Constitutional Court Annuls Zero Interest Rate for ICETEX Credits: What Happens Next?

In its review of the Tax Reform, presented by the Government of President Gustavo Petro in 2022, approved last December and which came into force this year, The Constitutional Court decided to annul the article 95, which allowed granting a zero interest rate (0%+IPC) on ICETEX credits for higher education studies in the country.

In said article, established a contribution to be made by universities to students with educational credit granted by the entity and who did not have a rate subsidy.

This was said by ICETEX, which explained that This benefit was aimed at students with refundable credit in the study stagewho would not have to pay additional points when Consumer Price Index (CPI) nor the capitalization of interest equivalent to the zero rate.

Read also: Who will have their debt with ICETEX for educational loans forgiven?

When the aforementioned reform came into effect, in January 2023, credits began to be granted under these conditions and thus 77 thousand students who requested ICETEX financing were benefiting for his studies at various universities in Colombia.

“The measure sought to help Colombian families, understanding that the loans granted by the entity became unpayable, in addition to mitigating the high cost of living, which by 2022 reached 13.12% and which directly impacts educational loans,” the entity said. state funding for higher education, after learning of the Court’s decision that overturned the article.

“We understood the reality of families and, for this reason, We achieved that the loans that were unpayable became fair loans”, stated the president of ICETEX, Mauricio Toro.

However, with the declaration of unenforceability by the Constitutional Court, this benefit is without effect, which is why ICETEX announced that “it will continue looking for mechanisms to maintain educational credits with fair interests”.

Zero rate for ICETEX credit: why did this benefit fall?

The contribution for students who finance their studies with ICETEX credits, and which allowed the aforementioned benefit (IPC + 0% interest), was declared unenforceable because, according to the Constitutional Court, In the approval process, the principles of consecutiveness and flexible identity were ignoredbecause it was not debated in committees, but was only presented and approved in plenary sessions of the Senate and House.

With the entry into force of the Tax reformclarified ICETEX, “Higher Education Institutions assumed the payment of additional points to the CPI in the interest rate of the student’s creditguaranteeing that these will continue in the classrooms and stopping the dropout that could occur due to high interests.”

According to Mauricio Toro, the decision of the Constitutional Court, known this Tuesday, October 10, responded to a “lawsuit filed by some private universities that opposed the contribution that we proposed to be paid by the universities. “We asked the Court for a deferred effect so as not to harm the students, but it was denied.”

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However, the Plenary Chamber of the High Court also established in its ruling that It is necessary for the State to work to create new measures to regulate educational creditsbecause most students do not work while at university, but after graduating.

“A special regulation of educational credit is necessary that contains express rules so that the financial market, especially the one in which ICETEX intervenes, considers, at least, the condition of timeless illiquidity in which a student finds himself while studying and completing their studies,” the Court noted.

An eventual regulation in that sense, according to that Court, should recognize “that In educational credit, the debtor’s payment capacity increases as he or she manages to join the labor market. and consolidate a position in this as soon as the funded studies are completed.”

We will continue looking for mechanisms to accompany the dreams of the 77 thousand young people who do not have subsidy on their credits and who benefited from the contribution made by universities to assume the additional points for inflation. ➡️ pic.twitter.com/5H6nuL0Yon

— ICETEX (@ICETEX) October 11, 2023

What will happen to beneficiaries of ICETEX credits for zero interest?

Taking into account that 77 thousand young people had already benefited from credits without additional points to the CPI and without capitalization of interest equivalent to the zero rate, thanks to the article that is now void, doubts arise about what will happen with these coverages.

In this regard, the president of ICETEX, Mauricio Toro, said that “new mechanisms and tools” are being sought that will allow these benefits to be maintained. “with lower credit costs”, beyond the decision of the Constitutional Court.

“Among these alternatives, ICETEX is working on individual agreements with each educational institutionwith the purpose of continuing to apply the tax benefits to students,” Toro emphasized.

Thus, the official warned that Those who “are studying in institutions that do not have an active agreement with ICETEX will not be entitled to these benefits as of January 2024”.

The latter means that those people who received the benefit (CPI + 0% interest), They will no longer have this coverage from next year if the universities where they study do not reach an agreement regarding this with ICETEX.

For this reason, Toro invited the country’s higher education institutions to “as soon as possible and quickly sign these agreements, so that we continue to benefit our young people, since those students from universities that do not have an agreement with “We will not be able to enjoy this benefit and the payment of your credit will be affected.”

Meanwhile, ICETEX stated that it “fully respects and abides” by the determination of the Constitutional Courtand that from that entity and the Ministry of Education we will work with the Congress of the Republic, actors in the educational system and higher education institutions “to build alternatives that allow maintaining economic justice in educational credits.”

In it #ICETEXmoreHuman We will work tirelessly with higher education institutions to find new ways to guarantee fair interest rates and greater opportunities to support the life projects of young people. 🧑‍🎓👩‍🎓

— ICETEX (@ICETEX) October 10, 2023