Incentives for banks granting educational loans pushed

MANILA, Philippines - Pasig City Rep. Roman Romulo has filed the bill, titled “Act Establishing a Student Assistance Program by Banks and Government Financial Institutions,” granting lucrative tax benefits to banks that provide educational loans to eligible post-secondary students, particularly those from families that have yet to produce a single college graduate.

“Congress should enable a greater number of young Filipinos, especially those from hard up families, to acquire a post-secondary education. A household with at least one college graduate can easily rise above the poverty threshold,” Romulo said in a statement.

Apart from sustaining a household, “a college graduate who is gainfully employed could help finance a sibling’s tertiary schooling, thus multiplying the family’s ability to achieve a higher standard of living,” he said.

The loan would cover the tuition and miscellaneous fees of the borrowers at the school where he has been admitted, plus expenses for books, food, transportation and other requirements.

The borrower would repay the loan periodically, starting not earlier than two years after graduation and ending not later than 8 years after leaving school.

The lender may also impose an add-on annual interest rate of three to five percent. But instead of the student-borrower paying for the extra rate, it would be treated as tax credits that the lender may then use to pay for or offset future tax obligations.

To facilitate loan repayments, the bill requires the participation of the Social Security System (SSS) and the Government Service Insurance System (GSIS). Student-borrowers would be issued SSS or GSIS numbers, depending on their preferred future employment in the private sector, or in government.

The bank may engage the SSS or GSIS to collect repayments via their systems of salary deduction or withholding. It may also ask the Philippine Overseas Employment Administration to help collect from borrowers seeking work abroad.