Submitted by Roslyn Shepherd

The US Education Department has issued a warning to colleges over student loan nonpayment rates (theepochtimes.com) saying “student borrowers have an obligation to repay their loans, but institutions also share a responsibility to ensure their students are prepared to enter repayment and understand the consequences of nonpayment”. It noted that “students are not well-prepared to repay their loans & that student lending institutions should reevaluate internal practices to promote responsible borrowing and successful repayment by informing defaulted student borrowers about opportunities to rehabilitate their student loans, enhancing entrance counselling about student loans, and examining financial aid practices…”.

As the previous manager of the Student Revolving Loan Fund (SRLF), credit
collection policies and procedures were strengthened to ensure recovery of
default borrowers’ debts. Not surprising, most of these defaulters had well-
paying jobs. Now I have been informed the repayment issue has changed in
that it’s about the financial plight of default borrowers who are unemployed
or underemployed. As referenced by the US Education Board student lenders have a fiduciary responsibility to student borrowers. In recognition of its responsibility, the SRLF has employed a Guidance Officer to provide
borrowers with an understanding of the job market as it relates to their
ability to repay their loans. At a point, the SRLF even stopped granting loans
where there were more qualified borrowers than jobs. The SRLF varied
lending options can now address this issue.

Most student borrowers are young people obtaining their first loan
agreement with the view that it is an investment in their future. the
downturn in the job market has impacted this belief. Now student default
loans are listed with and on credit collectors’ website which even after the
student defaulter gains employment, hampers their ability to secure further
borrowings from potential lenders, e.g., financial institutions, hire purchase
lenders. Most if not all lenders now reference these websites to determine
credit worthiness. Court proceedings can mitigate default when borrowers’
salaries are garnished or property realized and monies applied to the debt.
Where there’s no financial recourse, e.g., sureties unable to pay, and/or an
absence of real security for an unemployed defaulter, the debt continues to
increase with interest charges.

Surprisingly, there’s little information about payback on the SRLF’s website.
I am therefore unaware what if any financial accommodations are offered by
the SRLF (which is now a bank) to default borrowers. The SRLF has a sound
financial base and from all indications is flushed with cash. Nonetheless, it
should still continue to recognize its social responsibility and be willing to
offer support at the back end of the loan transaction. This can be done by
allowing payback to be attached to what the defaulters can pay based on
their financial situation and interest charges mitigated as necessary.

Positive change has always been the SRLF’s forte. At the start of my tenure,
it did not even have money to lend potential student borrowers. Now that it
has it appears to be undermining the future of too many borrowers. It
needs to go back to its roots and truly live what it purports, that is, investing in students futures and not undermining or destroying them.