students who have found it either difficult or impossible to get persons to stand security for the loan.
The Gavel notes that Shaw's announcement last Thursday is merely a sweetener. He, however, could score big with the nation if when he speaks of the new framework for the SLB in August, he at least maintains the new nine per cent interest rate, the 15-year payback time, as well as the reduction in insurance premiums from $1.50 per $1,000, to $1.00 per $1,000 on loans.
The minister must, among other things, find a way to implement the four per cent national priority-guided loans which the prime minister promised. The future of the nation depends on this.