Minister forecasts revamp of Education Loan Authority

Mon, Apr 20th 2015, 11:41 PM

Minister of Education, Science and Technology Jerome Fitzgerald yesterday said that the government will revamp the Education Loan Authority Act as part of its plans to recoup some of the over $60 million in outstanding loans under the Education Loan Authority (ELA).

Fitzgerald told Guardian Business that the government hopes to review potential amendments to the act in Parliament as early as this week, arguing that the act's current "all or nothing" payment program is "not fair" for many ELA beneficiaries.

"We're going to be revamping it so that it makes sense to us and gives the minister a little more discretion with regard to monthly payments, because under the act you don't really have discretion now, so if someone can't pay the full amount it's either all or nothing.

"We've made some amendments to the act now that will allow us to work more with the persons who owe money, because there are many of them who want to pay, but under the present system it really is not fair to them. So a number of initiatives will come out of that," he said.

However, Fitzgerald did not reveal hard details about the reforms to the ELA act. Loans in default, where students had been delinquent in their monthly payments for more than three months, totaled $60,134,812 as of June 30, 2014, up from $57,438,902 in 2013. The government will reimburse the ELA.

The ELA was established in 2002 to raise money to fund the Educational Loan Guarantee Scheme, which provided educational loans to Bahamians students seeking to study at approved colleges and universities. The Education Loan Authority Act authorizes the entity to borrow and raise up to a maximum of $100 million in funds for the scheme, of which $33 million was issued by Bank of The Bahamas (BOB).

An audit tabled by the Senate last month revealed that the auditor team at Grant Thornton issued a qualified opinion of the ELA as of June 30, 2014, which questioned the ELA's ability to continue as a going concern, given its loan portfolio, and the ELA's ability to determine whether the government would guarantee the excess amount of the maximum set by the scheme, which amounted to $5,120,656 as of June 30, 2014.

This left the authority with the ability to lend up to $67 million that would be guaranteed by the government. However, the ELA issued guaranteed loans exceeding the $67 million threshold as of June 30, 2014, with roughly $21.75 million already reimbursed by the government.

The government suspended the scheme on August 5, 2009 due to the loans receivable portfolio swelling beyond the amount guaranteed by the government. Loan commitments made to students under the scheme before the suspension will still be honored, but no new students will be accepted into the scheme, nor will any additional loans be granted to existing students in the scheme.

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