Student loan program reform set

by Florante S. Solmerin

THE Commission on Higher Education admitted yesterday that the government's student loan program has earned the name "Study Now, Pay Never" because of serious collection problems but said reforms are underway to improve the rate of repayment.

Carlito Puno, CHED chairman, said education officials have had a hard time tracking loan beneficiaries after they graduate.

"We've been experiencing difficulty in collecting payment of the SNPL [Study Now, Pay Later] loans ever since," Puno said.

He added that a poor data bank and the fast turnover of CHED personnel administering the program have also hurt collection efforts.

Earlier, House committee on appropriations chairman Albay Rep. Joey Salceda exposed the weaknesses of the program, saying only 1 percent of its beneficiaries ever pay the government back.

Every year, P374 million is allocated to help some 33,000 poor college students. Of the total amount, P363.1 million or 97 percent goes to scholarships and grants, while P11.7 million goes to student loans.

"The reason CHED allocates fewer funds to the student loan program is its failure to collect repayment from borrowers," Salceda said.

A study by the Unesco showed that since 1995, only 1 percent of the poor students who availed of SNPL loans have paid their debts.

Government banks that administered the program from 1976 to 1991 had a repayment rate of 46 percent.

Under the Department of Education, which administered the program from 1992 to 1994, the repayment rate plummeted to 3 percent and became even worse under CHED.

Salceda has filed House Bill 5315, which seeks to collect the unpaid balance from loan beneficiaries.

Reacting to Salceda's remarks, President Gloria Macapagal Arroyo has directed Puno to allocate P250 million more to an expanded loan program to enable poor students to earn a college degree.

The fund will be divided among a number of educational associations, and new measures will be put in place to ensure that loans are repaid, Puno said.

"With new mechanism, deserving beneficiaries will be chosen and meticulously screened and tested," Puno said. "The commission has also worked out ways of ensuring that loans shall be paid accordingly by beneficiaries after graduation through a new monitoring scheme."

Puno said CHED will release new procedures and guidelines soon.

Loan applicants must be Filipino citizens, enrolled in a CHED-priority course, and not more than 30 years old at the time of application. They must have a 75 percentile rank or higher in the National Secondary Achievement Test; and a weighted average of 2.5 or higher in the last semester in college, if any. Their parents or guardians must have a gross annual income that does not exceed P150,000 and the applicant must not be the recipient of any other loan or grant.

Qualified borrowers will get a package of P 7,250 per semester to cover tuition and other school fees and will be charged a 6 percent simple interest per year, starting when the loan is released.

Beneficiaries must begin repaying their loans two years after graduation and amortize it over 10 years. In case of a default, the guarantor—the Government Service Insurance System or the Social Security System, will help borrowers find ways to repay, Puno added.

In a related development, Alagad party-list Rep. Rodante Marcoleta filed a bill yesterday that would encourage wage earners to contribute voluntarily to a national student loan fund that poor but deserving college students can tap.

The proposed loan program would have a higher interest rate of 15 percent and a shorter repayment period of just five years, one year after graduation. With Joel M. Sy Egco

Manila Standard Today
April 19, 2006