Students bear the brunt of failed pre-need firms

At around this time, two years ago, Florabel Manuel, 20, had nothing to prepare for and nothing to do.

She would wake up around noon, log on Facebook, but would see none of her friends online. All of them were in class, learning about the exciting yet crowded world of journalism.

Manuel had failed to enroll in her university and was waiting for the semester to pass. She could have been a candidate for graduation next March if not for that semester.

“I wasted five whole months of my life,” she said. 

Manuel was a victim of failed promises, of a confluence of factors beyond her control.

Her parents were among the thousands of plan holders of the troubled College Assurance Plan (CAP), which is still settling its obligations.

These parents had relied on CAP to get their children through their education. Little did they know that they won’t reap their investment on time and that they would have to shell out or borrow money for something they had already spent for.

Worse, they never thought that they would face the ordeal of telling their children that they have to stop schooling.

Who would have thought that a pioneering company that had 700,000 plan holders would face financial woes?

Unfortunately, such horror story is not exclusive to CAP investors. Clients of pre-need firms like Pacific Plans, Prudentialife, and the controversial Legacy Group also saw their hopes ground to a screeching halt.

Broken promises

Carlos Manapat, an economics professor from the University of Santo Tomas, is a cynic when it comes to pre-need investments.

“I’ve never met a student who got enough from any of those pre-need plans. It’s always insufficient, or delayed, or they get nothing at all,” Manapat said.

Manapat, who also fell victim to a failed pre-need investment, said people get little money from such investments due to the manner companies operate.

“I was able to talk to an agent, and he told me that during the first few years of your payment, a big percentage of it goes to the agent and the firm, not to the bulk of your investment. It can only go to the bulk of your investment if you invest in ten years,” Manapat said.

“When you invest, they do not tell you where the money will go. They tell only promises. They’ll say that in 10 or 20 years, when your child goes to college, they will be able to pay for it,” he added.

Bryan James Lim, a pre-med student, could not agree more. He had to stop college since his parents did not have enough money to send their three children to school.

“We had to pick who was going to continue his studies but since my elder brother was finishing college, he went first,” Lim said.

Lim’s parents availed of educational plans for him and his two siblings. Even his cousins had them. Only one of them received something and it was only about three-quarters of what they invested. 

Paying the price

Upon learning that he would stop schooling, Lim thought of ways to help his family cope with the hard times.

He spent all that extra time looking for jobs and managing papers. He had hoped to go to his parents working in Taiwan and restart his education there. His father worked at a shipping company while her mother was a factory worker there.

In contrast, Manuel said she could have been more productive during her idle months.

“Sometimes, I wonder, what if I had given those five months to someone who was terminally ill? I could have helped somehow, but I know that couldn’t happen,” she said.

Manuel’s parents are jobless and only the apartments they had put up for rent are sustaining their family of six.

She could only reminisce the times when they were better off, when their family would go out every Sunday to buy toys and eat at restaurants. Her father had inherited lands from his parents, and then worked as a salesman for a car manufacturer.

When a slew of financial mistakes and hard times hit her family, Manuel thought she would forever lose her education.

“Everybody was moving on with their lives, and I was stuck where I was. My friends were all busy with school and there I was, being left behind,” she added.

Unpredictable

In a way, universities and colleges also contributed to the fall of pre-need companies.

“Nobody can predict the increase of a particular school’s tuition, neither can the government control it,” Manapat said.

He explained that once a really good school is given autonomy by the Commission on Higher Education (CHED), tuition hike is only a matter of justification.

If the school can defend its use of the money, its application for increase has a good chance of being approved.

CHED recently approved of the increases in tuition and other fees in more than 350 private colleges and universities nationwide, prompting some groups to seek relief from the Supreme Court. The high court, however, junked their petition, calling it “premature.”

The sheer number of claimants also struck a blow to the pre-need industry.

“Business boomed when these companies started. They got a lot of applicants, and a lot of money. Time came when all the applicants tried to withdraw the money that the firms do not have,” Manapat said.

Still optimistic

Manapat said Filipinos do not let such setbacks put them down as most of the students who relied on failed pre-need plans found other ways to finish their studies.

“We Filipinos have strong family ties that even if you don’t have money, you can always ask from your relatives,” he said.

“We have a lot of Filipino relatives working abroad, and based on several studies, the bulk of these OFW (overseas Filipino workers) remittances goes to educational investments.”

The worst is over for Manuel and Lim as they will continue their studies this year.

While they don’t look at the past fondly, they admit that all the drama from the embattled pre-need firms paid off in a completely different way.

“I learned the hard way. I just thought that maybe the experience was to teach me something,” Florabel said.

“That's when I began to realize the value of each day, and how only I can save myself from further downfall. I was alone then, literally and emotionally. I had to get up at some point.”

For Lim, the experience gave him an edge.

“I feel very different from my friends now. I’ve been through things that I shouldn’t have at my age,” he said.

“I see a brighter future ahead of me. I’m confident now because I feel that I’ve been molded by the hardship.”