Opinion
An insurer’s view on the proposed students’ loan scheme
Publish Date: May 28, 2012
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By Flavia Mpagi
 
Education anywhere, and particularly at the tertiary level comes at a price. For far too many, the cost is simply too dear. The joy of qualifying for and being granted a study course can be cut short when one is barred from sitting for semester examinations due to failure to honour fee payments.
 
The recently proposed Students’ Loan Scheme Bill, therefore, provides some relief to the anguish faced by many parents and students alike, but with it come certain concerns as well. Naturally, this Bill places further pressure on an already stressed tax base and, as potential contributors, you should have a say into its drafting.
 
In such cases, it doesn’t hurt to examine the statistics. With an annual growth rate of 3.2%, the number of Ugandan youth passing through the education system has been steadily on the rise. Unemployment figures do not make for happy reading with the national average at 3.5% and the alarming one affecting the youth at a staggering 32.2%!
 
With continual budget deficits there is a lot of brainstorming around this idea that still needs to take place. It has been reported that lessons are being drawn from countries like the USA and the UK in implementing this scheme. However, lessons on job creation must be a priority.  
 
Government should ensure that people have employment after school and that they are paid a salary large enough to live off and pay the students loan with interest before committing to paying for their tertiary education. Being unemployed for four years after finishing tertiary education will mean a higher amount to pay back.
 
That’s if you are lucky enough to get a job anyway. A scenario where a return on investment is only 66% of your input, due to unemployment in this case, is simply a bad investment. 
 
However, if the Bill is to become law, it is my hope that in order to protect tax payers’ money, the Students’ loan schemes are insured.
 
The loans should be insured against default. Insurance will then compensate the government for losses due to the default of the loan. Likewise, the lives of the students who are given these loans should be insured against anything that could hinder them from completing their tertiary education. 
 
This will include whole life insurance policies which will compensate the government on the premature death of the student while pursuing their tertiary education and also at work before paying off the loan. 
 
A total and permanent disability policy would insure students at all time before paying off the loan, against disabilities so severe that the student can neither study nor work.  
 
A critical illness policy would compensate the government in case students are infected by severe diseases like advanced cases of cancer which hinder someone from both studying and working especially before paying off the loan.
 
Further still, when the students start working, their jobs should be insured against inability to work caused by illnesses, accidents and retrenchment under an income protection policy.
 
There is, therefore, no excuse for drafting this bill without protecting tax payers’ money by including the insurance of these loans. 
 
The author is an insurance specialist  
fmpagi@ira.go.ug
 
 

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