Prime Minister Dr Ralph Gonsalves has criticized the opposition New Democratic Party’s (NDP’s) proposed reduction of the interest rate on student loans by just over 50 percent, saying it will not be sustainable.
The opposition NDP, during their election campaign, promised a reduction from 8.5 percent to 4.5 percent interest on student loans. The incumbent ULP, in their election campaign, promised a reduction to 6.5 percent.
Calling to the Issue at Hand programme on WE FM last Sunday, Dr Gonsalves said that when his administration started the student loan programme for economically disadvantage students the opposition New Democratic Party (NDP) said the programme would make the government broke, that there would be delinquency.
He said that in response he told the opposition that he would “put more faith in the young people of St Vincent and the Grenadines that I’ll put in Dr (Aldo) Rolla whom they had guaranteed dozens of millions for” in relation to the Ottley Hall Marina and Shipyard.
Dr Gonsalves said some students have become delinquent on their loan repayment and that it is unfortunate.
“But the thing is so successful they want to make people forget that, and they say ‘well, the interest rate is too high, we will drop it to below five percent,’” Dr Gonsalves said.
The Prime Minister reasoned that to drop the interest rate to below five percent “will mean that the programme will become unsustainable because the money comes from the National Insurance Service (NIS).
He said that according to an actuarial study in relation to monies guaranteed by the government, the investment must yield 6.5 percent “in order for the investment to be sustainable over a period of time, given the size of the NIS and the benefits which have to be paid out and all the rest of it.”
Prime Minister Gonsalves said some persons even suggest that the interest rate on the student loan can be carried to three percent.
“Well, you can do that but if you get specific money where you can get three percent money,” he said. Dr Gonsalves said he questioned top officials at the NIS on the matter and he was told that of the current rate of 8.5 percent interest, the NIS gets its 6.5 percent, and administrative expenses and delinquency have to be factored in.
Dr Gonsalves said he told the NIS officials that they didn’t have to get 6.5 percent on every portfolio. He said he told them the student loan programme was on such which they did not have to make 6.5 percent and he suggested that the NIS could absorb the Administrative cost.
He indicated that the NIS took the suggestion onboard and they arrived at 6.5 percent interest rate but he pushed them down to six percent.
“But you got the opportunism of the NDP with something they were suggesting which was entirely not sustainable. The programme would crash,” he said.
“You see what I mean? Because the larger question arises: ‘if the cost of the funds is six and a hal percent, why should persons who would be coming back with a degree, who would earn far more money than an itinerant sanitation worker, or the worker at the port and so on, why should they be subsidized to that particular degree by the working class itself?
Asked if the ULP’s interest rate reduction included other students who received student loans outside of the economically disadvantaged student loan programme where parents and otherd signed as guarantors, Prime Minister Gonsalves said no. He also said that there were students who received loans from commercial banks and have to pay interest rates above 8.3 percent.