Many countries, including the United States, and the United Kingdom have something called student loans. These are awarded to students who are unable to shoulder the financial burden of tertiary education, which will usually be repaid later when the student graduates from university and enters employment.
A few months ago, student loans seemed like a distant future for Nigeria, however, on Monday, June 12, 2023, President Bola Tinubu signed the Student Loans Bill into law. The bill was introduced by former Speaker of the House of Representatives, Femi Gbajabemila. The bill will give Nigerian students access to interest-free loans to fund their tertiary education.
Is a student loan scheme worth it?
Some will argue that student loans are not the solution to the problems facing Nigeria, but no doubt, this bill will be beneficial to some. Some federal universities have announced tuition fee hikes of up to 200 percent. Nigeria already has such a low literacy rate, which is mainly attributed to poverty, so raising tuition fees will only exacerbate the problem. But are student loans really the solution?
We all know that the biggest problem facing Nigeria today is the high rate of unemployment. Education is encouraged to improve our literacy rate, but more often than not, degrees earned in universities are left to gather dust, while graduates are forced to find other means of sustaining themselves. So is it worth it to take so much money to get a highly valued education only to have no benefit in the future? For graduates who have no sustainable income and can barely afford to eat, where are they expected to source the money to pay off their loans?
For those who are really passionate about pursuing higher education, student loans will be a boon. Whether this leads to a majority or a minority remains to be seen.
It is important to note that a similar bill was put into law in the 1970s by the head of state, Yakubu Gowon. Seeing that it no longer has an effect proves the futility of the effort. Federal student loans introduced later had repayment terms of up to 20 years. A few years later, the government pushed for “cost-reflective tuition”, which caused tuition fees to skyrocket. In 1978, public frustration over high tuition fees led to the “Ali Must Go” protests. Whether the implementation of this new student loan bill will follow the same course as in the past. However, we are hoping for more positive results.
In this article, I will answer many questions about the new student loan bill, including where the funds will come from, who is eligible for the loan, how to apply for the loan, and how the loan will be repaid.
Where will the funds come from?
The National Education Loan Fund, the official name given to the fund for official purposes, will be held by the Central Bank of Nigeria, and will be financed from 1% of the revenue of the Nigeria Immigration Service (NIS), Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and 1% from oil and minerals.
An estimated revenue of over N200 billion will be allocated to the National Education Loan Fund annually, which is more than enough to fund the education of over two million students.
Who is eligible?
Not everyone will be able to afford student loans. Only those people who really need it and have the ability to repay it in the future will be given loans. To be granted student loans, you must meet the following requirements:
- You must have been admitted to a public university, polytechnic, college of education or TVET school in Nigeria.
- Your annual income or your family income should be less than N500,000.
- You must provide one of the following guarantors: two public servants who have been in service for at least 12 years, with at least 10 years of post-secondary experience, a judicial officer, or an attorney holding a justice of the peace.
- You have never defaulted on any debt, or been found guilty of exam malpractice, felony, fraud or drug offences.
- Your parents must also have never defaulted on any loan.
How to apply
If you are interested in applying for student loans, you should follow the steps below:
- Meet all eligibility requirements.
- Get a cover letter signed by the Rector, Vice-Chancellor, or Head of Institution as well as the Student Affairs Officer of your higher institution.
- Submit your application through the Student Affairs Office of your institute. Your institution will then compile a list containing all the eligible candidates along with the signed cover letter and send it to the Education Bank Chairman.
Information regarding the status of your application will be communicated within 14 days, and the loan issuance will be completed within 30 days.
How the loan will be repaid
After funding your education with a loan, of course, you have to pay it back in due time. The loan is interest-free, meaning you only have to pay back the loan without any additional interest. Repayment will start two years after NYSC, and 10 percent of your salary will be deducted from source every month to repay the loan. If you are self-employed, 10% of your total monthly profit will be deducted for loan repayment.
If you change jobs, you must notify the committee chairman and provide new job details within 30 days of starting the job.
If you are self-employed, you must submit all information relating to your business, including name, address, registration documents, and the names of partners, directors and shareholders within 60 days of starting the business.
If you fail to pay the debt, you are liable to two years imprisonment, a fine of N500,000, or both. Anyone who aids your default will also be liable for the same penalty.
The result
The new student loan bill will increase access to higher education in Nigeria, especially for the poor, and the repayment policy seems reasonable. However, federal universities may see this as an avenue to increase their tuition fees by unreasonable amounts.
Another issue with student loans is whether borrowers will be able to repay the loans. Two years after the NYSC is sufficient time to find a job or start a business, however, many Nigerians end up with low-paying jobs or remain unemployed for even longer. For someone unable to pay tuition fees, it would be very difficult to raise capital to start a business. Many Nigerian graduates have earned enough money to feed themselves well, so repaying student loans will be quite difficult for them. For those earning N50,000 a month, one can deduct N5,000 from that salary.
Encouraging education is a good thing, but the high rate of unemployment in Nigeria is a more pressing problem. The government should first try to ensure that graduates are gainfully employed before trying to implement strategies that will increase the number of people completing higher institutions, thereby increasing the unemployment rate.