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Students Loans Act: Improved Access to Education or a Mirage!

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11 months ago

July 2, 2023

Stella Charles Akupue

Students Loans Act: Improved Access to Education or a Mirage!

The Students’ Loans (Access to Higher Education) Act, 2023, gained Presidential assent on 12^th June 2023 and has since been making the rounds in the media and among Nigerians. The Act repeals the Nigerian Education Bank Act, Laws of the Federation of Nigeria, 2004.

It provides the framework for equal access to interest-free loans for all students
seeking to study in public institutions of higher learning in Nigeria for the
payment of tuition fees only.

To secure a loan, an applicant must:

Have admission to a university, polytechnic, college of education or vocational
the school established by the Federal Government or a State Government;

Have an annual personal or family income of less than N500,000;

Provide at least two guarantors who must be a civil servants of level 12, at least, a
a lawyer with at least 10 years of post-call experience, a judicial officer or a
justice of the peace.

The student is disqualified from accessing the loan if he or she:

Has defaulted in repayment of a loan from any organisation;

Is found guilty of exam malpractice by any school authority;

Has been convicted of a felony or offence relating to dishonesty or fraud;

Has been convicted of drug offences;

Has a parent who has defaulted on a student loan or any other loan.

NBA -SBL 2023

The Act establishes the Nigerian Education Loan Fund, which will be responsible for managing
student loans, making rules and guidelines concerning the loan application
process, reviewing loan applications, approving and disbursing same, and recovering
all loans, among other functions.

The Fund will also monitor the academic records of loan grantees and obtain information about their graduation, National youth service and employment to determine when each loan repayment is due.

The Fund will work with employers to ensure that the loan sum is deducted from the salaries of the grantees. The Central Bank of Nigeria will administer the Fund through Nigerian money deposit banks.

The CBN Governor is responsible for setting up and chairing a Special Committee which will perform the functions of the Fund.

The CBN Governor is also empowered to appoint a Secretary for the Committee. The
The Committee comprises several stakeholders from the education sector, Finance,
Minister, Auditor General for the Federation and representatives from the Nigeria Labour Congress (NLC) and the Nigerian Bar Association (NBA).

Students Loans Act: Improved Access to Education or a Mirage?

Nigerian Education Loan Fund will be financed through education bonds, education
endowment fund schemes, 1% of taxes, dues and levies accruing to the Federal
Inland Revenue Service (FIRS), the Nigeria Immigration Service and the Nigeria
Customs Service; 1% of profits from oil and other materials, gifts, donations and grants.

An application for a student loan is to be submitted through the applicant’s bank to
the Chairman of the Special Committee (for the Nigeria Education Loan Fund),
that is the CBN Governor.

The application must be accompanied by a letter signed by the Vice-Chancellor or Rector or the head of the applicant’s educational institution, as well as the Student Affairs Officer of the
institution.

The application must also be accompanied by a copy of the student’s admission letter, a letter from their guarantors recommending the applicant for the loan and accepting liability in the event of a default in the repayment of the loan.

Also, the application will contain the particulars of a guarantor’s business registration with the Corporate Affairs Commission (CAC) or documentation from the appropriate authority and details of the guarantor’s bankers.

It is essential to note that the disbursement of funds where a loan is approved is
subject to the availability of funds.

According to the Act, the loan repayment will commence two years after the beneficiary
has completed the National Youth Service Corps (NYSC) programme.

Ten per cent (10%) of the beneficiary’s salary will be deducted at source by his or her
employer, who will credit the Fund with these deductions.

A beneficiary of the student loan must communicate any change of job (with details of the new job) to the Chairman of the Committee within 30 days of resuming with a new employer.

Where the beneficiary is self-employed, he or she is expected to remit 10% of his or
her total monthly profit to the Fund.

A self-employed beneficiary must submit information relating to his or her business, including registration documents (if registered) and details of bankers, partners, directors and shareholders, to the Committee within 60 days of assuming that status.

A BEE TO POLLEN DRAWN, WRITTEN BY OZIOMA IZUORA.

It is an offence for a self-employed beneficiary or another person to withhold information about such a beneficiary as it relates to his or her business, and this offence is punishable by a fine of N500,000 or imprisonment for two years or both.

The Act makes other provisions for the operations and internal affairs of the
Special Committee established by it.

Providing interest-free student loans to improve access to tertiary education is a laudable initiative. However, the conditions for obtaining student loans need to be realistic to ensure that these loans are actually obtained by the target beneficiaries.

Students Loans Act: Improved Access to Education or a Mirage!

The requirement for two guarantors who will become liable in the event of a loan default does not appear practical, as people would be reluctant to serve as guarantors for applicants, thereby making it difficult for applicants to fulfil the conditions for accessing these loans.

In terms of systems and processes, a credible identity database is necessary
for loan operations, to effectively track loan recipients and ensure repayment
of loans.

Improving the integrity of Nigeria’s national identity system and improving synergy between government institutions using a unified database will be instrumental in following up on loan repayment instead of transferring the burden to guarantors in the event of a default.

It would also appear that the qualification threshold to access the loan means several other needy students are excluded. A maximum income cut-off of N500,000 per annum means that the several million poor families outside this threshold will not benefit.

It is also important to note that this law states no amount is as payable as tuition. It appears that this may have a positive effect as it would enable adjustment in line with possible future increases in tuition fees.

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The assumption that a Nigerian graduate would have secured a job within two years
of completing the NYSC programme is questionable.

Students Loans Act: Improved Access to Education or a Mirage!

The unemployment rate in Nigeria is staggering and has been estimated by experts to be as high as 40.6% in 2023. There may be a need to provide variable timelines so that if a beneficiary’s circumstance makes it difficult to pay, the timeline can be adjusted to consider this.

The Act does not explicitly state the frequency of the 10% deduction of an employed loan beneficiary’s salary for the repayment of the loan. However, it may be assumed that it should be monthly, as stipulated in the case of a self-employed beneficiary.

It is also unclear why the management of the Fund is domiciled with the Central Bank, as it is not part of its core responsibilities, nor is there any justification made for this.