FINANCE Minister Dr Nigel Clarke has announced several changes to the existing loan agreement at Students’ Loan Bureau (SLB), signalling Government’s intention “to expand economic opportunity for all”.

Clarke, who opened the budget debate in Parliament yesterday, said the changes will be effective April 1, as the SLB seeks to ensure that financing for tertiary education continues to be affordable and accessible, and that the revolving loan fund becomes sustainable.

“For new loans, application of payments will be made to the most outstanding balance first. Historically, for decades, payments made to the SLB by borrowers have been applied first to penalties, then to interest and finally to principal,” the minister said.

He noted that this is not in keeping with the practice of financial institutions, generally, and has the effect of making the SLB’s loans harder to service.

A performance audit of the SLB last year revealed that borrowers were becoming increasingly delinquent, a situation which, along with up to $2.5 billion in loan write-offs, has adversely impacted the agency’s liquidity position and forced it to rely on Government subsidy to support loan disbursements.

Between 2012 and February 2018, SLB non-performing loans moved from $1 billion to $11.3 billion, and at the same time, Government subsidy as a proportion of total loan disbursement rose to 91 per cent or $3.1 billion in 2016/17, up from 13 per cent or $0.4 billion in 2012/13. The growth in non-performing loans and write-off of non-collectable loans totalled $2.5 billion.

“Economic opportunity for all means that payments by borrowers will be applied to most outstanding payment first,” said Clarke.

Additionally, the finance minister said eligible borrowers in good standing with the SLB will be entitled to a reduction in their interest rates of two percentage points.

Clarke said this is in keeping with the reduction in the Bank of Jamaica policy rate over the time since the last adjustment.

This means that interest rates will move from 9.5 per cent to 7.5 per cent for post-graduate loans, and from six per cent to four per cent on the Pay-As-You-Go loans.

The minister said effective April 1, all borrowers employed full-time to registered charities, which are in good standing, will have 10 per cent of their loan balance forgiven for each full year that they are employed full-time to a registered charity.

“I operated a charitable organisation for approximately 10 years before politics. I know of the difficulties and challenges. There are many charities doing outstanding work in Jamaica. We want to encourage them and to encourage talented graduates to work in the NGO (non-governmental organisation) space, even for a time, as we work to build a better Jamaica.

“This policy helps the student, helps the charitable organisation, helps the vulnerable population served by charities, and helps Jamaica. We are improving access to tertiary education. We are expanding economic opportunity for all,” said Clarke.

For the 2017/18 financial year, 13,724 Jamaicans applied to the SLB. Of that figure, 13,568 loans were approved. The SLB disbursed loans amounting to $4 billion.

In 2019/20, the Government will provide grant support of $3 billion to the SLB, Clarke said.

In the past three years, the value of loans disbursed by the SLB has increased by over 22 per cent.