EDUCATION-CHILE: Student Loan Reforms, a Step Towards Commercialisation?

By IPS Correspondents Reprint | | Print |

Tamara Vidaurrázaga

SANTIAGO, Feb 28 2001 (IPS) - The president of the University of Chile Student Federation (FECH), Iván Mlynarz, said a proposal to reform the student loan system by incorporating private capital was just one more step towards the “commercialisation” of higher education.

All the state is interested in is for “these gentlemen doing business in private universities or vocational-technical colleges to improve their capacity to compete in the market for higher education,” Mlynarz told IPS.

The new proposal will entail the creation of a Student Loan Agency which will take over the universities’ current job of administering the loans, and will issue long-term bonds that can be purchased by investors like private pension fund administrators and insurance companies.

The government’s aim is to increase the funds available for university tuition, which continue to fall short despite a 137 percent increase in state funding for student loans since 1990, according to an Education Ministry report on the new proposal, which was presented early this month.

The government stated in its proposal that “youngsters should contribute to paying for their higher education because it constitutes an important personal investment.” In Chile, it adds, “the average salary of workers with university degrees is four times higher than that of high school graduates.”

In the 1980s, the dictatorship of Gen. Augusto Pinochet (1973- 90) overhauled higher education, and a number of private institutes and technical-vocational colleges began to crop up.

Another reform was the introduction of tuition in public universities, which up to then were free of charge. The state universities began to make student loans available, out of central government as well as university funds, which students must begin to pay off two years after they graduate.

Student aid is currently comprised of just over 100,000 dollars in funds provided by the central government, plus the funds made available by each university.

But under the current system, the student loans are only available for public universities, and not for the private institutions that mushroomed since the Pinochet dictatorship’s reforms went into effect.

Mlynarz complained that the new proposal would fuel the “commercialisation” of higher education by granting private institutions the same benefits enjoyed by public universities.

The head of the Education Ministry’s higher education division, Pilar Armanet, said the proposal was aimed at making financing available to talented low-income youngsters, and to extend that possibility to students in private facilities.

Mlynarz, however, said it was not sufficient for students in private colleges to have access to loans if the state failed to guarantee the quality and pluralism of education provided by private institutions, as well as their commitment to the development of Chile.

When several private institutions closed down due to economic problems, the state did nothing to help the students whose studies were abruptly cut off, or to deal with the problem of the instability in higher education created by such developments, said the student leader.

He added that the new student loan proposal would raise problems that have not yet been addressed by the Education Ministry. For example, it is not clear whether the interest rate on the student loans, which currently stands at two percent, will be increased to five or six percent.

Nor has the government clarified what authority the Student Loan Agency will have to collect on the debts owed by students, and what legal instruments it will have in case of default.

According to the new proposal, university graduates will pay five percent of their salaries, and the outstanding debt is pardoned after 20 years.

Thus, if the graduate’s annual income is less than or equal to the debt, the amount owed will grow, the interests will not be paid off, and the debt will merely expire in 20 years.

Mlynarz said the new plan would not resolve the economic problems of the universities, since in order to pay off the debt owed on a university degree – the cost of which averages 2,000 dollars a year – the graduate must earn at least 840 dollars a month. Otherwise, “the debt would be unpayable.”

In the case of engineers, for example, who earn at least 1,800 dollars a month, paying off the loan will not pose a major difficulty. However, a large number of university graduates, including journalists, high school teachers or professors earn no more than 500 dollars a month.

Mlynarz attributed the new proposal to policies imposed by the World Bank, which he said was not overly concerned about the quality of university studies in developing countries, or the “intellectual autonomy that universities must guarantee.”