NEWS

Government’s Accelerated Repayment Incentives

The Fijian Government up­holds education as the most effective pathway to grow­ing the Fijian economy, enriching Fijian society, and advancing the mobility of the Fijian people. The Government is building
03 Nov 2018 11:00
Government’s Accelerated Repayment Incentives
Fiji Revenue and Customs Service chief executive officer Visvanath Das

The Fijian Government up­holds education as the most effective pathway to grow­ing the Fijian economy, enriching Fijian society, and advancing the mobility of the Fijian people.

The Government is building a knowledge-based society by ensur­ing that Fiji’s young people have equitable access to high quality education at all levels of the Fijian education system.

Over the past years, Govern­ment’s consistent and targeted in­vestment in the education of Fiji­an students has led to the historic achievement of universal free pri­mary and secondary school educa­tion, and that a record number of Fijian children do have access to secondary and tertiary education.

To ensure that every young indi­vidual has access to tertiary edu­cation and is not prevented from pursuing higher education due to lack of financial support, the Ter­tiary Scholarship and Loans Act 2014 was introduced.

In the National Budget of 2018/2019, a number of initiatives under Tertiary Education Loan Scheme (TELS) were introduced and redesigned.

 

Accelerated Repayment Incentives

Accelerated Repayment Incen­tives (ARI), introduced in the 2018/2019 National Budget, is an early loan repayment mechanism intended to benefit TELS students.

ARI encourages TELS recipi­ents to make early repayment of loans and offers heavy incentives if loans are repaid before the due dates.

The earlier the repayment date, the higher will be the discount percentage on the overall loan amount.

Subsidisation on early loan re­payment will assist TELS recipi­ents to settle their loans early.

ARI scheme also intends to make TELS a self-sustaining model, al­lowing for an influx of repayments to be reinvested in the scheme at a much faster rate. ARI is effective from 1st August 2018.

This means that all those with TELS loan outstanding as at 1st August 2018 will be eligible to en­joy benefits under this scheme.

Those who accelerate their loan repayments will enjoy discount on their total loan amount.

Depending on how fast is the re­payment, discount rate of 50 per cent, 25 percent or 10 percent on the loan amount can be enjoyed. In essence, faster the loan repay­ments, lesser will be the amount of overall debt on TELS recipient.

A discount on loan repayments will mean that a significant por­tion of overall loan debt will be waived by the Government.

This is to encourage students to settle their loans early in order to achieve early financial independ­ence.

Also, each TELS recipient’s in­centive will be equity – based, al­lowing those with more debt, more time to repay their loans at a dis­counted rate.

Loan Repayments Under ARI

TELS ARI is a three step incen­tive scheme as below –

As illustrated in Table 1 above, ARI provides three levels of dis­count – 50 per cent, 25 per cent and 10 per cent on the amount of the loan.

The three levels are based on total amount of debt and how quickly the discounted portion of the loan will be settled by TELS recipient upon completion of graduation.

Guidelines on early repayment of loans under ARI scheme

Loan refers to total sum of mon­ey disbursed to a TELS recipient for pursuing any one or more ter­tiary education programme. Total loan amount means the principal amount of loan together with any interest accrued thereon.

Graduation refers to the com­pletion of final graduation. For instance, if a TELS recipient pur­sues a diploma course and imme­diately thereafter a degree course, graduation shall mean graduation under the degree course.

TELS loan becomes a debt re­payable to Revenue and Customs upon completion of graduation and therefore a TELS recipient is under an obligation to settle loans immediately upon completion of graduation.

ARI discount applies from the first date of employment of TELS recipient and all discount calcula­tions shall be carried out from the date of employment.

However, if a TELS recipient is not employed and he or she wishes to make early repayment of loan for a specific reason (e.g. migra­tion), ARI discount shall apply from the date of graduation.

ARI will not apply to those who have fully repaid their loans be­fore August 1, 2018.

A TELS recipient cannot claim retrospective discounts for loans repaid before August 1, 2018;

Discounts applicable under ARI

Ryan availed TELS loans of $30,000 in January, 2012 to pursue a course in medicine with FSM.

He graduated from FSM in De­cember 2015 and started working full time with CWM hospital in February 2016.

During the period February, 2016 – July 2018, Ryan repaid $10,000 of the total loan amount.

As at August 1, 2018, Ryan’s out­standing loan amount together with interest stands at $25,000.

Will Ryan be eligible for dis­counts under ARI for early repay­ment of loan?

What benefits can he avail under ARI?

CEO’s position: Given that Ryan’s overall loan debt is outstanding as at 1st August 2018 (effective date of ARI), he can avail discounts under ARI scheme to repay his loans.

Loan amount disbursed to Ryan becomes a debt from the date of completion of graduation, that is from December 2015.

However, discounts under ARI shall apply from the date of em­ployment, that is from February 2016.

There are three levels of dis­counts under the ARI scheme.

Depending upon the amount of loan and number of years within which the loan is repaid, the rate of discount applies.

Ryan falls in level 2 of Total Debt Level [$20,000 – $49,999] as his to­tal debt is $25,000 as at 1st August 2018.

The rate of discount shall depend on number of years within which Ryan repays his total debt.

The three different discount rates are explained below –

50 per cent Discount: If Ryan makes full loan repayment before February 2019 (within three years from the December 2015) he can enjoy a discount of 50 per cent, re­sulting in overall loan repayment of only 12,500 (50 per cent of out­standing debt of $25,000).

25 per cent Discount: If Ryan re­pays his loan after February 2019 but before February 2022 (between three to six years), he can enjoy a discount of 25 per cent on his total debt.

It means discount amount of $6,250 (25 per cent of $25,000) will be waived off and Ryan will pay only $18,750.

10 per cent Discount: If Ryan re­pays his loans after February 2022 but before February 2024 (between six – eight years), he can avail a dis­count of 10 per cent i.e. $2,500 on his total debt resulting in overall loan settlement amount of $22,500 ($25,000 – $2,500).

Accelerated Repayment Incen­tives is a Government initiative to assist students to proactively en­gage in financial planning and aim for early financial independence.

Abuse or exploitation of this scheme shall be viewed as a breach of Agreement between the student and the TELS Board and penalty provisions of the Agreement shall apply accordingly.

For further information, please contact Salanieta Lolou on 3243933 |slolou@frcs.org.fj or Radhika Mani on 3243545 | rmani@frcs.org.fj.

Feedback: maraia.vula@fijisun.com.fj




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