DOF wants Landbank, GSIS to refinance public teachers’ loans

October 5, 2017

Finance Secretary Carlos Dominguez III called on the Land Bank of the Philippines and the Government Service Insurance System (GSIS) to work out an easy-to-pay, low-interest refinancing program for loans incurred by public school teachers to free them from private lending institutions that charge exorbitant borrowing rates.

In a statement by the Department of Finance Thursday, Dominguez said the LandBank and GSIS should be able to come up with a loan restructuring scheme that would enable debt-saddled teachers to pay their loans to private lending institutions and give them with better borrowing rates than those offered by these private money lenders.

This refinancing program, Dominguez said, would will help teachers, as they get to pay lower interest on their existing loans and allow them to save for their retirement funds.

“The teachers pay less, [the government financial institutions (GFIs)] earn more than leaving (their money) in government securities, and the funds that teachers earn anyway goes back to them as their retirement fund,” Dominguez said.

A report by the GSIS during a recent Executive Committee (Execom) meeting of the Department of Finance (DOF) showed that the Department of Education (DepEd) has a high default rate of almost 40 percent on its GSIS loans.

This high default rate is largely due to loans incurred by public school teachers, who cannot pay the GSIS because of their other financial obligations to private lenders, which charge them higher interest rates.

GSIS acting president and general manager Nora Saludares said the DepEd prioritizes private lenders over the GSIS in queuing loan payments of teachers, which are done through automatic salary deductions.

Saludares said the DepEd has issued a directive prioritizing GSIS premiums and loan obligations as the first preference in the salary deductions of teachers and other DepEd employees.

Following the issuance of the DepEd order, Saludares said the GSIS is now drawing up a  “financial assistance” package  for  teachers and other DepEd personnel to allow the refinancing of their outstanding loans to private lenders.

Upon learning of the GSIS problem with teachers’ loans, Dominguez said at the Execom meeting that he wants to “rock the boat” and get the LandBank and GSIS to aggressively compete with these private lenders by offering lower borrowing rates to public school teachers and other DepEd personnel.

“We have this demand (for loans) and we are not meeting them even if we can, and others are taking advantage and charging more. Why don’t we maximize what we can lend to them?” Dominguez told GSIS and Landbank officials present at the Execom meeting.

Dominguez said he will ask the DepEd to ensure that the GSIS and other GFIs are given priority in the queueing system on loan payments as they offer lower interest rates than the private lenders.

“The queue should be determined by how much one charges (in terms of interest rates),” Dominguez said.

Dominguez said private lenders can continue to compete if they can offer borrowing rates lower than what the GSIS and other government financing institutions can offer. DMS