A guarantor is a person or agency that gives an assurance that a loan will be paid. The guarantor agrees to pay someone else’s outstanding debt in the event of default.
The Students Loan Trust Fund requires that applicants must provide one guarantor to qualify for the loan. Previously, under the Social Security and National Insurance Trust (SSNIT) Students Loan Scheme, each borrower was required to provide three guarantors who needed to be contributors to the SSNIT Pension Scheme.
Many students, particularly the needy, found it difficult to get three guarantors to stand surety for the loans they were to contract for their tertiary education.
Thus when the Students Loan Trust Fund took over the management of the students’ loan, one of the first things it did was to reduce the guarantor requirements to one. But the problem of getting even one guarantor still persists. Therefore, the SLTF in its bid to resolve the issue adopted a diversified guarantor system, where, in addition to the SSNIT pension Contributor, any of the under listed can guarantee a loan application for a student who wishes to access a loan facility from the Trust Fund:
- i. A Corporate body
- ii. Nationally Recognized Religious Body
- iii. Metropolitan, Municipal and District Assembly
The SSNIT contributor is the basic guarantor that the Trust Fund accepts. Currently this form represents about 98% of all guarantees that are provided by applicants. A person who wants to guarantee a loan under the students’ loan must first of all be a Ghanaian and must have contributed cumulatively to the SSNIT pension scheme for at least 60 months or 5 years. The person should not be more than 53 years old at the time of signing the guarantee and must not have guaranteed for more than two (2) persons already. However, Parents can guarantee for all their children, irrespective of the number.
The SLTF accepts guarantees from corporate bodies. Past or current members of the Ghana Club 100 or Companies Listed on the Ghana Stock Exchange are eligible to guarantee students loan applications. There must be a resolution from the company agreeing to guarantee student loans for borrowers.
Nationally Recognised Religious Bodies
Nationally Recognised Religious bodies are also permitted to provide guarantee for borrowers. The church should have been in existence for at least ten years and must provide a copy of the certificate of incorporation from the Registrar Generals Department. Like the corporate body, the church must also present a resolution as evidence that the church has agreed to guarantee student loans.
Metropolitan, Municipal and District Assemblies
Metropolitan, Municipal and District Assemblies (MMDA’s) across the Country can guarantee loans for students within their jurisdiction. They must also provide evidence of a Resolution by the Assembly to guarantee student loans.
Higher education financing, which has been a great challenge in the country, could be greatly enhanced if Corporate and religious bodies, as well as MMDA’s would support students by guaranteeing loans for tertiary level education.
The SLTF has put in place an efficient repayment system to recover the loan therefore; the main responsibility of a guarantor is to assist SLTF to trace the borrower when repayment is due.
Students Loan Protection Scheme (SLPS)
In order to remove the guarantor’s burden of repayment when a borrower dies or becomes permanently incapacitated, the Students Loan Trust Fund put in place a Students Loan Protection Scheme (SLPS). This is an initiative instituted to absolve the financial burden on guarantors and families that will result from the death or permanent and total incapacitation of borrowers.
In 2012, 11 claims were approved and paid from the SPLS and the respective guarantors released off their obligations to the Trust Fund.
Since the Students Loan Trust Fund took over the management of the student loans, repayment has been good due to the robust system of tracing and locating borrowers and collaboration by employers as required by law. Many borrowers have shown good faith and are paying back their loans contracted whilst in school. To date, about one thousand guarantors have been released following the completion of loan repayment by the respective borrowers.
Author: Henry Dottey
The author is the Public Relations Officer of the Students Loan Trust Fund