Tighten student loan recovery screws - Report

CHANDAPIWA BAPUTAKI
Staff Writer | Friday July 10, 2009 00:00

The Ministry of Education through its department of tertiary education financing, engaged a consultancy to review the grant/loan scheme, which has been operating since 1995 without any review. The consultancy-BEST- will also recommend a new direction in the areas of critical human resource for the economy and the award of government sponsorships and recovery of student loans.

In their second draft report that was presented to the ministry, the researchers, led by Professor Sheldon Weeks, stated that such a law should address the general framework of establishing a loan scheme for eligible students and the administration and management of the scheme. The report states that the Act should address the establishment of a student loan scheme to assist eligible applicants to pay for costs of tertiary education. The Act will address how the scheme will be funded, the application of the scheme and the process of application for the loan, and the condition of the loan when granted. 'For example, the requirements of a written agreement between the loan provider and the beneficiary, benefits to be assigned unique identifiers, what would happen in the event the beneficiary does not perform satisfactorily in his/her studies and the manner of the disbursement of the loan amount,' the report said, adding that the Act will have to address the issue of recovery of loans, by clearly spelling out the beneficiary's obligations to repay the loan with the consequences of not repaying defaulting in repayment.

The researchers also recommended that the law must address other means of maximising opportunities for recovery of loans such as sharing information about beneficiaries with other governments like those responsible for income tax in order to facilitate tracking of defaulters. The report states that this will assist in imposing obligations on employers of defaulters to deduct loan repayments directly from beneficiaries' emoluments.

According to the report, the issue of who will be responsible for the management of the scheme is crucial. It states that a number of options are available and the responsibility can be entrusted to the Department of Tertiary Education Financing in its current set-up.

The consultants, however, recommended that the department could be converted into a semi autonomous body or to consider the option of creating a trust to administer and manage the scheme.

The absence of a legal framework underpinning the current LGS in Botswana was identified as one of the major weaknesses of the current scheme, which is governed by the law of contract. The report points out that one of the major problems faced by the current GLS is the high rate of defaulters by beneficiaries, especially in repaying their loans. 'It would appear that a significant number of the beneficiaries simply ignore or refuse to honour their repayment obligations after completing their training,' the report says.

The report notes that an appropriate legal framework that will provide a student grant/loan scheme with powers to track and recover loans from debtors and enforce other obligations arising from the agreement is essential for ensuring viability of the scheme. 'The legal framework must maximize chances of recovery and ensure that the collection process is as efficient as possible,' the report says.