Tax Credits For Banks That Give Student Loans - Philippine News

Banks that provide educational loans to eligible post-secondary students, particularly those from families that have yet to produce a single college graduate, must be granted lucrative tax benefits, according to a bill filed by Pasig City Representative Roman Romulo.

"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 news release.

"Despite the large number of unemployed young professionals, partly due to the mismatch in their skills and the expertise required by industries, there is no question that college graduates have far greater opportunities to secure good-paying jobs here or abroad," Romulo pointed out.

Besides sustaining a household, Romulo said 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.
Eligible college students may obtain a loan under Romulo's proposed Act Establishing a Student Assistance Program by Banks and Government Financial Institutions. The loan would cover the tuition and miscellaneous fees of the school where the borrower has been admitted, plus expenses for books, food, transportation, and other requirements.

The funds would be disbursed in portions every semester. Subsequent releases would be withheld once the borrower has ceased to be enrolled, and would be automatically credited as loan prepayment.
The borrower would repay the loan periodically, starting not earlier than 2 years after graduation and ending not later than 8 years after leaving school.

The bank would charge an effective interest rate based on the prevailing 91-day Treasury bill rate, which stood at 3.956 percent per annum as of last week.

The lender may also impose an add-on annual interest rate of 3 to 5 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.

The bill promotes preferential lending to eligible "priority" students, or those from families where no other immediate member is enrolled in, or has completed any post-secondary schooling.
Loans to "priority" students may have an add-on interest rate of up to 5 percent, convertible into tax credits. Advances to other non-priority students may carry an extra rate of only 3 percent, also convertible into tax credits.

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.