Issues With Tinubu’s Education Loan Scheme

 By Jideofor Adibe

Tinubu’s first three weeks in office have been packed with actions – fuel subsidy was removed on his inauguration, some aides have been appointed, the Naira has been floated and a Bill establishing an education loan scheme has been signed – among others. Though the actions so far have been mostly policy pronouncements that are yet to be implemented and tested, some people, carried away by the giddiness of the actions, have wrongly declared that Tinubu’s first 15 days in office have been better than a whole four-year term spent by past administrations. 

This piece interrogates the Access to Higher Education Act 2023 (otherwise known as the education loan scheme), flagging the promises and issues it raised: 

One, contrary to the belief in some quarters, the education loan scheme was not an initiative of Bola Tinubu. The bill was first introduced in 2016 by Femi Gbajabiamila, the immediate past Speaker of the House of Representatives and President Tinubu’s protégé and Chief of Staff. It was reintroduced in 2019 and received more attention from the National Assembly in November 2022 following an eight-month industrial action by the Academic Staff Union of Universities, ASUU.

Two, contrary to the impression in some quarters, the education loan scheme is an attempt to address just one of the several challenges in our higher education system– namely the financial encumbrance for indigent students who want to pursue education in government-owned institutions of higher learning. The truth however is that the challenges in our higher education go far beyond the issue of access for indigent students because it is actually cheaper to obtain higher education from government- owned tertiary institutions than to train a child in primary school in even a third-rate privately owned school. In fact, Nigeria’s public tertiary institutions are currently tuition-free.

Though students pay for course registration and make other sundry payments, it is officially tuition-free. The key challenges of higher education in Nigeria include inability to make these institutions real citadels of learning, poor research and teaching traditions, inadequate funding, poor remuneration of staff and several contradictions within the higher education system itself. There is also a wrong assumption that higher education should be for everyone. This has led to an over-emphasis on paper qualifications, with people who should spend time on other vocations trying to obtain paper qualifications in fields they have no aptitude for.

Three, the structure of the education loan scheme makes it vulnerable to capture and inheriting the inefficiencies prevalent in other government-owned institutions. For instance, the proposed education fund is to be domiciled in the Central Bank of Nigeria, CBN, and managed by an 11-person special committee chaired by the CBN governor. This necessarily means it will be hamstrung by red-tape and vulnerable to capture by top politicians who will want to use it to bolster their standing in their communities. 

Again, the fact that the loans are interest free (even in periods of high inflation) and the sources of the funding (one per cent of all profits accruing to the Federal Government from oil and other minerals; one per cent of taxes, levies and duties accruing to the Federal Government from the Federal Inland Revenue Service, FIRS; Nigeria Immigration Service, NIS; and Nigerian Customs Service, NCS; education bonds,  education endowment fund schemes, donations, gifts, grants, endowment and revenue accruing to the fund from any other source) do not suggest that government wants it to be run efficiently in a self-sustaining manner.

In contrast, in the United Kingdom, student financing is managed by the Student Loans Company, which was set up in 1989. It is owned by the UK Government’s Department for Education (85%), the Scottish Government (5%), the Welsh Government (5%) and the Northern Ireland Executive (5%). The company has undergone several transformations based on experiences from practices. One of the most profound of these transformations was in 1998 following the introduction of tuition fees when it replaced the mortgage type lending(which it had used previously) with an income-contingent repayment, ICR, scheme. From 2006, loans covered the cost of tuition fees in addition to living costs.

Interest is charged from the day the Student Loans Company makes your first payment to you or your university or college until your loan is repaid in full or cancelled. The interest rate is based on the Retail Price Index or RPI, which measures changes to the cost of living in the UK. Last Fall, the UK Department for Education set a maximum interest rate of 6.3 per cent on student loans but it has jumped to 6.9 per cent since then, and it is going up again to 7.3 per cent. Repayments for these loans are collected by HMRC via the PAYE tax system. In the UK, everyone understands that the loan is not free lunch. An opposite impression is given in the case of the Access to Higher Education Act 2023.

Four, the eligibility criteria for the loan make no sense. For instance, to be eligible, an applicant’s family income (combined income of both parents or guardians) must be less than N500,000 per annum. This means essentially that a family earning more than the paltry sum of N41,667 per month will not qualify. Since a family where both parents or guardians have such joint monthly income will be classified as being on minimum wage (and therefore exempt from paying taxes), such a family will be unable to produce their tax receipts which is another requirement for accessing the loans. 

Another criterion is that applicants must provide at least two guarantors, each of whom must either be a civil servant on at least level 12, or a lawyer with at least 10 years post-call experience, or a judicial officer, or a justice of peace. But how realistic is it to expect people on such low income to be able to get such guarantors who will undertake to repay the loans if they default? Moreover, since most of the indigent students come from households where the parents or guardians are in the informal sector of the economy, it can only be imagined how daunting it will be to compile evidence of eligibility.

Five, the application process appears cumbersome. To apply for the education loan, candidates are required to submit applications to the chairperson of the CBN-governor-headed committee through their respective banks. The application is to be accompanied by a cover letter signed by the head of their institutions and students’ affairs officer of the institution. Applicants are also required to submit a copy of their admission letter, at least two guarantor letters addressed to the chairperson of the committee, two passport photographs from each of the guarantors, their employer and evidence of employment. In cases where the guarantor is self-employed, their business registration with the Corporate Affairs Commission, CAC, or any other appropriate authority and their bankers, will be required.

Six, the repayment process is also problematic. It requires that payment starts two years after NYSC – irrespective of whether the beneficiary has got a job or not. The scheme also wrongly assumes that any self-employed person is making a profit and demands that 10 per cent of their total monthly profit shall be remitted as part of the repayment plans. Meanwhile, defaulters risk a N500,000 fine, two years jail term or both if they fail to repay their loans. This compares poorly with the practice in the United Kingdom and other advanced countries where payment is weighted by income and there is an income threshold before the repayment kick starts.

In essence, while the thinking behind the Access to Higher Education Act 2023 is noble, there are many fine-tuning that will be needed before the scheme is put into practice.

*Prof Adibe is a commentator on public issues