Minister of Education Jeff Lloyd. Photo: Terrel W Carey/Tribune Staff
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Education Loan Authority's (ELA) delinquency recovery rate needs to increase seven-fold, a Cabinet Minister admitted yesterday, with Bahamian taxpayers "on the hook for $100m".
Jeffrey Lloyd, minister of education, told Tribune Business that the Authority's Board was about to hire a private collection agency "with the teeth" to pursue deadbeat borrowers after its staff found themselves "overwhelmed" by the sheer magnitude of the task.
With legal action was the ultimate recourse, Mr Lloyd said the delinquency recovery rate needed to increase from the present $60,000-80,000 per month to $400,000-$500,000, or from $1m per year to $6-$7m, if the Authority is to "put a serious dent" in what it is owed.
Warning that his and the Authority's "patience has simply run out", the minister slammed the "stubborn and recalcitrant" defaulters who refused to enter even settlement discussions, adding that they faced having their credit standing "permanently tarnished" when The Bahamas' first-ever Credit Bureau goes live within the next view years.
And Mr Lloyd said Tribune Business had "hit the nail on the head" when this newspaper asked whether too many Bahamians viewed a government loan as a gift, grant or free credit with no obligation to repay "a dime" to the Bahamian taxpayer.
His comments came after the Education Loan Authority's 2017 financial statements, tabled in the House of Assembly yesterday, reinforced the depths of a financial crisis that has suspended its granting of new loans for almost a decade and left Bahamian taxpayers facing another substantial liability they may be called upon to cover.
The accounts, audited by the Grant Thornton accounting firm, were heavily qualified as a result of 88 percent of the Authority's $76.844m gross loan book being in default at June 30, 2017.
Some 84 percent, or $64.578m, had been delinquent for one year, with a 12-month incentive programme designed to encourage borrowers to settle their debts or bring them current netting only $3.035m.
As a result, the Authority sank into a $6.229m total comprehensive loss for its 2017 financial year compared to the $1.757m worth of "red ink" incurred in 2017. Three single expenses - $3.22m in bond interest; $1.861m in bad debt write-offs; and $1.375m in impairment provisions - exceeded its total income of $1.293m.
Mr Lloyd yesterday said too many delinquent borrowers had rejected or ignored the Authority's incentives, including "deep discounts of 40 percent", to come in and settle, get current and/or work out a payment plan.
"The Board of the Education Loan Authority is just in the process of finalising a decision on a collection agency," he told Tribune Business. "We had a Request for Proposal out, quite a few replies and are about to make a decision on who to select to get these delinquent accounts back in order.
"It's been our intention to start that process as quickly as possible. We are very impressed by the efforts of the staff in collecting monies on a monthly basis, but it was overwhelming. This collection effort is a bit overwhelming for staff.
"They're collecting $60,000-$80,000 a month, but if you're touching $100m that's outstanding and getting around $1m a year, that will take a lot of time to settle these outstanding accounts. We need greater recovery."
Mr Lloyd continued: "It's important to have this collection agency with the teeth to get out there and take action if people are not responsive, and that's legal action.
"If you look at how bad the situation is, we need to be collecting at least $400,000-$500,000 a month, $6-$7m a year if not more, to put a serious dent in the outstanding balance, which is about $100m and - more importantly - to get the loan process restarted."
The Education Loan Authority has issued no new credit for almost 10 years, having ceased doing so in August 2009, due to the high level of delinquencies among prior borrowers.
The Authority, which was created in 2002 under the second Ingraham administration, was charged with initiating loans to Bahamian students wishing to study at approved universities and colleges. Some $67m was raised via bond issues, with the remaining $33m coming from Bank of The Bahamas to take the funding pool to the $100m maximum that can be guaranteed by the Government.
Mr Lloyd, though, said the failure of many recipients to repay their debts was depriving "dozens and dozens" of current Bahamian students of the opportunity for a higher education, and the possibility of acquiring improved skills and higher salaries.
While Bahamian taxpayers were "not quite on the hook" for the Authority's operational costs and bond payments, which are being financed from monies it has been able to recover, the outstanding loan balances certainly represent a liability.
"It's regrettable that the Bahamian people loan out $100m or more dollars and we put people out into society, many of whom are working, insistent they're not going to repay despite the best and Herculean efforts made by the Education Loan Authority," Mr Lloyd told Tribune Business.
"We have been aggressive at times, but have laxed in the effort. With this loan collection agency we're about to approve our intentions are to be aggressive in pursuit of those who owe money to the Loan Authority."
