Wed | Dec 11, 2019

More persons funding college through savings

Published:Sunday | October 6, 2013 | 12:00 AM

Tameka Gordon, Business Reporter

Jamaica's largest bank is also one of the top providers of education savings options, whose portfolio up to last year was valued at close to J$23 billion.

The figure represents a 19 per cent annual gain in National Commercial Bank Jamaica's OMNI Educator savings pool, which may well serve as proxy for a market in which the anecdotal evidence points to increasing subscriptions for products that are used to fund both local and foreign tuition.

It's a market to which Jamaica's 40-plus credit unions have long pitched their savings products; that Scotiabank Jamaica has tapped into through ScotiaMINT - a portfolio that is valued at J$42 billion but extends beyond education savings; and First Global Bank serves through its 'Global Kids & Teens' accounts.

Earlier this year, Sagicor Bank Jamaica also got into the act, with a variation of its Super Interest Savings Account called SISA Junior.

"The reality is that with the rising education costs and reduced government subsidies towards education, there is increased difficulty in accessing student loans," said Ingrid Card, assistant vice-president in charge of marketing for the Sagicor Jamaica Groups.

Parents looking towards tertiary education options outside of Jamaica and the Caribbean may also come in for further challenges given the sliding dollar, the company said.

Sagicor Bank's introduction of SISA Junior, which is a Jamaican-dollar savings product specifically for children between 0 and 17 years, is in response to the funding gap.

There is also the Heritage International Scholarship Trust Plan — a partnership of Scotia Insurance Jamaica Limited and Heritage Educational Funds International — a US dollar account into which children under 14 years are enrolled. The plan pays out when the beneficiary enters college, either in Jamaica or overseas.

The Bank of Jamaica says it does not drill down sufficiently into the banking data it collects to speak to the trends in education savings, nor the value of the market segment.

At Cable & Wireless Co-operative Credit Union (C&WJCCU), savings through its Early Bird and SAYE Plans amount to J$620 million. That figure, said C&WJCCU general manager, Barrington Whyte, represents a 520 per cent gain in value over three years.

The push to start saving for school expenses and college earlier has "really taken off," Whyte told Sunday Business.

OMNI, a bancassurance product, remains popular as a savings vehicle for foreign and local study. Even educators like it.

Shirleen Jackson, a 42-year-old teacher, said she was enticed by the 10 per cent savings bonus at maturity when she purchased the product for her daughter who was three years old at the time.

While not totally dismissing the notion of borrowing from the Students' Loan Bureau (SLB) once her daughter reaches the age for college, Jackson said she was "banking on her OMNI" as she would prefer to not go to the loan agency.

OMNI Educator is a long-term tax-free investment plan that allows parents to save for their children's tertiary education. Its defining feature is the payment of an education grant of an amount equal to 20 per cent of the policy's accumulated value that results from the eligible premiums.

The policy must be held for at least five years to be eligible for grant payment.

Christine Blair, a mother of two, is also an OMNI adherent. Right now she is
putting her two girls through high school and, while her savings are
meant to pay for college, she is already drawing down on investment
returns to purchase books for her offspring.

Because
the policy has a savings and investment component, she said it gives her
wiggle room to put her girls through high school as well as aid with
high-school expenses, without disrupting her long-term
goals.

Such savings products are "a must- have for
parents," Blair told Sunday Business amid back to
school shopping earlier this month.

FGB Kids and Teens
is a Jamaican- dollar denominated account opened with a minimum of
J$2,000, which is also the minimum monthly contribution. Interest rates
currently range from 1.5 per cent to three per cent based on the
accumulated balance.

The marked increase in university
fees offer another incentive to start saving
early.

Fees at the University of the West Indies rise
annually, and were up by 5.5 per cent across all faculties for the
2013/14 academic year.

UWI's enrollment in 2011/12
amounted to 13,014, according to the Planning Institute of Jamaica's
most current data. Persons studying overseas amounted to 280 for 2011,
according to the PIOJ.

The cost of tuition has not up
to now dissuaded demand for college
spaces.

PricewaterhouseCoopers has projected a growth
in demand for student loans of J$34.5 billion by 2016/17 and close to
triple that at J$87.73 billion by 2020.

Increase in
demand for college education is also reflected in the demand for SLB
financing. Loan applications to the SLB jumped from 6,600 in 2007 to
16,676 in 2012, reflecting growth of 153 per cent.

SLB
was reported to have approved J$4.2 billion of loan applications in the
last academic
year.

tameka.gordon@gleanerjm.com