Bank of Guam tapped for educational loans

CNMI officials have begun talks with Bank of Guam on the possibility of extending government-guaranteed loans to local students who will not be able to receive financial assistance under the scholarship program.

They are also studying a proposal to ask the Marianas Public Land Trust to invest some of its money into the education of government scholars in an effort to help defray tuition costs and other expenses.

According to House Ways and Means Committee Chairman Karl T. Reyes, these plans will help the government meet its mounting financial obligations, particularly in the scholarship program which funding under the FY 2000 budget has been cut by 50 percent.

More than 1,000 CNMI scholars will have to share the $2.3 million earmarked for this year, down from $4.4 million allocated in 1999.

Reyes said that if the proposed financing scheme being worked out with BOG pushes through, the funding level will be increased by a hundred percent.

This means that with nearly $5 million in available funds, each student can receive a maximum of $6,000 per year in financial aid from the bank loan guaranteed by the government.

The Commonwealth will have to shell out additional money for the annual interest rate until the student can repay the loan after completing a four-year college degree, according to Reyes.

As an incentive, the representative said the government can forgive the debt if the student decides to return to the island to work either in the public or private sector.

To ensure repayment, the parents will be asked to co-sign the agreement so that those who have not come home to work in the CNMI will pay back the loan in full amount.

“Through this scheme, there will be more scholarship money,” said Reyes.

The local scholarship program has come under fire in recent months following implementation of new policies that has drastically cut the amount of grants as part of the Tenorio administration’s efforts to prevent budget shortfall. (See related story on Page 2)

While it is not certain whether the talks with bank officials will lead to a concrete deal, BOG has recently approved a $30 million loan sought by the island government for its capital improvement projects.

This loan will be repaid through the forthcoming bond float worth $60 million which lawmakers supported to match federal construction grants under the Covenant 702/CIP program.

Meanwhile, finance officials and legislators have been mulling a plan to utilize the MPLT funds to invest in the local scholarship program, instead of outside investments.

“We have the money here. Why can’t we use it ourselves?” asked Reyes.

The trust fund has swelled to more than $60 million from the $33 million initial capital that came from payment by U.S. military for lands on Tinian and Tanapag, according to the Ways and Means chairman.