Many observers, though, and probably the delinquent borrowers, are likely to adopt a "believe it when we see it" attitude to Mr Lloyd's warning given that he and previous ministers have repeatedly threatened to get tough without any subsequent action being taken.
Mr Lloyd, meanwhile, said too many Bahamians viewed a government loan as free credit - akin to a grant or gift - that does not have to be repaid. He added that this culture extended well beyond the Education Loan Authority, recalling his career at the Sears & Co law firm and what occurred when it was hired to pursue Bahamas Mortgage Corporation debts.
"People took out a loan and paid not a single dime for years," he added. "When contacted by the Mortgage Corporation or ourselves they said the Government gave it to us, notwithstanding they signed a mortgage agreement committing them to repay over a number of years.
"Their attitude was that it was granted by the Government, it's free and there's no obligation to pay. That's prevalent throughout society, and I'm quite sure that attitude has seized a number of our loan holders. No doubt about it.
"Our patience has simply run out. We're going to be aggressive in applying the law in these circumstances, yes."
Mr Lloyd said there had been an increase in delinquent borrowers coming into the Authority in the past six weeks to two weeks to settle, come current or agree payment plans. He suggested one factor driving this was the imminent arrival of the Credit Bureau, and possibility that "there credit profile will be tarnished, probably permanently, by their situation".
Grant Thornton's 2017 audit, meanwhile, said it was impossible to determine whether the $16.337m loan provisions taken by the Authority were adequate, given that no proper assessment of its credit portfolio had been conducted.
It revealed that while the Government guarantee for the defaulted loan had ceased due to legislative changes enacted by the former Christie administration in 2015, the one covering the Authority's $68.428m bond debt remained in effect.
Divided into three tranches, valued at $20m, $20m and $27m respectively, the first one was due to mature last year. It is unclear whether that happened, but the debt is likely to have been rolled over and the repayment term extended.
"Repayments of loans receivables by students have not been sufficient to enable the Authority to meet its obligations," the financials said. "The Authority relies on the Government subsistence to provide funding to meet its obligations.
"Management is of the view, however, that it is the intention of the Government to continue to financially support the Authority as a going concern. The Authority continues to operate at a deficit, and therefore, continued financial support of the Government is essential for its operations."
Comments
The_Oracle 5 years, 3 months ago
Private collection agency with "teeth"? Is he saying the Government has no teeth?
Well_mudda_take_sic 5 years, 3 months ago
Minnis is certainly a toothless puppet of a PM....just ask King Sebas of Lucky Charms who pulls all of his strings. LMAO
DDK 5 years, 3 months ago
"the Authority's Board was about to hire a private collection agency "with the teeth" to pursue deadbeat borrowers after its staff found themselves "overwhelmed" by the sheer magnitude of the task."
"Management is of the view, however, that it is the intention of the Government to continue to financially support the Authority as a going concern. The Authority continues to operate at a deficit, and therefore, continued financial support of the Government is essential for its operations."
ANOTHER CROCK OF BULL! Terminate ALL of them!
Well_mudda_take_sic 5 years, 3 months ago
They're laughing at you. Me too. LMAO
DDK 5 years, 3 months ago
You are too kind.
joeblow 5 years, 3 months ago
He should start by stating those who will be exempt after they make one phone call!
Well_mudda_take_sic 5 years, 3 months ago
The current list of delinquent borrowers and guarantors of the long past due loans has been carefully pruned, i.e. all politically sensitive loans totaling millions of dollars have been forgiven and written off by authority of the Ministers of Finance and Education. LMAO
TalRussell 5 years, 3 months ago
Yes or no - beloved comrade Joseph, father Jesus, think your son forgive me if I dare to post whats up in my mind calling out when it comes to a particular substantive crown minister's on the job in the Imperial red cabinet guard. Yes, no?
DDK 5 years, 3 months ago
Go ahead, Comrade! Knock yourself out!
TheMadHatter 5 years, 3 months ago
Hey Jeff, can we come for OUR money? Yall found the VAT money yet? Yall money counts, but ours don't? Hope you don't find a red cent.
geostorm 5 years, 3 months ago
Way to go Mr. Lloyd, collect every dime! There is absolutely no excuse for students not to repay those loans. The government was very lenient in the past. I remember when I first returned home from college, I was paying $25 per week to repay my student loan. They accepted that because I was only initially able to secure a part time job. Once I started working in my field of study, I was able to increase my monthly payments and repay the entire loan within 2 years.
