Less student loan requirements with potentially more debt payment problems
At the national financial debates on 12 March 2024, the Financial and Public Sector Minister Nigel Clarke stated that as of 1 April 2024 students would no longer need guarantors for student loans. This announcement was positively received by university students and those dreaming of attending university as it allows students from lower-income households to have greater access to university education.
Clarke noted that the guarantors listed rarely have to pay the Student Loan Bureau; instead, they are occasionally used to locate student applicants. The implementation of the National Identification System (NIDS) will aid in locating students therefore guarantors will no longer be as relevant to the process. Last year, 185 per cent more students on the Programme of Advancement Through Health and Education (PATH) attended universities through a similar student loans policy.
However, in anticipating some concerns, Clarke noted that “Since inception, the Student Loan Bureau uses a very tiny fraction of repayment to make provisions for loss of life of the borrower”. He added, “With this new guarantor policy, we’ll move this billion-dollar excess from the life insurance reserve, which you don’t need in that position, into a new guarantor reserve fund to back this new policy”. From a commercial perspective, the government’s new policy would use the deceased’s life insurance to repay SLB for the money owed. Furthermore, the excess money SLB saves in case the borrower passes away essentially eases worries about loss of revenue when a borrower dies.
But what impact will this have on these students who will now be in debt upon graduating? Greater access to higher education also causes more competition for jobs after graduating. And since many university graduates have experienced underemployment or unemployment issues, then there is the potential for increased post-university debt among young adults.
In response to concerns about debt repayment, Executive Director of the SLB Nickeisha Walsh, said in January 2024, “SLB offers the lowest interest rates for any school product”. She further stated that the SLB is also open to discussing individual ways to help loan beneficiaries repay the loan, even by providing a waiver when necessary.
The announcement to eliminate the guarantor requirement is a progressive move that will increase the number of students attending university in Jamaica. But it may also lead to unforeseen repayment challenges if appropriate jobs continue being scarce for recent university graduates.
