RUSSIA: Guaranteed loans help students survive

Russian university students will be helped weather the economic downturn through state support for study loans, Education Minister Andrei Fursenko has pledged. Although one state-backed loan scheme 'Credo' - heavily used in the past by top Russian universities - had collapsed after the bank through which funds were channelled went bankrupt, students needing financial help to enter higher education should not be left to suffer, Fursenko said.

"We have introduced some innovations," He told business daily Kommersant. "Credits will be offered at the current bank lending rate but the state will subsidise by three-quarters the current 13% interest rate of the Russian Federation Central Bank. The maximum rate a student taking out a loan will have to pay is 11.5%."

Students applying for loans will not be expected to provide equity or guarantors for the loans, Fursenko said and the state would underwrite the loans.

"The credit policy should also be demand driven - taking into account those university specialisations that are in most demand. It is also necessary to work with high schools which really provide good preparation. And the expansion of the programme should be in line with the amount of credit lines made available to students from both state and private universities."

Loans should also be made on the provision that good academic progress was made and that the students pledged to repay them, he added.

Fursenko estimated that some 10,000 students across Russia were currently eligible to take up such loans: "By our calculations, the size of the state support for educational credits in 2009 should be around 750 million roubles (US$22 million)."

Two thirds of that sum would be used to guarantee banks against defaults and the rest to subsidise the commercial interest rates charged by banks, although Fursenko added that the rate of defaults was not expected to be excessive.

"It is also not necessary to overestimate the demand for credits; particularly since for every thousand graduates this year, 420 will have been on 'budget places'," he said, referring to those students who won places at university where fees and maintenance grants were paid for by the government.

Across Russia there were 90,000 vacant 'budget places' at universities. Students at more popular universities who began their studies on a fee-paying basis could often expect to transfer to fully- funded government subsidised budget places later in their studies because of this, Fursenko said.

He said he was against government price fixing for course fees as he believed in university autonomy. But in the current economic situation, he expected universities to exercise caution when considering increasing course fees for those students who were fee-payers.