With the introduction of student loans in 2012, it became the long-awaited savior for many prospective students who were unable to afford tuition fees and the cost of living in the capital city Male’.
Department of Higher Education (DPE) of Ministry of Education, the regular of government-funded student loans in the country was overwhelmed by the number of applications and the support received from the students with the introduction of the loan scheme. Hence, more than 2,000 students were granted with the loan between 2012-2014.
Student Loans became one of the easiest ways to obtain funds from the bank without securing a collateral or being subjected to interest. This skyrocketed the program.
During the first two years of introducing Student Loans, an estimated amount of 300 Million Rufiyaa has been spent by the government for about 2,000+ individual loans.
Debt Crisis may be a new concept for Maldivians. But, if you may think a little back in time we may slightly have experienced it with the disaster relief easy loans granted after 2004 Tsunami. People who were irregular on payments later had to pay double/ triple the principal loan amount after many years of non-payment. Not to mention many were dragged to court for collection. (information from an undisclosed person).
An Actual debt crisis is when the majority of the debtors are behind/ not paying their scheduled payments. When this happens it puts the bank/ loan granting institution at the risk of cashflow tightening. In the case of student loans it is the government who bears the risk for students and when the government is tight on cash it is the whole population that suffers.
Every year about 2,000 more Student Loans is granted and the government spends an estimated amount of 500 Million Rufiyaa (half a Billion) annually.
Student Loan outstanding (total due) amount has surpassed 2 Billion Rufiyaa as of August 2017
Although, the data is not publicly available experts speculate that Student Loan debt in the Maldives accounts for the largest share of the public (individual) debt.
A couple of solutions that might improve the situation and may avoid the possible crisis.
1. Informing students of the responsibility they are accepting with the Student Loan.
Most students are not aware of the responsibility they have with the student loans and often ends of misusing the funds or dropping out from college before completing the program. This often leads to students not being able to make monthly payments to the loan and contribute to the crisis.
Authorities must take an active part in explaining to the students that the funds they receive are not for granted and they are ultimately paid the people in the form of taxes etc..
2. Employment opportunities.
Ideally, student loans are granted with the intention of building a better workforce. However, if graduating students are not provided with adequate employment opportunities they will find it difficult to pay off the student loan. The government and its authorities must give an extra care to provide employment opportunities for student loan granted graduates as they hold a higher stake of government compared to others.
3. Reducing the cost of living in Male’
Student loans consists of 3 components
1. Tuition Fee
2. Living Cost
3. Other (Book allowances)
Tuition fees vary depending on the program. Most local degrees hover around MVR100K/- as tuition fees, where diplomas are around MVR60-70K and Masters are around MVR150K.
Living cost, however, is fixed, MVR6,000/- per month (MVR72,000 annually) is granted for living costs. Which adds up to a significant amount considering the fact that a degree would take 3 years to complete. About 60% the loan for local studies consists of living cost.
If the government can somehow manage to reduce the actual living cost in Male’, a significant amount of the living cost component can be reduced and eventually benefit both the gov and the student.
4. Just be regular on payments
Last but not least, if you happen to have a student loan be responsible and start paying regularly. It not only reduces the amount you owe but helps the country in every possible way.
Education loans are a something for which government spends a lot just to educate you, dont take it for granted, study with this motivation and pay back responsibly.
Total student loan debt of the United States is over $1.45 trillion more than the total credit card debt in the country.