Student Loan: Is Nigeria Ready?

 By Mabel Oboh

About two years ago, at the convocation of the University of Lagos (UNILAG), Hon Femi Gbajabiamila, Chief of Staff to the President, who was then the Speaker of the House of Representatives, delivered a lecture. Among many other talks, he posited that a student loan scheme was one of the ways to solve the problem of funding education in Nigeria. 

He sponsored the bill on the matter in the National Assembly. It was not surprising therefore that Gbaja sold the student loans initiative as a priority agenda for the administration. On Monday, June 12, 2023, Nigeria’s democracy day, just two weeks into the life of the government, President Bola Tinubu announced the scholarship scheme.

The speed with which the introduction of the student loans came makes one wonder if the scheme was well thought out, a misfire, or, a looming implosion. Is the idea of its introduction intended to placate the fuel subsidy removal, or serve as one of the palliative packages? What does the government truly want to achieve; Propaganda or a solution to the University funding challenge for students from the most vulnerable families in Nigeria?

Come to think about it, the idea of students loan is not entirely new. Research shows that the loan idea was in place since 1972. It did not work or was abused. The details of the promised student loan leave much to be desired. If the administrations have had many challenges with the implementation of the best of policies in this country, how Tinubu can succeed with a very porous policy such as the document being bandied around at the moment gives me serious anxiety.

So if the interests of the masses or indigent students are to be served, the loan should be changed or assisted with grants. Let’s step back a little. The idea of student loans came in 1972 in Nigeria. People who took loans never paid.

Then in 1993/1994, the military-enacted Decree 50 also set up a Students’ Loan Board. This was domesticated by the National Assembly in 2004. However, within a year, it went off. Guess what, the money disappeared.

How will this be different with the many hawks already hovering around power? And what, pray, is wrong with probing the activities of the Tertiary Education Trust Fund (TETFund) and then expanding its scope?

Let’s look at the 2023 Student Loan Act. Not only is the process cumbersome, the conditions are, typically, set to enslave an already battered youth population that other countries cherish.

The Student Loan law provides interest-free loans to indigent Nigerian students. Students must apply to the Chairman of the Education Bank through their respective institutions and an applicant’s income or family income must be less than N500,000 per annum. Applicant must provide, at least, two civil servants as guarantors: of not less than 12 years in service; or a lawyer with at least 10 years post-call experience; a judicial officer; or a Justice of Peace. Students who have defaulted on previous loans, or are found guilty of exam malpractices, felony, or drug offenses will not be considered.

Students with parents who have defaulted in respect of previous loans will not be considered.

All applications will be submitted through the Students Affairs Office of each Institution via a list of all qualified applicants from the institution accompanied by a cover letter signed by the Vice-Chancellor or Rector or the head of the institution and the student affairs.

The new Act establishes the Nigerian Education Loan Fund domiciled with, managed, and administered by the Central Bank of Nigeria (CBN) through the money deposit banks in Nigeria. The CBN governor will set up a special committee to perform the functions of the fund. The chairman of the committee shall be the governor of the CBN who shall appoint the secretary of the committee. Academic records of beneficiaries are to be monitored through the student affairs office of each institution via a list of all qualified applicants from the institution, accompanied by a cover letter signed by the vice-chancellor, rector, or the head of the institution and student affairs.

The Act stipulates that a beneficiary will begin repayment two years after completing the mandatory one-year National Youth Service Corps (NYSC) scheme by having 10% of his/her monthly salary deducted into a designated bank account. Defaulting or aiding to default will attract a fine of N500,000 or two years imprisonment or both.

Funding for the scheme will be from one percent levies from the Federal Inland Revenue Service (FIRS), the Nigeria Immigration Service (NIS), and one percent from oil profits, This sounds very vague. The only good news in the Act is the sound of disbursement timeframe: it says application and disbursements are made within 30 days of the application reaching the chairman of the committee. However, that sound is distorted by the inhumane conditions that come with the loan.

It could be argued that the conditions are designed to discourage would-be applicants. First, for the combined family earnings to be less than N500,000 annually, parents must earn less than N30,000, which is less than the minimum wage. Besides cutting off several would-be beneficiaries, this group cannot get tax receipts (a requirement) to tender, since this low wage cannot be taxed. That is a grave pointer to the plans (or lack of one) the Federal Government has for the masses. Another red flag is the list of offenses that disqualify applicants. These automatically disqualify many that are reformed and seek help to get educated and be set on the right part.

Furthermore, perhaps most insensitive, are the list of guarantors. How are such classes of individuals expected to sign up for indigent youths? In the first place, how are prospective applicants and/ or their parents expected to get access to such persons? Shouldn’t prospective students be trusted with their future? And they top it all up with the bureaucratic process of accessing the loan: from the applicant’s institution to the CBN! 

Since when has civil service been so efficient as to process such in 30 days? Okay, let’s even be positive. But to start repaying two years after NYSC is simply assuming too much. These institutions spill out thousands of graduates yearly with many ending up as unemployed or okada men (commercial motorcycle riders). In most opinions, this student loan scheme simply wants to fill up the prisons that are already overcrowded. Or how else is a defaulter supposed to get N500,000?

LOANS AFFAIRS FROM OTHER CLIMES

Let’s even see results from other climes.

A student loan is nothing new in many Counties, especially in the Western world. The ideology behind the students is to assist students from less privileged back attain tertiary education with ease. After graduating, they only start paying back the loan after getting a job with a cut-off mark salary. The loan does not have to be paid unless you get a job and in the United Kingdom, for instance, 25 years is the time frame to pay back the loan.

The United States of America (USA) is a good example with loan debts of over $1.6 trillion. And over 45 million Americans are trapped in it. Some are already in their 60s and the rate of defaulters this year is estimated at 40 percent. It is so bad some American youths decided not to get married. In May President Joe Biden decided to cancel $66 billion in student debt. The Senate said no and Biden responded by vetoing it.

Just this scenario in Nigeria. That is if the monies don’t grow wings before they reach the applicants. Also, we don’t have verifiable statistics, unemployment is rising as is inflation, and basic amenities, taken for granted in places where loans failed, are not available here. This student loan scheme is doomed to fail. Already the government is saying no funds for the education sector. If they decide on autonomy, nothing can stop a rise in tuition fees.

In my opinion, Nigeria is not ready for student loans with steep conditions rather, President Bola Tinubu should explore other options and review the terms and conditions of this loan if he truly has the interest of the millions of indigent youths at heart. One of the things he can do is, no matter how incongruous this sounds, fix the refineries. 

Then take care of the electricity. Do these two and just with a spanner or screwdriver the youths will change this country. And for our youths who want to attain tertiary education in these present climes, the government should look at reviving scholarship schemes and giving out grants to those that want to attain either tertiary or other forms of higher education.

*Mabel Oboh is the National Publicity Secretary of the African Democratic Congress, ADC