Fewer students seeking education loans

The Student Revolving Loan Fund (SRLF) is reporting a decline in delinquency and fewer people seeking an education loan from that institution.

In its financial statement for the year ending March 31, 2020, the SRLF said it saw a decline in loan approvals from $9.3 million from the previous year to $6.8 million.

As at the end of the reporting period, loans approved but not yet disbursed amounted to $5.96 million, compared to the $10.91 million at the end of the prior reporting period.

The SRLF has traditionally lent mostly to those students pursuing studies outside of Barbados given Government’s policy of providing free education up to tertiary level for citizens.

In the report, which was published earlier this year, acting Administrative Manager Ambrose Johnson said the SRLF had initiated strategies to mitigate the declining trend in loan approvals.

However, he said with COVID-19 starting to have a negative impact from the final quarter of the financial year under review and expected to continue throughout financial 2020/21, the SRLF was optimistic of maintaining loan approvals at the same level of the financial year 2019/20.

Funds that have not yet been repaid to the SRLF as of the end of the reporting period stood at $92,859,430 (of which $25,503,916 is allowance for loan losses), compared to $104,956,544 the prior year. This includes principal and interest receivable.

Johnson acknowledged that delinquency was high among student-lending agencies globally and that student loans by their nature were inherently riskier than the average loan offered by the traditional financial institutions.

However, he said notwithstanding this reality, efforts can be undertaken to minimize loss by way of delinquency.

“The average delinquency rate internationally for student loans is 12 per cent. The SRLF’s delinquency rate as at March 31, 2020 was 17 per cent. While this is an improvement from 27 per cent in recent years, the goal of the SRLF is to reduce its delinquent loans to less than 10 per cent by March 2022,” he said.

Loans Manager Suzanne Griffith told Barbados TODAY that due to the ongoing COVID-19 pandemic, the SRLF had embarked on a programme that would provide some ease to students who are struggling to repay their loans.

“Where possible we have initiated an accommodation relief because we are conscious that there are a lot of students who are unable to make payments due to unemployment and in some cases hardship,” she said.

“We have offered interest relief and deferral of payments for three or six months and at the end of that period we relook it and if the situation has not improved then we are willing to look at it to extend it.”

Griffith said since its introduction last year there has been “quite a few students” who have been taking advantage of that programme, due mainly to unemployment.

In his report, Johnson said the SRLF would continue to be proactive in its collection efforts as it strives to reduce its delinquency and ensure that funds are always available to lend to Barbadians who wish to pursue their “academic dreams”.

In addition to local efforts, the SRLF has engaged international collection agencies to pursue borrowers living overseas, said Johnson.

For the financial year under review, the SRLF’s total income increased by $3.8 million or 73 per cent over the previous year. Interest income on loans increased by $2.5 million or 57 per cent and interest on investments increased by $1.1 million or 160 per cent, when compared to the previous year. These two sources of revenue were the main contributors to the significant increase in total income.

The report said: “The phenomenal growth in income is as a result of the SRLF collecting on older chronically delinquent loans that were previously written off.

“In addition, its expanding investment portfolio allowed the SRLF to grow its income from investments. With total income up significantly when compared to the previous year and a $2.3 million or 49 per cent reduction in expenses, this translated in net profit of $6.6 million for the year under review,” the report said.

“As a result of its improved collection efforts, loan receipts increased for the year by 18 per cent or $2.8 million over the previous year. Total receipts reached a record high of $18.2 million at the end of March 31, 2020. This growth in receipts has enabled the SRLF to continue to be self-sufficient in covering its operating expenses and providing funds for new loans thereby not having to rely on Government for any subvention. In addition, the fund has been able to expand its investments portfolio moving it from $22 million in the previous year to $36 million as at March 31, 2020,” it added.

At the end of the financial year total assets increased to $108 million, up from $101 million in the previous year. This increase was achieved despite a reduction of $4 million in the student loans receivable asset. The reduction was buffered by a $14 million increase in the investment portfolio.

Chairman of the SRLF Management Committee Betty Alleyne-Headley said the organisation would continue to position itself “to meet any current and immediate challenges”.

“To stay relevant, the SRLF will have to make changes to the legislative framework, continue to improve its processes, introduce new products, improve its corporate governance structure, continue to leverage the use of information technology and strengthened its engagement with its employees and customers,” said Alleyne-Headley. (marlonmadden@barbadostoday.bb)