A Jamaican student of Medgar Evers University in Brooklyn, New York, owes US$11,000 in fees, and needs the same amount to complete the final two semesters of the bachelor's degree in computer science.

His mother says that she is prepared to guarantee a total loan of US$22,000 to help him. He will be able to complete the degree by June 2010 if given this facility.

Advice from the Student Loans Bureau (SLB) in Kingston is that this student would best be served by transferring credits earned at Medgar Evers to a Jamaican university where he could complete the degree and where his tuition would be fully funded.

As it is, the only facility available to him for Medgar Evers is a Parent-Plus loan, which must be guaranteed and paid by someone who lives and resides in Jamaica.

This loan is no more than $500,000 and so the computer science student would have to find other funding elsewhere. If his mother signs for Parent Plus, she would have 36 months to repay the loan of $500,000 at 12 per cent interest, or $18,889 monthly.

six-month grace period

Regular loans from the SLB are accorded a six-month grace period after completion of the tertiary programme before repayment starts.

It should be noted, however, that a 10-year limit is placed on the loan, which begins its life on the day you first borrowed money.

So, if a programme lasts for five years, the repayment time will be five years only, as that will be all the time left after graduation.

Even though payment is not demanded while the student studies, interest of 12 per cent per annum is added yearly, and every year that the loan is taken is treated as a separate loan.

Therefore, if you borrowed $122,000 in your first year and for every year after for three years, at the end you will owe for that first year $122,000, plus 36 per cent. You will owe for your second year $122,000, plus 24 per cent, and for the last year in which you borrowed this money, you will owe $122,000, plus 12 per cent of the amount. Other charges will apply, including insurance.

While attending school, simple interest will be applied, but on completion of graduation, the annual 12 per cent charge will be compounded.

annual increases

Historically, university fees change every year, but for the sake of illustrating expected repayment obligations, if you borrowed $201,000 every year for three years, what you will owe on graduating will not be $603,000, plus 12 per cent annual interest.

Instead, if the money was borrowed for the three-year period September 2009 to September 2012, when repayment starts in January 2013, you will owe the SLB $747,720 - including insurance costs - with a different accumulation of interest for every year you borrowed $201,000.

You will then have until December 2019 to complete payments, having exhausted three years of the life of the loan. If you decide to wait until December 2019 to pay back the loan, you will owe $1.4 million.

But, payment is expected to start six months after completing the course, and starting January 2013, you will also be expected to begin payments and also cover insurance costs for another six-month period.

This coverage includes death, disability and permanent incapacitation, such as that caused by cerebral palsy and any other condition which might stop you from working.

The cost of this insurance is $1.10 per $1,000 of the loan.

The student who borrowed $201,000 for three years, will spend the first six months paying $24,500 to cover this insurance cost. Thereafter, the payment monthly will be $16,378 until the loan payment is completed in December 2019.

fees not covered by the slb

With an interest rate of 12 per cent add-on, the monthly payments after three years of borrowing are estimated by the bureau to be as shown in the table above.

The SLB says it does not quote loans on the reducing balance as students are not expected to make payments at all during the life of the study programme.

Depending on the programme of study, the student may be required to pay laboratory, administrative and other fees, but these are not covered by SLB loans, which are primarily for tuition.

Student-loan officials note that any amount paid by the student borrower during the moratorium period - that while attending school - will be applied directly to the principal owed and so will reduce money owed on graduation.

avia.collinder@gleanerjm.com