Banks urge to put up P35 B for student loans

MANILA, Philippines - The country’s commercial and universal banks can put up as much as P35 billion for college education loans to help more students complete tertiary education, a senior administration lawmaker said yesterday.

House Deputy Majority Leader and Pasig City Rep. Roman Romulo said the country’s financial institutions can take their cue from the state-run Development Bank of the Philippines (DBP), which has put up a P2-billion special loan program for high school graduates who wish to pursue college education.

The DBP Higher Education Loan Program for Students, or DBP HELPS, is a wholesale credit facility using qualified colleges as conduits for student loans.

“Besides DBP, we have 35 licensed universal and commercial banks. If each of them just set aside P1 billion, or one-half of what DBP has allotted, then we can easily have some P35 billion available for lending to students,” Romulo said.

“We laud the DBP’s ground-breaking program, which will surely enable a greater number of high school graduates to acquire a bachelor’s degree. Other banks should replicate the lending facility,” he added.

DBP’s initiative came not long after University of the Philippines freshman Kristel Tejada took her own life shortly after she went on a forced leave of absence for failing to pay tuition.

Romulo noted that three out of every 10 high school graduates are unable to proceed to college largely owing to the rising cost of tertiary education and that many of those who entered college fail to complete the four-year course for the same reason.

“The cost of a college education has become increasingly prohibitive. It has been doubling every five years, with tuition soaring by roughly 15 percent annually,” Romulo said, warning that the nation will likely face a diminishing number of college graduates in the years ahead.

Romulo is the author of the proposed Act Establishing a Student Assistance Program by Banks and Government Financial Institutions, which the House of Representatives has already approved on third and final reading.

Under the program, an eligible student may obtain a low-cost bank loan to pay for tuition and other expenses. The loan would have an effective interest rate pegged to the 91-day Treasury bill rate, which stood at 0.040 percent per annum as of April 24.

Under the bill, the bank may apply an add-on three to five percent annual interest rate. But instead of the student paying for the extra interest charges, the lender may claim the corresponding amount as tax credits. The bank may then use the credits to pay or offset its tax obligations.

The borrower would pay off the loan periodically, starting two years after graduation but not later than eight years after college.

Borrowers would be issued either Social Security System numbers or Government Service Insurance System numbers, depending on their preferred future employment. The bank may then enlist the SSS or GSIS to collect payments via salary deduction or withholding.

The lender may also ask the Philippine Overseas Employment Administration to help collect from borrowers with job contracts abroad.

United Nationalist Alliance senatorial candidate and Cagayan Rep. Jack Enrile also urged the government and private financial institutions to set aside funds for student loans, saying that many high school graduates are unable to go to college due to lack of money. 

“That will show very clearly that the state is committed to giving priority to education as mandated by the Constitution,” he said.