Beirut, Lebanon: With the support of the Central Bank, commercial banks have facilitated the process of student loans for higher education, yet many students are still struggling to pay tuition fees.
As university registration for the spring semester winds down this week, students and administrators told The Daily Star that while the program was an encouraging first step, securing a higher education continues to suffer from a lack of sufficient opportunities for financial assistance.
“Money is the sole obstacle to finishing school,” said Nader Diab, a student at American University of Science and Technology. “I tried getting a student loan from the bank, but they only gave me a quarter of what I needed.”
For the 2010-11 academic year, the Central Bank encouraged commercial banks to reduce their reserve ratios, to encourage the offer of student loans with a fixed 3 percent annual interest rate. The program was created to ease the process of student loans; according to the Central Bank’s website, it allows repayments over a 10-year period.
The program deals with each commercial bank separately. Ola al-Assir, a deputy director at the Central Bank, said each bank has its requirements to be fulfilled by would-be student loan seekers. “We could only enforce certain criteria,” Assir said.
Faisal Nsouli, the Dean of Studentsat AUST, said the government has set guidelines for the interest rate and period of repayment. “But at the end of the day, banks are banks,” Nsouli said, noting that students have to deal with different banks’ loan requirements.
However, some students were unable to fulfill such requirements.
“The only problem we faced with such a program is the bank’s request for guarantees, which became difficult for students,” said Salim Kanaan, the director of Admission and Financial aid at American University of Beirut. “AUB, then, decided to act as a partial guarantor so if there is a big default, AUB can cover that, allowing students to provide minimal guarantee.”
Abdo Ghie, assistant vice president for Enrollment Management at the Lebanese American University, voiced the same concern. “The student has to either offer cash collateral equivalent to the amount of the loan, or have a guarantor co-sign the loan,” Ghie said.
Diab faced a similar difficulty when he applied for a student loan. He had to secure a co-signee with a salary over $1,000. “I diguarantor so if there is a big defaultdn’t have that,” he said.
The Central Bank’s program is not profitable for banks. “The education loan for us is not a profitable credit; we’re merely helping students obtain a university degree,” an analyst at a commercial local bank said.
For bankers, education loans involve many risks, which mean strict lending requirements.
“Our risk policy requires the right guarantor, in case the student decides to change his major, drop out, or even leave the country after they’re done,” the analyst said.
The basic guarantor of a loan must supply proof of employment, and be over 21, Lebanese, and residing in Lebanon. The guarantor’s total debt, along with the prospective loan amount, should not exceed one-third of the guarantor’s income.
According to the analyst, if these criteria are unattainable, cash collateral can be used in place of a guarantor; the borrower deposits money in a lockbox account equivalent to the sum taken out. The bank, then, can secure payments in case of a default.
“This cash guarantee is actually most preferable among applicants,” the bank analyst said
Aside from education loans, students can take advantage of financial aid programs at their universities. “Financial aid is need-based aid, looking into the total income and expenses of the family,” said AUB’s Kanaan, adding that that such aid can cover only a certain percentage of tuition.
For its part, LAU created a loan system similar to banks.
“We can provide loans through the university, we offer financial aid which includes grant and work study; what these two can’t cover, the loan can,” Ghie said. He noted that if the students’ grades are high, then grants and work study can cover all of the tuition fees.
Some students, then, face a vicious cycle since not everyone can obtain a high Grade Point Average, especially those with full-time employment.
“I can’t maintain a high GPA because I work eight to nine hours a day to support myself,” Diab said. “It’s not that I’m stupid!”
The issue of student loans is overwhelmingly important for those studying at private universities in Lebanon, while the Lebanese University, a public institution, only charges LL250,000 annually for classes at any of its faculties.
Meanwhile, the Central Bank’s support program hasn’t been a failure.
“As soon as I heard about the program, I took out a loan to finish college,” said Charbel, 25.
“It helped me out a lot and covered all of my tuition fees.”
Charbel graduated in 2009 and currently works as an accountant. “I haven’t started the payment installments yet; I’m waiting on them to call me and begin,” he said.
Students who have taken out loans to pay their tuition fees worry about their future.
“I took out a loan to finish my studies with 3 percent interest, when I graduate I’ll be in debt, $14,000 in debt,” said Myriam, 23, a student at the Lebanese Academy of Fine Arts.
“It’s kind of difficult to start your career with a huge debt, because after that you need a car loan and then a mortgage,” she added.
University administrators agree on the need to have an adequate government program to better assist the next generation, taking the United States’ federal student assistance program as an example.
“It’s nice that we’ve developed a system to facilitate loan procedures for students, but it’s not sufficient,” Ghie said. He believes that banks, with such a program, should grant loans to whoever applies with the needed amount.
Nsouli stressed the need for a system of equal opportunity.
“It’s the duty of the state to provide equal access to all of its citizens; this is the underpinning of any state,” Nsouli said.
However, for now, the government itself will not be in the business of offering loans.
“The country has to have, at first, a big sum of money in order to provide the loans and then wait around 15 years for the student to pay it off. The current system can’t afford such loans,” Kanaan said.
Ahmad Jammal, the director-general for higher education at the Education Ministry, says the private sector is a sufficient source of student loans.
“It’s really unnecessary for the government to provide loans to students since there are 40 universities that have been successful in securing tuition for students,” Jammal said. “The banking sector is competent in providing such loans, as well.”
Jammal added that the ministry can encourage Lebanese universities to continue and build a better financial support system for students, but no more.
“Under administrative regulations, the ministry can’t make such financial commitments as student loans in any case,” added Jammal.
© The Daily Star
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