We need to stop believing that the government owes us everything. If you borrowed the money, whether its for a student loan or a mortgage, you signed an agreement in good faith, so you are obligated to pay it back. It's that simple!
Well_mudda_take_sic 5 years, 3 months ago
Just more hot air from a useless and highly compromised politician. Lloyd is nothing but a tool. LMAO
B_I_D___ 5 years, 3 months ago
Step #1...put them to the top of the list of bad debtors when the credit rating comes out...along with all the dead beats...
momoyama 5 years, 3 months ago
Funny how this lousy FNM government is outraged and determined to go after Bahamian students for daring to get an education, but has no such outrage about the thousands of foreign family island landowners who owe many hundreds of millions in unpaid real property taxes. Back home, the government would take and sell for tax their land. In the Bahamas, the government is only interested in hammering the poor and local middle class for tax delinquency. Sickening crew.
joeblow 5 years, 3 months ago
the students got an education with borrowed money, taxpayer money. Money they promised to pay back. There is no reason the government can't collect outstanding debt from ALL who owe, and they should!
momoyama 5 years, 3 months ago
Is there a reason a company like commonwealth breweries or commonwealth bank, which rakes in tens of millions in profits cannot even pay a 19 percent corporate income tax (a fifth of what they would pay anywhere else) to fund our development instead of putting all the taxes on the poor and middle classes? There is, in fact, no reason for tertiary education not to be completely free, apart from the ignorance of the uncle tom clowns who govern us. We tax the poor and give the rich a free ride. The old Bahamian way...
momoyama 5 years, 3 months ago
I mean't to say a 10 percent corporate income tax
TigerB 5 years, 3 months ago
Its the same thing with taxes, B.O.B, mortgage cooperation, the light bills at BEC and the water bill, seem we as Bahamians just to like to pay our bills. Its about time.
momoyama 5 years, 3 months ago
That's it: blame the poor. No hint in all this that maybe, just MAYBE a 12 percent tax on consumption (which hits the poorest hardest) and a tax system that lets the rich off scot free may be to blame for people's pattern of delinquency, eh?
Dawes 5 years, 3 months ago
Don't think the person blamed the poor, they blamed those who don't pay their bills. Or do you think people who don't pay their bills are poor?
DDK 5 years, 3 months ago
Bahamians have long been debt evaders, way before they ever heard of VAT! It starts with the elected M.P.'s!
Dawes 5 years, 3 months ago
Every year they say the same thing and then nothing. I truly hope that not only do they go after those who owe, but also name and shame them, but i won't hold my breath. I now don't believe much that is said over here until i see it happen.
sheeprunner12 5 years, 3 months ago
Just publish the list of loans delinquents in the Tribune, Guardian, Punch, Journal and Government website ............ But that will be a list of Who's Who in the country ....... Carl Bethel and Alfred Sears gave away our Treasury money to their "friends, families, cronies, and lovers' children" twenty years ago and it all went up in smoke ......... They living in Canada, US and England now.
The handful of poor public school children who got ELA loans and fell on hard times will get squeezed while the "muck-a-mucks" laugh at Jeff Lloyd dem.
Greentea 5 years, 3 months ago
Thats the problem. I think if they are honest we would be shocked who among the so called upper classes/ politically connected classes had children who received "loans" for college. But you know those names have been pruned- Notice I didnt say "paid off and pruned"- just pruned. The scruggglin' unconnected middle and working classes of this country ketch all the hell and all the burdens of this nation.
BONEFISH 5 years, 3 months ago
All efforts should be expended to collect those funds.The list of all persons who are delinquent should be printed and the amount outstanding.I am tired of being made to pay through taxes for the folly,mismanagement and outright theft of the state's resources.
momoyama 5 years, 3 months ago
So struggling ex-students are thieving the state's resources? What about the wealthy corporations and individuals who pay no income tax and sit around complaining? Your moniker should be "bonehead"
Dawes 5 years, 3 months ago
Are those wealthy corporations and individuals not paying items they are obligated to pay? No. No one forced these students to take loans out, but they did say when you take a loan out these are the repayment terms. Which the students agreed to at the time and now do not. As it is all that has happened is it has ruined the student loans for the next generation.
TalRussell 5 years, 3 months ago
Yes or no it's not an exclusive comrade student issue is it.... lets not masks the real issue... which is same over at Bank of Bahamaland where some politically appointed board members had to either approve or oversea the approvals and then do nothing years about collecting the payments on the $200 million in bad loans?
Is there a board that approves the loans and if so what do we know about its comrade members and their lending culture?
