Faces of delinquency!

Dennie Quill, Contributor

I HATE to distract you from the din of vuvuzelas, advertisements, mass rallies and bell-ringing which are features of campaign 2011. But I found myself examining the face of each defaulter paraded in The Sunday Gleaner by the Student Loan Bureau (SLB). I was interested in eyeballing delinquents who had failed to repay money they had borrowed for their education. The defaulters attended some of the country's premier tertiary institutions as well as teachers' colleges and community colleges and were trained in a variety of disciplines.

Tertiary education is expensive but when one acquires that certification, it puts one in good stead to get a better-paying job. The SLB was established in 1970 to help talented students gain access to tertiary education. I feel passionately about the obligation to repay one's student loan because I am an SLB beneficiary, and without this loan to pay for education-related expenses, including tuition and boarding, I would not have been able to access post-secondary education. And repaying my loan was an absolute priority in the scheme of post-graduation demands.

Revolving fund

Because this is a revolving fund, repayment is critical if the bureau is to keep making loans to new applicants. When students do not repay their loans, the bureau has to borrow expensive money to supplement the low repayment rate in order to make new loans. Every defaulter costs the Government and, ultimately, it is the taxpayer that feels the pain of default.

Over the years, the scheme has been refined, resulting in adjustments in interest rates, easier loan-repayment terms and, more lately, an amnesty was introduced to allow defaulters to make repay-ment arrangements without being punished.

It is true that student-loan default is often a reflection of a poor economy that offers up few job prospects for graduates. And we hope the SLB has a way of working with these unemployed or under-employed students to defer payments and keep them in good standing until they are on their feet.

However, since the amnesty was introduced some months ago, it is reported that more than $80 million has been collected from defaulting students, which suggests that many of them do have the ability to pay and were simply shirking their obligations.

Credit ratings

So what can be done about delinquent borrowers? The impending establishment of credit bureaus will certainly rank defaulters very low and this will affect their ability to access credit on many levels. It may also ruin the credit rating of their guarantors, and this should be worrying to those who opt to sign in support of a borrower's application. And employment prospects may be blighted after a publication like Sunday's.

There are institutions that assist students with budget-planning and offer financial-aid counseling. In some countries where delinquency is also a problem, there is a requirement that prospective students present a budget, and only if it is regarded as realistic will they be offered loans. In some countries too, there is legislation that authorises the Government to garnish the borrower's wages. The problem with student loans is that there is no physical asset on which to foreclose.

I have been thinking that since we are in the political season, maybe politicians should spare a platform moment or two to send a message to the youth they are trying to court that there needs to be fiscal responsibility and honour in all that they do.

The lesson from this student-loan dilemma is that we may have to start once again to practice thrift. If we are agreed that education is a national priority, then both parents and students may want to give greater consideration to early planning by saving for higher education.