Are our teachers lacking financial literacy?
DepEd data show that elementary school teachers owe PHP 301 billion as of 2016, PHP 123 billion from GSIS and PHP 178 billion from private lending institutions. DepEd Sec. Leonor Briones noted that public school teachers earn more than their private counterparts, but the former are more highly indebted. Moreover, she cited a study that DepEd teachers are 50 percent more likely to be in debt than other civil servants with comparable salary levels. So what’s going on?
Teachers’ indebtedness may be due to the ease in borrowing. Just sign the papers and you’re in. Teachers can even take a personal loan, which are usually not collateralized and do not entail any group pressure to pay, as in the case of some microfinance credit programs. Sec. Briones recounted that one teacher had borrowed from seven financial institutions. Solution? Time to tighten the rein on these lending programs.
Moreover, teachers may simply lack financial literacy. Many borrow to make ends meet, but an increasing number borrow for holiday travel, or to buy personal items (jewelry, entertainment appliances), or to spend on family parties. Their inadequate financial literacy, plus the ease of borrowing, engenders over-borrowing. With multiple loans, they could end up having a net monthly pay of only PHP 5,000. Solution? Provide financial literacy training.
The contagion of borrowing in a chummy setting like teaching, is also an important driver. One teacher borrows, learns about the lending institutions and the contacts, transmits these to her co-teachers, and soon, the rest are on a borrowing streak. And of course, “keeping up with the Juaniyos” is intensifying as society becomes more middle class. If the Juaniyo’s daughter has a birthday party at Jollibee’s, why not my daughter? Solution? Time to remind people to live within their means.
And finally, the moral hazard problem: loan forgiveness programs introduce a big element of laxity in payment among borrowers. After all, if the loan is going to be restructured or even forgiven in the future, what’s keeping Ma’am and Sir from borrowing and paying? Solution? Rein in the borrowing rules. Easy credit is sometimes a trap.