Russia bankrolls loans to students

August 4, 2000

Russia's state savings bank has launched the country's first national student loans scheme with education ministry backing.

The Pounds 2.5 billion initiative by Sberbank is aimed at existing students and undergraduates starting next month. They are eligible to receive up to 70 per cent of the cost of tuition for five-year university diploma courses, but only if parents or employers offer collateral or guarantees.

Recipients will be expected to pay only the interest - currently 21 per cent annually - on the loan, which will average between Pounds 2,000 and Pounds 3,000, during their studies. Capital repayment is expected within five years of graduation or the conclusion of studies if a student drops out.

Sberbank is one of Russia's strongest and most stable banks with a history going back to Soviet times. Loans will be aimed at students from middle-class families who can offer collateral, such as apartments and dachas, cars and share certificates, or offer guarantees from employers or other legal bodies.

Sberbank spokesman Alexander Golovanov said it was too early to say how many students might apply but the idea was to support families who had the ability to finance loans but did not have large sums of cash to hand.

"The middle class is the basis of each civilised country the world over," he said. "The loans will be based on legal contracts involving the student's parents, and there will be flexible terms allowing repayments over up to ten years by agreement. We do not expect large numbers of defaulters."

Education officials hope the scheme will enable more students to take up university places. Competition for budget or free places at universities is stiff, and most state universities offer places to fee-paying students as well. Fee-payers are expected to maintain good grades or face expulsion.

Tuition fees vary, but at popular Moscow institutions, such as the Moscow Institute of International Relations, they are between Pounds 3,000 and Pounds 5,000, at the Higher School of Economics, Pounds 1,500-Pounds 3,000, and Moscow State University Pounds 1,000 -Pounds 3,000.

The loans deal is Russia's first national scheme aimed at helping domestic students study at home. Before the economic crisis of August 1998, when a number of Russian banks failed, Dutch bank ABN AMRO and the European Bank for Reconstruction and Development offered loans. But these were aimed at top students going to overseas universities such as the London School of Economics.

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