The government's guaranteed loan program has been suspended indefinitely as the Ministry of Education seeks to collect $68.05 million in defaulted loans, Minister of Education Carl Bethel revealed yesterday.

The government has had to pay off at least half of that debt over the past nine years, said Bethel at a press conference held at the education ministry's Thompson Boulevard headquarters.

"To date, the government of The Bahamas has settled some $30.6 million in defaulted loans with an additional $37.4 million in loans currently in default with the Bank of The Bahamas," he said. "In total, some $68.05 million in loans are in default."

This represents a rate of default which currently stands at 61 percent, according to Bethel.

The government loan program was established under the Ingraham administration after the Education Guarantee Fund Act was passed in 2000. Nearly 5,000 university and college students have benefited from the program since its inception.

Education officials said the program initially allowed students to borrow up to $20,000 per year to fund their college education. The act also provided that the government could guarantee no more than $100 million worth of loans.

But yesterday, Bethel said the huge sums of unpaid money have forced the government to suspend the program and more than 300 new applicants will have their loan applications denied this year.

"Due to this large rate of defaulters, loan holders who are either unwilling or unable to repay their obligation, and the fact that the guarantee program has reached its statutory limit, the government of The Bahamas is left no alternative but to suspend the program at this time in respect of any new loan applications," he explained.

The move to suspend the program will have no impact on those students who are already a part of the program as the government will continue to fund their education, Bethel noted.

However, for those former students who have defaulted on their loans, Bethel said the government is planning to take a more aggressive approach to collect its money than in years past.

"In good conscience, the government cannot at this time justify placing this additional hardship on the Bahamian people," he said. "When these defaulters do not pay their loans as agreed, the government has to step in and pay it. This takes away from the countless other priorities that we have.

"I wish to say to the defaulters that the government will do what is necessary to collect the people's money, including publishing names in the paper and possible legal action. We will be making agreements with collection agencies in the upcoming weeks to assist in recovering borrowed funds."

Asked how the default in loans was allowed to reach nearly $70 million, Bethel said it had been difficult for the scholarships and loans division to police the fund without the "full assistance" of the financial institutions that rely on the government's guarantee.

"You are dealing with 5,000 people and it is always a question of what steps can be taken against that many persons. But institutionally it should be kept in mind that there is a difference between the methodologies that would be used by a commercial bank and the methodologies that would be used by some entity other than a commercial bank," he said.

Bethel added that the future of the guaranteed loan program would depend solely on the repayment of defaulted loans.

"The ongoing viability of the program will now hinge on the amount of funds collected from defaulted loan holders. So I urge persons, particularly those that are working, that they made a commitment to repay their loans," said Bethel. "If you are not working, go in and talk with staff at The Bank of The Bahamas and make payment arrangements of some kind."

Thursday, August 6, 2009