Mexico Launches Nafinsa-Backed Higher Education Loan Program

The government of Mexican President Felipe Calderon announced a college loan program Monday that aims to lend more than 3 billion pesos ($219 million) a year to students who wish to pursue some form of post-secondary education at private institutions but who can't afford the payments.

The loans, extended by private sector banks and guaranteed by government development bank Nafinsa, could help finance education for 25,000 Mexican students in the initial phase of the program, Nafinsa said in a statement.

Students will be able to borrow up to MXN280,000 each for higher education via credits that mature in 15.5 years and carry a fixed interest rate of 10%; they will have a six-month grace period after graduation before they have to start paying back the loans.

Private-sector banks participating in the program include Banco Bilbao Vizcaya Argentaria SA's (BBVA, BBVA.MC) Bancomer unit, Spanish financial group Banco Santander SA's (STD, SAN.MC) local unit and HSBC Holdings PLC's (HBC, HSBA.LN) Mexican unit.

According to Mexico's National Association of Universities and Institutions of Higher Education, 30% of the country's 2.7 million students pursuing education above the high school level are attending private institutions.

Nafinsa said that while state and federal governments, as well as most private education institutions, offer scholarships, it's important that Mexico expand access to educational financial aid for the betterment of both young people and the country.

Mexico's Finance Ministry, together with 21 private institutions of higher education, are putting forth counter-guarantees to help mitigate the credit risk of the loans and to secure an attractive interest rate for borrowers.

Students wishing to access the credit must be Mexican nationals who have been accepted by one of the 21 institutions involved in the program. The students must also maintain acceptable grades, and find a family member to co-sign the loans.

During a pilot program, Nafinsa said, more than 1,200 students borrowed a total of MXN130 million to pay higher education fees.

By Amy Guthrie, Dow Jones Newswires; (5255) 5980-5177, amy.guthrie@dowjones.com

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