Conference of Caribbean Area Network for Quality Assurance in Tertiary Education
UNIVERSITY COUNCIL OF JAMAICA
Earl Jarrett- General Manager, Jamaica National Building Society
Financing Tertiary Education: Towards a Workable Model for Sustainability
Hilton Rose Hall Resort & Spa, Wednesday, October 31, 2012
I am honoured to be invited to participate in this conference on Tertiary Education and finding a workable model to address the subject of financing for this level of education. And, I extend congratulations to the University Council of Jamaica on its 25th Anniversary and for staging this event, which is timely intervention to focus on enhancing the quality of education at the tertiary level in the region.
Our theme for discussion is particularly important, given the increased focus on this area in recent years, not only here in Jamaica, but globally. For example, the issue was placed squarely in the global limelight last November due to widespread student protests in London against the British government’s decision to increase tertiary education fees and reduce government subsidized financing of this level of education.
Here in Jamaica we had to face the stark reality about the government’s funding agency for tertiary education, when the Students Loan Bureau announced at the start of this school year that it had difficulty in identifying the required capital to provide loan funding for tertiary students.
Student Loan Financing:
To explore the issue of student loan financing it is useful to look at the cultural context in which we operate. While it is generally accepted that the primary responsibility for student education financing should be the responsibility of family members and derive from family savings, this is often not the case.
Generally, we have come to expect and accept that financing education is a social benefit and the responsibility of government. Historically, we have felt that the State should carry the burden of financing education… and this has been supported by the policy positions of various administrations, which have ranged from free education at all levels to heavily subsidized costs within the shared cost context.
In the midst of all this, what is without question is that: It is acknowledged that a country’s education system and access to education by its people is one of its strongest indicators of development. Education provides the greatest opportunity for upward mobility and for the Caribbean region, with its large youth population, to be competitive in the creation of knowledge,
This could contribute in part to the low level of financial preparedness which is evident generally among the region for pursuing higher education studies. There is a pattern of low family savings rate in the Caribbean, as not many persons consider saving as an important vehicle to fund personal goals such as the education of their children.
For those who think otherwise, funding from education comes principally from three main areas:
- Family sponsorship
- Family savings
- Equity loans from homes or on mortgages, provided by member based organizations such as building societies and credit unions.
This third point brings into focus that there is a relatively small number of home owners, which provides limited opportunity to use their mortgage. In some cases, the costs associated with accessing funds via mortgages are high, and repayments for those loans begin immediately.
Sources of Financing
Given the cultural challenges, financing student education has traditionally come from sources such as:
- Student loans provided by public sector interests, such as government agencies, or private sector interests such as commercial banks, credit unions and other member based organisations. Financial institutions offer scholarships, bursaries and grants.
- Student employment is another source of funding. Students may retain full employment and undertake part time study or access employment while they are full time students. Additionally students seek summer time employment during school breaks to supplement educational expenditures
- Through the Foundations of private sector companies – bursaries, grants and scholarships are offered to help underwrite tertiary education costs.
There are undoubtedly severe challenges to funding higher education.
Limited employment prospects and poor economies present little opportunity to persons to have the disposal income or qualify for loans to pursue higher educational goals.
In the mid to late 1800s, the Jamaican education system benefited tremendously from charities and trust funds which were used to established some of our more notable educational institutions.
Many of our secondary institutions, such as: The Wolmers Schools, Mannings High, Jamaica College, Munro, St Georges’ College, Calabar, Immaculate Conception High, and The MICO… all began through private sector benevolence. Unfortunately, this level of financial support has reduced significantly.
Student loans access has challenges of its own. Here in Jamaica access to such loans are terribly limited and the Student Loan Bureau underfunded (as you have heard). In addition, there is a poor repayment record due to the absence of a Credit Bureau in the Caribbean, and this, in turn, impacts the availability of capital, as there is not enough funds in the revolving programme due to the non-repayment of loans.
There are also strategies which can be adopted to improve financing of tertiary education and to encourage better performance of the current student loan programmes:
- The establishment of a regional Credit Bureau which should include the tracking of student loans. Given the severe challenges we have with repayment by some persons, it should be legislated that student loans should form part of one’s credit history and defaults should permanently effect credit ratings. In the USA, the default of college loan repayments perhaps has more negative impact on someone’s credit history than even defaulting on mortgage payments.
- Compulsory Student bonding to the government and private sector service should be implemented to ensure that the recipients of financial assistance for their education honour their obligations and give back to the country for the investment in their education.
- Establish a Guarantor Registry to facilitate cross checking by institutions to check to ensure that the same person is not guaranteeing several loans or that there are loan defaults which are associated with this individual.
In order to move forward it is imperative to assess the current situation and come up with a new approach. At present there is a committee which is looking at the current model of financing tertiary education to come up with new approaches.
I submit that within the discussions the following critical requirements should be given serious consideration if we are to successfully change the current picture:
One… Change Government’s policy in respect of how educational financing is perceived and undertaken.
Two… Reform taxes to include tax incentives to enable firms, businesses and persons who invest heavily in educational programmes through grants, bursaries and scholarships. It could also encourage the resuscitation of trust funds and foundations by wealthy individuals.
Three … Establish a public education campaign on saving for tertiary education. A National drive to promote saving is critical. The components of this programme would include:
- Encouraging savings from birth. In the 1970s a National Savings Programme was rolled out here in Jamaica but did not take off as intended. I propose that we have to cultivate a culture of saving, to get persons to understand their personal role in securing their financial future. This involves introducing financial literacy and saving schemes linked to a financial institution as a compulsory part of the educational curriculum.
- Establishment of ‘education savings accounts.’ This supports the model adopted by New Zealand in the mid 1980s to break the culture that financing education is the responsibility of the State. They introduced an education campaign “Think Tertiary Early” which emphasized to students and families the need to plan early for tertiary education.
The New Zealand policy shifted the burden from the State to the individual and they have seen significant uptick in their tertiary level enrolment figures. The data shows that enrollment in tertiary institutions students more than doubled between 1985 and 2001, from roughly 120,000 students in 1985 to 282,000 students in 2001 and as at 2009 stood at to nearly 500,000.
Four… Establish a compulsory national savings for education fund, similar to the Pay As You Earn deductions to the National Housing Trust. This would provide a constant pool of funds to provide a solid capital base for financing education.
Five… Financial institutions should explore the creation of education or tuition saving accounts with special rates to foster the personal investment in education. Additionally, these accounts should be tax free to encourage increased saving.
Six…Develop a formal programme and structure to engage the Diaspora to support and finance education. Through private sector involvement, the Diaspora has been providing significant support to the education system.
The Diaspora community should be formalised into an integral part of our educational development programme and more done to coordinate our efforts in the provision of education — either directly through sponsorships, scholarships or donation of cash or kind, or indirectly, through mentorship or adoption of development programmes of educational institutions.
Seven… Abolish the Money Lending Act which places significant restrictions on some financial institutions. This would free them up to widen their scope to engage in activities which could encourage more lending for educational programmes.
Ultimately the responsibility for tertiary education is primarily that of the individual student, and his or her family.
The role of government is to create an enabling and supportive environment, and there are specific steps that each party—government, the private sector, and the primary stakeholders can take to make tertiary education more accessible and affordable to all.