Latest update October 11th, 2026 10:40 AM
THE STUDENT LOAN FUND IS BANKRUPT
Just before it demitted office after its ruinous twenty-eight year rule, the PNC had come under pressure to charge fees for university students. The PNC had surrendered itself to the dictates of the World Bank and International Monetary Fund.
These institutions would have no doubt demanded fees at the university as part of their conditions for granting the funds for the structural adjustment programme between Guyana and them.
The logic of these Institutions must not be lost. A disproportionate amount of the public expenditure on education was being used for the University of Guyana (UG), and given the then stress on allocative efficiency there was, from a market perspective, a sound argument for the introduction of fees at UG.
The PNC before it left office did signal that fees were going to be introduced. It made mention of cost recovery, a phraseology that it has attempted subsequently did not necessarily mean fees. Well, what other means of cost recovery could it have feasibly introduced?
It was left to the PPP when it took office to do the honors and to introduce fees at UG. The party knew that it had no choice. Cheddi Jagan was aware that critical balance of payment support was to be had. But he also as a working class champion did not wish to deny anyone entry into the University. So he came up with the scheme to lend students the money for their tuition. It was his way of being compliant with the dictates of the IMF and World Bank while at the same time ensuring that no one would be denied access because of inability to pay fees.
The student loan facility was therefore conceived by the PPP as a welfare fund aimed at bypassing IMF/ World Bank stipulations. The plan was that the fund would have been a revolving one. The government would inject annual allocations to cater for the students that were already at UG and those that were entering. Eventually the repayments from the student loans would render such annual allocations unnecessary since these repayments would allow for the replenishment of the fund.
The fact that twenty years after, the government still has to replenish the Student Loan Fund to the tune of four hundred and fifty million dollars, suggests clearly that the fund is bankrupt. No one needs the Minister of Finance to signal that billions are owed to the fund. The very fact that annual replenishments have to be made after twenty years, means that the loan repayments by students are not revolving the fund. The fund is stuck and the rate of delinquency is as such as to deem the fund as bankrupt.
But the PPP could not have been bothered because it had conceived this fund not as a commercial fund but as welfare fund which they were using to subsidize university education. The huge debt burden was never a concern because the government had used the loan facility to technically offer free university education.
Now that the National Assembly had not approved of the replenishments for the fund for this year, there is no money to finance the University of Guyana. And of course, the government had now discovered, if it did not know this before, that billions of dollars are owed to the fund by graduates over the past twenty years.
The financial crisis faces the University of Guyana at the moment. So what is to be done? The first thing that it has to do is to convert the Student Loan Agency into a Loan Recovery Department. That department should be mandated to go after the billions of dollars that are owed to the government by students.
The second thing that has to be done is for the Minister of Finance to go with a supplementary Bill to the National Assembly to source the $450 million needed to finance the new students entering university. This can be done easily. The opposition will support this measure.
The problem however, is what happens next year. There can be no more advances to the student loan fund because for all intents and purposes that fund is bankrupt. Therefore, what needs to be done is that notice should be given to students entering the University of Guyana in September 2015 that they will be required to pay their own fees; no student loans will be given by the government.
There will be a big hue and a cry about where the students will find the money from. Well they can go and borrow it from the banks. If the student loan fund was operating on a commercial basis, they would have to lodge collateral to ensure repayment of the sums borrowed. So they can do the same and borrow from the commercial banks.
Share this:
Discover more from Kaieteur News
Subscribe to get the latest posts sent to your email.