When the government released the findings of a forensic audit of the University of Guyana Student Loan Agency last month, there was an expectation in some quarters that an announcement would follow of a set of comprehensive steps to address this national problem. This is, of course, apart from the recommendations outlined by the audit firm, which, when carefully considered, cannot be approved as a comprehensive prescription for this problem, but more of a ‘one size fits all’, across-the-board recommendation that did not appear to recognize categories of defaulters, nor remedies for those who may simply be unable to shoulder the financial burden at this time.
Without question the university has a student loan crisis on its hands, and as the report by accounting firm HLB, R. Seebarran & Co indicated, some 70% of loan recipients are delinquent in repaying their loans, and this amounts to billions of dollars. In other words, for the majority of persons accessing loans, managing the debt is either simply not a priority, or otherwise they are having some degree of difficulty in meeting their obligations to the university.
Many Guyanese grow up with the understanding that higher education is one of the more important investments an individual can make for themselves and, indeed, for their country. Therefore, they chase the dream of enjoying a good life here at home by signing up for enrolment in the University of Guyana, our premier institution of learning, looking to earn a first degree – an opportunity the majority are only able to exploit with financial assistance from the state.
The state’s assistance is not a free gift and is handed out on the condition that students repay the loan with interest within a period of 15 years. It is expected that with the disbursement of every single loan by the state, the university receives the equivalent in real cash in order to effect its day-to-day operations and execute capital works. This means that the university itself will be indebted to the state in the amount of the total unpaid loan balances. It may be useful for the university to say how the university itself utilized those funds since this arrangement has been established.
The aid is accessible to students who are Guyanese citizens, but in the absence of any means of testing, both students of underprivileged and privileged backgrounds qualify, with the only requirement being the provision of a guarantor with demonstrated income earning capacity sufficient to repay should the student default on the repayment of the loan.
Clearly, beneficiaries have been shirking their obligations to repay, which defeats the operation of the Student Loan Fund which ought to operate as a revolving fund. This means that those who do not repay their indebtedness to the fund can actually be limiting the educational prospects of others – at least in theory.
The recovery approach taken by the new administration of naming (and possibly shaming) some on the current list of defaulters, and this includes magistrates, attorneys and the like, is a questionable approach to loan recovery since the threat of exposure is usually more effective than the actual exposure. We are not sure whether the threat of exposure was ever made to the more prominent names on the list.
The critical question to be asked is: how many of the defaulters have the financial ability to repay these loans? In many respects, being employed is not an indication that an individual is earning sufficient for them to take care of their most basic obligations, much less to have disposable income for the repayment of a debt which may be sizable in comparison to their annual income. Indeed, many first degree workers entering the job market are paid what is considered survival wages in this country as compared with their counterparts in the Caribbean.
What was absent from the audit and ought to have been forthcoming from the university and/or the administration, was the unemployment rate for all new bachelor’s degree recipients; what figures, if any, are available on the jobless rate for recent graduates and a breakdown of their disciplines.
The audit recommended that mechanisms be put in place for the prompt repayment of the loans as well as legal action against defaulters who are employed and are not honouring their obligations. Again, however, there are no data to support whether many defaulters can clear these debt obligations within the timeframe set, based on the current repayment structure and rate of interest.
Further, multiple factors can contribute to the challenge of repaying a student loan. These include low annual income relative to the rising cost of living, unemployment, add-on costs of continued training and development – which influence decisions regarding promotions, salary upgrades, etc ‒ as well as mortgage payments and healthcare costs, among others.
Indeed, as outlined in the audit, the format and security for the issuance of loans must be reviewed to strengthen the existing systems. More important, we need a more robust student-debt management programme to address management of the national student debt.
For example, in the United States the Obama administration has created repayment options like the President’s Pay as You Earn (PAYE) plan, which caps monthly student loan payments at 10 per cent of discretionary income to help borrowers manage their debt after college, and while a lot of work remains to be done, some positive changes are emerging. It also should be noted that the Student Loan debt in the USA has a default rate of 12% as at 2015. Given the sophistication of the USA it may be useful to extrapolate and arrive at a ‘desirable’ default rate in Guyana.
To ensure student loans are manageable, the Obama administration has also cut student loan interest rates, and more borrowers are making use of flexible income-driven repayment plans.
Student loan defaulters in Guyana need more options outside of being afforded a one-year grace period before payments are due on the loans. More pathways out of the debt are needed such as the option of working in partnership with the private sector to offer tax breaks for companies willing to assist in paying off student loans for employees.
While audits are good, we have no need for regurgitated information about how many people owe the government money for pursing an education. Our government must also recognize that successfully completing the degree programme does not automatically result in gainful employment, and many university graduates are taxicab drivers and the like, eking out a living due to the dearth of employment opportunities in Guyana.
For the majority, the crisis extends beyond student loan debt to living securely, and without the albatross of repaying an unmanageable debt incurred in the pursuit of personal and national development. This of course does not extend to those who have done well but neglect to honour their commitments to the university and the state.
No student who is qualified and desires to attend university should be denied a chance to attend on the basis that they can’t afford to pay. What’s more, the government has a duty to invest in human capital development and education without creating limitations as to who can access quality, higher education.
It is important to remember that educated citizens are the sine qua non for any productive, innovative and prosperous society. In fact, some would argue that in the long term, education can also be a matter of national security.
In closing we recommend that the government and the university develop and set out a multifaceted strategy for the recovery of the debt taking into consideration the various categories of debtors and avoiding a one-size-fits-all approach. Upgrading the management of the Student Loan Agency and providing it with the tools and resources to properly manage its portfolio of debt may well result in a reduction in the numbers and frequency of defaulters in the future.
