Student loans from banks proposed in House

MANILA, Philippines — Poor college students may soon be able to take out a loan from private banks or government financial institutions to pay for their tuition and living expenses, under a bill filed by the chair of the House basic education committee.

The loan will be payable in installments at least two years after the student has graduated under reasonable interest rates, according to Pasig City Rep. Roman Romulo.

As incentive for the lender, it will get corresponding tax credits.

In filing House Bill No. 5792, the congressman proposed the creation of a “Student Assistance Program” that would put in place mechanisms for student loans covering tuition and miscellaneous fees, as well as other costs of attendance, such as books, projects, food and transportation.

Based on the provisions of the bill, lenders may charge interest based on the prevailing 90-day treasury bill rate at the time of approval of the loan, and an additional 3-percentage-point interest to be paid by the student borrower.

Loans granted to eligible priority students will have an additional interest of 5 percentage points that is not payable by the student but may be claimed by the lender as tax credit against gross receipts tax, according to the bill.

As for the collection of payment, borrowers may file a request with the Government Service Insurance System or the Social Security System “to collect the repayment of the loan through their system of salary deduction and withholding.”

Those seeking employment abroad may enter into a similar arrangement with the Philippine Overseas Employment Administration.

Romulo said his proposal would encourage the participation of the private sector, particularly banks, in making funds available to deserving students in need of financial assistance.

‘Study Now, Pay Later’ program

There is a program similar to the Romulo proposal, but financing came solely from the government.

“Study Now, Pay Later” was a scholarship program first proposed by Sen. Benigno Aquino Jr. in 1968.

On June 10, 1989, then President Corazon Aquino signed Republic Act No. 6728, or the Government Assistance to Students and Teachers in Private Education Act, which included a provision for the “Study Now, Pay Later Plan” (SNPLP) to be administered by the Department of Education, Culture and Sports, the precursor of the Department of Education.

Under Section 11 of the law, a special fund was created known as the students’ loan fund that would cover tuition and other fees that should be paid directly to the school concerned.

The loan, which would not exceed an interest rate of 12 percent yearly, should be paid by the student after he finished the course or profession for which the proceeds of the loan were expended, but only after two years from the time he was employed.

Almost a decade later, in February 1998, amendments to the law were made, including the provisions on the SNPLP plan.

Under Section 10 of Republic Act No. 8545, the students’ loan fund would be administered by the Commission on Higher Education (CHEd) and the Technical Education and Skills Development Authority.

The law also changed the interest rate of the student loans to 6 percent per year.

In the 2018 annual audit report, the Commission on Audit (COA) said that the “deficient implementation of the SNPLP and the Student Assistance Fund for Education for loan programs resulted in a low collection rate of only P2.14 million, or 1.18 percent of the due and demandable balance of loan receivables amounting to P181.66 million.”

The COA, in its 2017 audit report, called out the CHEd for its weak loan collection system and inadequate records in connection with the release of SNPLP loans to the CHEd’s regional offices in the Ilocos, Bicol, Western Visayas and Caraga regions. It noted a low collection rate of P2.89 million, or just 2.09 percent of the P138.24 million in due balance of loan receivables.—Reports from DJ Yap and Inquirer Research