Yes, no is it a politically appointed board and are we laud board members (past and present) for the $100 million bad debt issue and move on not to raise concerns?
BahamaPundit 5 years, 3 months ago
This is very similar to BOB. Nothing will happen. Not even the FNM believes the people have to pay the country back. This is a socialist nation. Bahamians feel that the country owes them and should make them rich. Nothing will come of this but some news stories.
momoyama 5 years, 3 months ago
So the money that goes to build schools, police stations, hospitals and pay those who occupy them comes from outer space, then? I thought it came from the taxes paid by the same Bahamian people who you now claim must be socialists. Ignorance is killing us, my friend.
BahamaPundit 5 years, 3 months ago
We're 8 billion in debt and growing every year. We still defecit hundreds of millions. VAT hardly scratches the surface. You paying VAT on chicken in the bag does not mean this will cover Bahamians defaulting on BOB mortgages or student loans. Are you even serious? If Bahamians are paying these costs, why is the Bahamas currently rated at junk bond status?
SP 5 years, 3 months ago
Where does this well-repeated notion that "Bahamians feel that the country owes them" actually come? How many of these students have jobs?
momoyama 5 years, 3 months ago
It comes from ignorant morons (most of whom have little and produce even less) but are brainwashed by right-wing ultra-capitalists who in turn benefit from a country that taxes the poor instead of the rich and claims to have zero responsibility to spend the contents of the consolidated fund on the people (mostly the poor and middle classes) who overwhelmingly fund it.
BahamaPundit 5 years, 3 months ago
What you are saying is the country owes poor Bahamians because they are poor. You are supporting the saying with your argument.
DDK 5 years, 3 months ago
"Right wing ultra capitalists". Here, in the Bahamas?
sheeprunner12 5 years, 3 months ago
You cannot compare this ELA with what Pindling did back in the late 60s and early 70s with sending eligible persons off to school to run the civil service........ this was a FNM grand giveaway leading up to the 2002 election ........ and the PLP abused it as well ............... Now chickens are coming home to roost ....... kitty empty.
Kalikgold 5 years, 3 months ago
In order to receive the loan, a co-signor (ie parents) was required.
If the burrowers do not want to pay its loan, go after the co-signor. Very simple! And you watch how quickly things will turn around.
All that nonsense about people are struggling and proving low income is absolute BS. It is not taxpayers problem that you blew the money or an under achiever. You knew what you were getting into when you signed the documents.
Momoyama you are very annoying!
TalRussell 5 years, 3 months ago
Yes or no ma comrades - no need paint cloud of belittling negativity over an entire colony's people when other counties - USA and Canada included - are experiencing student loan delinquencies. Yes, no let's first look at "travel and other expenses" over at education ministry and at departments.
DDK 5 years, 3 months ago
Comarade, the U.S.A. has students strapped by debt because they have turned college into a mega business for the rich! Britain has started to follow suit, as usual. Basically, if Governments did what they were supposed to do with the money they receive from taxes there would be plenty to go around for necessities for all. This capitalist thing is not working, mainly due to human greed..
TalRussell 5 years, 3 months ago
Yes, no ma comrade DDK, far short cry from long term return on investment by PeoplesPublicPurse's during the years when minister education Cecil and Pindling, sent students off schools higher learning in the US, Canada and England - to return home begin years contributing towards development we Colony of Out Islands. Yes, no maybe even "big use words" Jeff may have been a recipient of Cecil and Pindling's higher learning outreach?
Dawes 5 years, 3 months ago
In Britain you only pay back once you earn over a certain amount. Therefore if the education did not result in you achieving a higher income, you don't pay it back.
Well_mudda_take_sic 5 years, 3 months ago
Repost: Decades of government sponsored programs that are nothing more than a redistribution of wealth from the haves to the have-nots, usually to buy votes, combined with the moral hazard of always granting amnesties and discounts to those who do not pay their debts, have created the irresponsible culture and attitudes that Bowe complains about today.
The fundamental reasons for the failure of the Education Loan Authority (ELA) belong squarely in the laps of Alfred Sears and Carl Bethel. These two bozos each had the opportunity but did nothing to introduce and implement measures that would have assured the self-sustaining nature of the ELA for decades to come. For both Sears and Bethel it was just too politically expedient for them to do nothing, even though they knew full well what the consequences would be. As for Lloyd's assurances to change things, it's all just political hot air because Minnis, like his predecessors, Ingraham and Christie, is not going to do anything to upset those voters who have effectively stolen from the ELA, and in the process have stolen the future of needy students coming after them.
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