Chile: Loan Forgiveness Plan Fails To Win Over Students

Measures to ease the debt burden of Chilean students in response to violent protests last year have failed to satisfy students and opposition politicians. Critics say new laws that forgive student debts and reduce interest on government-supported loans do not address fundamental problems. Student organisations and opposition politicians in Chile have rejected two government initiatives intended to ease the financial burden of higher education on students.

A loan forgiveness law approved in January aims to benefit more than 110,000 students who have fallen behind in loan payments. The second bill, currently making its way through parliament, allows for interest rates on existing student loans to be reduced from 6% to 2% per year. It will be applied retroactively, and repayment begins after a graduating student gets a job and is capped at 10% of salary.

The reduction already applies to incoming students, thanks to a special provision in this year’s budget. At present 370,000 students receive a state-backed loan. Only 38% of loans have been repaid, with 620 million people still owing.

“Five hundred thousand young Chileans will be able to make their dream of going to university come true. We need graduates who are not weighed down by debts,” President Sebastián Piñera said at a meeting announcing the new bills.

“This year we have almost doubled the number of higher education grants, from 170,000 to 280,000,” he added. However, the Confederation of Chilean Students, CONFECH, which led last year's massive protests, said both laws only legitimise a failed model of university financing.

Families pay for 85% of the cost of higher education in Chile, a country that has been pegged by the OECD as having the costliest higher education in the world. Opposition member of parliament Carlos Montes said that reducing interest rates on loans would only be a ‘band aid’ solution. “By the end of the year we will be facing the same pressures and problems, given that fees as well as indebtedness will remain sky high,” he added.

At a CONFECH meeting in early March, 27 student federations announced they would campaign this year for free education. In early April, they will present a proposal on how to finance education and will launch a nationwide protest.

Six out of 10 higher education students fall within the top 20% income bracket and government officials say free education will only benefit those well-off students. According to a recent study, the wealthiest 20% receive 41% of the resources devoted to education, compared to 9% for the poorest 20% of the population.

“The main barrier towards tertiary education for the poor is the fact that they do not have access to good primary and secondary education,” said María Paz Arzola, one of the researchers involved in the study. She argued that instead of putting resources into free higher education, more should be spent on improving basic education and on university grants targeted at lower-income students, with low-interest loans going to the poorest.

Part of its campaign for free higher education will involve CONFECH establishing alliances with other social movements. The alliance was kick-started by massive protests since early March in the southern province of Aysén.

Original source here.