'Do away with SLB guarantors', says economics professor
Jermaine Francis, Staff Reporter
Dr Marshall Hall, chairman for the Mona Campus Council at the University of the West Indies (UWI), has proposed that the country eliminate the system that requires guarantors for student loans.
Speaking at the second staging of the Caribbean Conference on Higher Education at the regional headquarters of the UWI yesterday, Hall said students are the beneficiaries and should be the ones held responsible for their loans.
"I would love to see us get rid of the guarantee process; get rid of having guarantors. The student is the beneficiary. The student is the one who should bear the risk," Hall argued.
The economics professor and business executive said some students are unable to access loans because they are incapable of finding persons who will take the risks and stand security for them.
"The reason for guarantors is because we want to make sure the loan is repaid. In places like the United States, you don't need guarantors because your credit-risk rating is there, and if you don't pay the loan, you will never get a credit card, for example," Hall posited.
He said since Jamaica was moving towards establishing credit bureaus and more wide-scale use of credit rating, the need for guarantors could be revisited for student loans.
More rigorous thinking needed
Hall said the fear of students migrating after completing studies and absconding their responsibilities to repay the loans could be solved with more rigorous thinking.
"Some 70 per cent of the students emigrate. Surely, we must find a way that they bear the risk in full ... . I am merely saying we need to find a way to get the students to understand that they are the beneficiaries and they are the ones who must bear the risks," he added.
In his Budget presentation on April 17, Finance Minister Dr Peter Phillips announced that the state-run Students' Loan Bureau (SLB) would be relaxing its rules governing guarantors.
Phillips had said whereas before, one guarantor could only stand as security for one student, the process would now be changed to accommodate an individual with the financial means being allowed to be a guarantor for a maximum of three students.
He told the Parliament that guarantors over age 60 would also be accepted on a case-by-case basis.
He also announced that interest on outstanding loans would no longer be calculated on the add-on basis, but on the reducing balance, thereby, reducing the monthly payments for beneficiaries.
"Later this year, we will have to settle the whole question of how we finance tertiary education," the minister added.