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Student-loan alternatives

Published:Sunday | September 5, 2010 | 12:00 AM

Avia Collinder, Business Writer

The Government-funded and operated Students' Loan Bureau (SLB) has become synonymous in Jamaica with education loans, never mind its recent controversies and long-term funding conundrum.

But more private financial institutions are getting in on the action offering study loans, albeit with a distinct bias towards those who stand out as having good repayment prospects while studying.

Commercial bank RBTT, for example, has launched an unsecured, education-loan facility that comes with an optional 12-month moratorium on the principal.

For this loan, the bank is targeting tertiary- level students who are working while studying.

According to RBTT, the loan is for those who are well paid in their field, or who have good prospects of being so rewarded on graduation.

"It is available for courses which offer good prospects for future employment or in the applicant's current field of employment," said Annette Atkinson, RBTT Jamaica's corporate communications manager.

The loan is one of several financing arrangements which are available from private institutions for tertiary students as an alternative to long lines and extended waiting periods normally associated with the SLB application process.

The RBTT loan comes with an 18.5 per cent rate of interest, but the bank says the rate is subject to review based on what it described as "changes in market conditions".

According to Atkinson, applicants have two repayment options.

"They can choose between a 36-month or a 48-month repayment period," she said.

Repayment commences 30 days after disbursement of the loan, and while applicants are required to meet the bank's normal lending requirements, where an applicant fails to meet some lending criteria, a third-party guarantee may be required The National Commercial Bank (NCB) does not have a specific education-loan product, but has a financing category described as "any purpose" loans, which can be used for educational pursuits.

With repayment scheduled to start in the month after disbursement, NCB declined to disclose the interest rate attached to such loans.

"Since it is back-to-school season, we are currently promoting our suite of any-purpose loan products for the purpose of financing education needs," said Adam Harris, consumer portfolio manager of NCB's retail banking division.

Harris said rates and repayment periods vary depending on the product.

Targeted customers for this facility are primarily parents or guardians financing their children's education, and salaried or self-employed persons furthering their education.

While most financial institutions will not discuss the take-up for education loans, RBTT has indicated that it is expecting to lend more than J$75 million over the next six months.

Satisfactory level of applicants

The bank's spokesperson said its loan product, which was launched in January this year, had so far had "a satisfactory level of applicants".

The RBTT representative said a number of applicants failed to meet the bank's normal lending requirements.

"We have reviewed some of the criteria for qualifying for the loan, which will result in more applicants in the targeted segment being able to access the facility," Atkinson said.

For student loans of not more than $300,000, credit unions are also an option.

COK Sodality co-operative credit union is offering an unsecured education loan of up to J$300,000, client relations manager Audia Hoo said.

The loan can be used to cover tuition, the purchase of school supplies - including but not confined to books, uniforms, laptops - or to refinance an existing education loan.

"We do have (other) facilities in place where persons are able to access loans for educational purposes using collateral," she told Sunday Business.

Collateral-free loan

The collateral-free loan requires that a percentage of the amount being borrowed is in the borrower's share account at the credit union. It attracts an interest rate of 24 per cent on the reducing balance with up to two years to repay.

COK Sodality targets individuals who are able to repay while studies are under way. As such, part-time students and parents of full-time students are required to start payment 30 days after the loan is disbursed.

"The take-up has been very good as we have been having one-day loan sales where the membership requirement of one year is waived for loan applications made on that day," Hoo said.

At another credit union, Churches Cooperative, loans are available at a maximum 16 per cent rate of interest for five years.

The amount requested must be secured and can be up to 10 times the member's share account balance.

The target market for this facility is mature students, working, students, and parents of students.

Repayment is also expected to begin one month after disbursement.