Global Courant
On Monday, President Bola Tinubu fulfilled his promise to revitalize education by signing into law the student loan law. The law aims to provide financial aid to needy Nigerian students pursuing higher education in government-owned universities, polytechnics and colleges. This just means that the implementation of this initiative has the potential to alleviate the negative consequences, including the need to drop out of school, postpone semesters or struggle to balance part-time jobs and their studies, which they often face to get.
As stated in the law, the loans provided only cover tuition fees and are paid directly to the universities. They do not include housing or living expenses. It is important to note that a student loan is not issued as physical money; it gives students earlier access to educational facilities and resources without having to pay tuition fees. This ensures that students can go to school without financial burden and obtain their certificates. While the initiative is undoubtedly commendable, it has sparked controversy among Nigerians.
Due to a prevailing lack of trust between the Nigerian government and its citizens, skepticism remains about the new student loan as a potential conduit for corruption by positions of power. Nigeria’s social investment programs have always been used as a conduit for corruption. For example, previous initiatives aimed at helping the underprivileged, such as N-Power, the school nutrition program, and CBN’s Anchor’s Program, have been plagued by a history of failure. But aside from this skepticism, some of the requirements to access the loan can be problematic.
One of the drawbacks of the current system is the rigidity of loan repayments. The Education Loan Fund plans to implement the PAYE (Pay As You Earn) model, whereby loan recipients begin paying back their loans as soon as they get a job. So if you are employed, your employer immediately withholds 10% of your salary and transfers it to the Studievoorschotfonds. For self-employed persons, a monthly payment of 10% of your total profit applies. But you must have started payment two years after completing your National Youth Service Corp (NYSC) program. Failure to comply with these repayment requirements may result in fines, including a fine of ₦500,000, two years in prison, or both. This has raised legitimate concerns.
First, while there is a need for defaulters to dance to music, prison as a stage is draconian. Defaulters should not be sent to prison, but should be blacklisted so that they cannot get any loans in the future.
Graduate employment prospects have also raised concerns about how students would meet their loan obligations. The unemployment rate in Nigeria stands at a prohibitive 33% as of 2020 and is expected to rise to 40.6% according to KPMG estimates, compared to last year’s rate of 37.7%. Given these circumstances, the ability of Nigerian students to repay their loans becomes uncertain in the absence of employment opportunities.
Finally, while a period of two years or more may be reasonable as many have requested, there should not be a standardized repayment plan for all loans. Instead of deducting a flat 10% monthly, individuals may prefer to make larger payments or pay the full amount at once, depending on the nature of their post-NYSC employment.
By law, students need two guarantors: a civil servant who has been employed for 12 years or more and a lawyer who has been employed for at least 10 years after being summoned to qualify for the loan. This may be asking too much. A colleague argued that individuals who have close ties to government employees at this level and are willing to act as guarantors do not necessarily need this type of loan.
On the other hand, this system could potentially create a lucrative business opportunity for attorneys and officials who are willing to offer their services as guarantors in exchange for payment. In reality, this development could undermine the integrity of the schema, as it provides a means of ultimately circumventing the intended process.
Another aspect that warrants change is the requirement that disqualifies students from receiving the loan if their parents have defaulted on a student loan or other loan. It raises the question of why the child should have to bear the consequences of their parents’ actions, since only the student is responsible for repaying the loan.
Largely, meveryone has described it as a rhizome approach. Importantly, a key case for the loan is that it will be used as a way to increase the current tuition fees paid by institutions. Some federally owned universities have already started announcing increases in tuition fees. For example, in December 2022, some federally owned universities announced a 200% increase in fees. It is very likely that the rise in tuition fees in some public tertiary institutions will set a precedent for other institutions to follow suit. This is probably justified by the argument that students now have access to loans, which can be seen as a potential source to cover the increased costs.
Quite frankly, the Nigerian education sector faces numerous issues and tuition payment is arguably not low hanging fruit. There are systemic issues that need to be addressed. Even with the availability of student loans, there are concerns about continued strike action by unions such as the Academic Staff Union of Universities and other related bodies, access to improved educational standards, advanced curriculum and adequate infrastructure, among other vital factors. Without addressing these issues, the core purpose of education may be compromised.
