(Educational Loan Project of LAI)

By
Kerry Lawagan LS ‘07 & Sheryl Belwa ‘05

 

Accessibility of funds to LEAP Scholars is a matter that has engaged and occupied our attention for some time, given that the DJLF-LEAP Scholarship only provides financial support for tuition textbooks. There are other expenses, during and even after their schooling, that they and their families cannot provide in times of need and for which they must borrow from others. On most if not all occasions, they are constrained to borrow from private lenders who charge high interest.

We propose to address this matter with the establishment of, for want of a better term, a Study Now Pay Later Fund.
Sourcing the Fund

A Fund will be generated by pooling contributions from LS Graduates (and possibly DJLF members).

  1. The fund will be loaned out only to current scholars and graduate scholars who need cash for:
    a. School expenses not covered by the scholarship
    b. Review classes for board examinations
    c. Job search
  2. Priority will be given to current scholars, hence for the first purpose above.

Operational concepts

  1. LAI members [and possibly DJLF members] will give equal contribution to the initial fund.
  2. Every quarter each LAI member will contribute a fixed amount to the fund. [This will help the fund to grow].
  3. The fund will be deposited in a bank [BPI].
  4. Each scholar must have an ATM account (must be the same bank with the fund) where the loaned money will be transferred. This will make the distribution of the fund easier and simpler. [For further discussion. The initial fund will be divided into a Loan-able portion (50%) and an Investment portion (50%). The Loanable portion is the cash that can be borrowed. The Investment portion will not be touched and allowed to grow.]
  5. The quarterly contribution will be apportioned between the loanable and investment portions of the FUND.
  6. Each scholar will have a credit limit. This is the maximum amount that each scholar can borrow.
  7. Scholars may have multiple loans (for prelims, midterms, finals) not to their credit limit.
  8. The credit limit will be restored upon payment of the loan.
  9. Partial payments shall be allowed.
  10. Credit limit will be adjusted from time to time depending on the number of current scholars and the fund status.
  11. Investment portion: will be invested in the Stock Market to grow and earn profit.
  12. The Fund will be managed by LAI, and, by DJLF members who have made the initial and quarterly contributions.
  13. A member of DJLF (Jake Duller) will be the adviser as to what stocks to buy or sell. [I’m sure his expertise will be very useful in this decision making]
  14. Since every quarter each LAI member is putting in contributions, there will be money that will be invested every quarter.
  15. The profit from the Investment Option will be shared by each individual contributor, receiving the same amount since each LAI member has contributed equally to the initial fund as well as the quarterly contribution.
  16. There will be an agreement, “Lock-in period”, as to when the profit can be withdrawn (should be long term). An LAI member will have the option to withdraw his full contribution to the project. However, when the withdrawal is done before the agreed period, the amount to be returned is only the member’s full contribution; his/her profit will be credited to the project.

Projections

To further understand the operations of the fund, its growth and the credit limits, the simple examples are presented below. The indicated months and years reflect when the plan was conceptualized and are now outdated, however, they are kept here as they are keys to understanding the relational timeline of the fund’s operations and growth projections and feasibility through the coming years.

Initial fund gathering: September – December 2015
1st quarter of LAI monthly contribution: January – May 2016
Project start date: June 2016
Currently studying scholars: 10
Participating LAI Member: 15
Initial LAI Investment: Php 2,000 each
Quarterly LAI contribution: Php 1,000 each
Lock-in period: 5 years

By December 2015, Initial fund is Php 30,000.00
2016 1st quarter contribution: Php 15,000.00 = Participating LAI Member * Quarterly LAI contribution
By end of 2016 1st quarter, we have a fund of Php 60,000.00 to start the project.
Loanable portion: Php 30,000.00
Investment portion: Php 30,000.00
Credit Limit per scholar: Php 3,000.00 = (Loanable portion) / currently studying scholars

Scholar A loans P2K for enrolment fees. (Scholar A’s available credit limit is now Php 1,000.00)
Scholar A pays P1K after a month. (Scholar A’s available credit limit is now Php 2,000.00)
Scholar A loans P2K for prelims exam. (Scholar A’s available credit limit is now Php 0.0)
*At this point, Scholar A cannot make another loan since he has no remaining credit limit. He will have to pay the existing loans first.

