Tax grant will close gap for 20,000 tuition loans, says SLB
Published:Sunday | April 21, 2013 | 12:00 AM
Avia Collinder, Business Writer
The extra funding for the Student's Loan Bureau (SLB) to be drawn from education tax collections will be sufficient to close the gap needed for an expected 20,000 loan applications for the next school year, the student lender has said.
The SLB, meantime, is receiving inflows from the first tranche of a loan negotiated with Caribbean Development Bank (CDB) to fund obligations for the current year.
The Jamaican Government has allocated a grant of J$2.915 billion for the SLB this fiscal year, of which J$2.8 billion will be drawn from the education tax collections.
Monica Brown, executive director of the SLB, told Sunday Business that the agency estimates that it will need J$4.9 billion to be disbursed as tuition loans in the next school year, which kicks off in September.
The grant plus revenue that the SLB takes in from loan repayments will be enough to fund the upcoming distributions, Brown said. The allocation from the education tax will become a regular arrangement, for the time being.
"This amount will be disbursed to the SLB each year. However, the specific period is to be confirmed," said Brown.
"The J$2.8b ET is targeted for coverage of the cost of tuition for the returning students for 2013-14. Funding for new applicants will be derived from other inflows, primarily collections. Projected demand is approximately 20,000 applications."
Fees uptick
The projected demand has taken into account the possibility that colleges will increase their tuition fee. The University of the West Indies has already announced a 5.5 per cent uptick in fees for undergraduates.
Brown said that based on the trend over the years, the approved tertiary institutions adjust their annual fees based on the inflation rate. Annual inflation is at 9.1 per cent.
Regarding the CDB loan, Brown said the first tranche of US$20 million (J$2 billion) is currently being disbursed to the SLB. Those funds will allow the bureau to meet financing commitments that were made to students in the current school year.
The CDB loan is to be repaid, starting in five years, at a rate of 2.5 per cent per annum on the portion sourced from the bank's Special Fund Resources, and 3.91 per cent per annum, on the portion sourced from the bank's Ordinary Capital Resources.
The CDB provided a loan in a similar amount to the SLB in November 2012.
The bureau remains current with its repayments of interest to the CDB, Brown said last Thursday.
"Note that there is a moratorium on principal repayments, which are not yet due," she said.
Brown admits that the level of non-performing loans "continues to be high and reflects the challenges being experienced in the wider economy. However, every effort is being made to reduce the high delinquency".
In a 2011 amnesty, J$100m was collected.
The interest rate charged on SLB loans was reduced to nine per cent from 12 per cent, effective April 2012, and continues to be reviewed, the director states.
"The lending by SLB will take into consideration the areas of focus contained in the Vision 2030 plan," she said.