Oran Hall | No guarantor, better access to tertiary education

The Students’ Loan Bureau, SLB, was set up to provide loans to qualified needy Jamaican students to enable them to pursue tertiary education, but some have not been able to access these loans because of their inability to provide guarantors. The announcement by Minister of Finance and the Public Service Dr Nigel Clarke, in the 2024/25 budget debate, that borrowers would no longer need a guarantor was aimed at correcting this problem.

Education in general, and more so tertiary education, is generally accepted as a very reliable means of getting out of poverty, because it creates opportunities for good, reliable employment with good, stable income. The beneficiaries are thus empowered to become financially independent, to assist other family members to get a good education, and to give valuable support to other family members.

Tertiary education also helps beneficiaries to network and develop relationships with a diverse range of people, which can help them professionally and socially, and they can also contribute to the development of others.

Additionally, education helps its beneficiaries to become more knowledgeable and highly skilled, thus enabling them to be better able to contribute to the development of society and the economy.

But many people are not able to make the big education investment from which they and the wider society can reap rich dividends for lack of personal capital and access to other people’s capital.

To show that there are individuals waiting to seize the opportunity to access funds without the challenge of having to depend on the ability to identify guarantors, the minister cited the responses to the lifting of the requirement for guarantors for wards of the State in 2022 and for people on the Programme of Advancement Through Health and Education (PATH) in 2023.

He noted the strong response within one year of the change in each case. In the former, the number of applicants increased from 46 to 98, and in the latter, from 92 to 547. Although these may not necessarily be representative of the entire population, they do tell a story.

The SLB, being a revolving loan fund, depends on its borrowers meeting their loan obligations to help it to be true to its mandate to provide educational loans to needy students, so there is a strong need for beneficiaries to be honourable and repay their student loan.

Not being able to lean on a guarantor will put borrowers in a situation in which they must bear their student loan burden alone. More than ever, they will have to be concerned about their own good name and credit rating, knowing how much harm a bad score can do to them and their ability to borrow otherwise to realise their other goals in life, which may make it necessary to resort to borrowing.

Removing the need for guarantors for students’ loans is also good news for guarantors, many of whom take the risk of guaranteeing the loans of students because they really want to help them. The truth is, many aspiring students often have to delay or bypass tertiary education because of the inability of their parents to be their guarantors because of their inability to meet the financial requirements of the SLB.

Taking the risk of standing behind the loans of students has not always gone well. Guarantors have often found themselves in situations in which they have been left to repay, at great cost to their finances and possibly their credit rating and reputation, funds that borrowers could not, or chose not to repay.

And what about saving time? The end of the need for guarantors for students’ loans will also bring an end to the tedious process of guarantors having to provide copious proof of their financial ability to assume the responsibility of guarantor.

What of the SLB itself? Should it not be happy given the freeing up of time to give more attention to the many other matters it has to attend to and having to deal with fewer people in situations in which the loans are not being serviced satisfactorily?

Then again, SLB loans will soon effectively become unsecured loans! It could have a new challenge – no second person to account for the borrowed funds.

Although SLB loan funds are undoubtedly a great help, beneficiaries must consider how to fund any gaps in their budget. Family help may still be necessary. So too could be part-time work, holiday work, and overseas work programmes for students.

Education is arguably the greatest investment anybody can make. Ending the requirement for tertiary level students to have a guarantor for their SLB loans is a great help, but the beneficiaries must do their utmost to fill any gap between the cost of their education and the funds they are able to borrow.

Very importantly, the terms of repayment should make it reasonable for the beneficiaries to honour their obligations, and they should do what is right and pay when that time comes for their honour and the benefit of those in the long line.

Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.finviser.jm@gmail.com