2016 2nd quarter contribution: Php 15,000.00
The group decide to put 50% to loanable portion and 50% to investment option.
Loanable portion: Php 37,500.00
Investment portion: Php 37,500.00
Credit Limit per scholar: Php 3,750.00

2016 3rd quarter contribution: Php 15,000.00
The group decide to put 50% to loanable portion and 50% to investment option.
Loanable portion: Php 45,000.00
Investment portion: Php 45,000.00
Credit Limit per scholar: Php 4,500.00

2016 4th quarter contribution: Php 15,000.00
The group decide to put 50% to loanable portion and 50% to investment option.
Loanable portion: Php 52,500.00
Investment portion: Php 52,500.00
Credit Limit per scholar: Php 5,250.00
*End of 1st year in the lock-in period

2017 Q1-Q4 contributions: Php 60,000.00
The group agree that the current credit limit is enough and decide that 100% of the contributions will go to investment portion.
Loanable portion: Php 52,500.00
Investment portion: Php 112,500.00
Credit Limit per scholar: Php 5,250.00
*End of 2nd year in the lock-in period

2018 Q1-Q4 contributions: Php 60,000.00
The group agree that the current credit limit is enough and decide that 100% of the contributions will go to investment portion.
Loanable portion: Php 52,500.00
Investment portion: Php 172,500.00
Credit Limit per scholar: Php 5,250.00
*End of 3rd year in the lock-in period

2019 Q1-Q4 contributions: Php 60,000.00
The group agree that the current credit limit is enough and decide that 100% of the contributions will go to investment portion.
Loanable portion: Php 52,500.00
Investment portion: Php 232,500.00
Credit Limit per scholar: Php 5,250.00
*End of 4th year in the lock-in period

2020 Q1-Q4 contributions: Php 60,000.00
The group agree that the current credit limit is enough and decide that 100% of the contributions will go to investment portion.
Loanable portion: Php 52,500.00
Investment portion: Php 292,500.00
Credit Limit per scholar: Php 5,250.00
*End of 5th year in the lock-in period

So in 5 years, we already invested 292,500.00.
Assuming that all our stocks are invested in ALI (Ayala Land Inc.) and that all these events happened from 2010 to 2015 (For the sake of having historical data).

ALI Price 2011 1st quarter: 19.00
Stocks bought: 1,578 shares = 30,000 / 19.00
Total shares: 1,578
ALI Price 2011 2nd quarter: 19.80
Stocks bought: 375 shares = 7,500 / 19.80
Total shares: 1,953
ALI Price 2011 3rd quarter: 20.00
Stocks bought: 352 shares = 7,500 / 20.00
Total shares: 2,305
ALI Price 2011 4th quarter: 21.00
Stocks bought: 357 shares = 7,500 / 21.00
Total shares: 2,662
ALI Price 2012: 21.30
Stocks bought: 2,817 shares = 60,000 / 21.30
Total shares: 5,479
ALI Price 2013: 25.00
Stocks bought: 2,400 shares = 60,000 / 25.00
Total shares: 7,879
ALI Price 2014: 26.35
Stocks bought: 2,278 shares = 60,000 / 26.35
Total shares: 10,157
ALI Price 2015: 34.15
Stocks bought: 1,757 shares = 60,000 / 34.15
Total shares: 11,914

And assuming that by the end of 2015 ALI is at Php 38.9 per share:
Equity Value = 11,914 * Php 38.9 = Php 463,454.60
Profit after 5 years = Php 463,454.60 – Php 292,500.00 = Php 170,954.60
LAI member income = Php 170,954.60 / 15 = Php 11,396.97 each

*The Php 19,000 contribution of each LAI member invested in Stocks yield Php 11,396.97 (59.98%)
(Note that this is not an accurate computation and just given for example only. The results may seem too high but I have used historical data that gives this illustration a very feasible potential; Dividends from ALI hasn’t even considered yet; the longer the investment the bigger the profit will be)

Evidently, LAI members will be getting a return on their contribution BUT more importantly will be helping current and future scholars to complete their LEAP scholarship.