The Finance department has ordered the Land Bank of the Philippines and the Government Service Insurance System (GSIS) to establish a loan restructuring scheme that will enable public school teachers to pay off debts to private lenders.
In a statement, the Finance Secretary Carlos Dominguez 3rd this would free the teachers from exorbitant borrowing rates.
“The teachers pay less, [the government financial institutions]earn more than leaving [their money]in government securities, and the funds that teachers earn anyway goes back to them as their retirement fund,” he said.
The Finance chief said he wanted to “rock the boat” by having LandBank and the GSIS aggressively compete with private lending institutions.
“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?,” he said.
Dominguez issued this order after the GSIS reported that the Department of Education (DepEd) had a high default rate of almost 40 percent.
Public school teachers were said to be prioritizing the payment of financial obligations to private lending institutions as these were charging higher interest rates.
Acting GSIS President and General Manager Nora Saludares was quoted as saying that the Education department had prioritized private lenders over the GSIS in queuing the teachers’ loan payments, which are done through automatic salary deductions.
Saludares said the DepEd had since reversed this and added that the state pension fund was now drafting a financial assistance package that will allow teachers to refinance their loans.
Dominguez said he would be formally asking the DepEd to ensure that the GSIS and other government financial institutions are given priority in the queueing system for loan payments.
“The queue should be determined by how much one charges (in terms of interest rates),” he said.