Will student loan scheme work in Nigeria?

• Provide job opportunities first — Experts

The Student Loan Bill signed into law by President Bola Ahmed Tinubu on Monday is not an overnight thought but one that had been on the burner from the previous administration, which hinted that the succeeding government will implement it.

Though the law seems cause to cheer, but student loans can feel like a trap and may not be easy to repay, especially in countries like Nigeria where the majority of graduates remain jobless for years.

The scheme is practised in some developed countries but despite employment opportunities for students in those climes, it has never been free of challenges, especially the issue of repayment because many end up not repaying.

It could be recalled that a former US president, Barack Obama, disclosed in 2021 that he only completed the repayment of a student loan he collected before he became a senator.

He said: “Michelle and I, we’re only where we are today because scholarships and student loans gave us a shot at a great education. And we know a little bit about trying to pay back student loans, too, because we didn’t come from a wealthy family. So we each graduated from college and law school with a mountain of debt. And even though we got good jobs, we barely finished paying it off just before I was elected to the US Senate.

“I mean, I was in my 40s when we finished paying off our debt. And we should have been saving for Malia and Sasha by that time. But we were still paying off what we had gotten, and we were luckier because most of the debt was from law school. Our undergraduate debt was not as great because tuition had not started shooting up as high.”

Taking that long for Obama to repay, means there are possibilities of many hundreds who couldn’t.  What then would be the fate of such a scheme in Nigeria?

This is not the first time such a law is being announced in Nigeria.  In the 1970s, the federal military government promulgated the Nigerian Students’ Loans Board decree to provide funding to Nigerian students based on loans repayable in 20 years after graduation.

No doubt, students were said to have benefited from the loan and universities generated more money as well but had to end years after an attempt was made to introduce tuition fees and increase other charges, an idea which was greeted with serious protest.

However, with the new students’ loan law which sought among other things to provide loans for the purpose of payment of tuition fees in higher institutions, the immediate questions that come to mind are; will the student loan work in Nigeria? Where will the fund come from? Is the loan the first thing needed or generating employment opportunities, and what happens when the debtors fail to secure a means of survival after two years of serving the country?

These questions are pertinent considering the country’s weakness in implementing policies and how corrupt individuals overseeing sectors hijack policies that are meant for the masses, poor attitude towards government properties, failure of many Nigerian graduates to secure means of a living wage years after serving the nation and the nonchalant attitude towards repayment of loans from government agencies among others.

Can the scheme work in Nigeria?

Considering the number of students in public tertiary institutions nationwide, which contributes the largest number of undergraduates in the system, the majority of those whose parents are in the average income bracket are likely to apply for the loan.

To answer the questions outlined above, and others on the lips of educationists and many other stakeholders, Daily Trust spoke to some experts whose responses are an interesting mix.  

A professor at the University of Abuja, Ben Ugwoke said: “Sincerely, I think the introduction of the students’ loan scheme in Nigeria is like placing the cart before the horse.

“The scheme is supposed to be a revolving programme, which means students who benefited are expected to pay back the loan for the scheme to continue.

“The question any concerned person would ask is ‘where are the jobs for the graduates that would enable them to repay the loans for the purpose of continuity? I would rather have thought that the government would first find a way to stimulate the economy so as to be able to absorb graduates in gainful employment, whether formally or informally,” he said.

The don further said: “To the extent of my explanation, I feel the student loan scheme of President Tinubu would go the way of the early one, which packed up in 2002 and nobody has been brought to book. Foremost, the economy should be stimulated to generate job opportunities for graduates.”

An educationist, Michael Sule, said the scheme may not stand the test of time as many indigent students may not benefit in the long run because as usual it is likely to be hijacked by those in the system and politicians and at the end, the aim would be defeated.

“And if the aim is to introduce high tuition fees in the system, the scheme may not work and secondly we do not have a transparent and corruption-free system in place to implement such a scheme,” he added.

The Dean, Faculty of Environmental Sciences of Nasarawa State University Keffi (NSUK), Professor Nasiru Medugu Idris, said the scheme may not work in Nigeria considering the large number of students in the country seeking to acquire tertiary education. 

“I don’t think it would work because of the large number of students in our schools today. So also, there are hurdles to accessing the loan. The procedure and timeframe may discourage most students. 

He said: “Creating jobs is far more important for now. If you look at the number of graduates that are turned out from our tertiary institutions, that number is alarming when considering providing such loans. But we should note that the private sector is the employer of labour more than the public sector worldwide. So the government should provide an enabling environment for the private sector to succeed and provide jobs.”

Hassan Taiye, also an educationist, said student loan is a norm in other parts of the world where policies and rules are implemented and there are job opportunities for students to choose from even while schooling.

“The question is: how will a government that cannot properly fund tertiary institutions grant loans to millions of students effectively? You know our system and mentality, the moment such a plan is put into effect, everyone will want to be a beneficiary. 

“Secondly, with our corrupt system, how do governments ensure getting the students to pay back, especially when many are likely not to get employed after graduation due to lack of industries,” he asked.

He, however, maintained that it is the responsibility of the government to ensure a conducive environment for the citizens to acquire quality education. “If they come up with a plan and data that show the right people to benefit from such a scheme, then we can test run it for a while to know if it’s worth it.”

Repayment and jail term

The Act stated that students who take loans are expected to start paying back two years after completing the National Youth Service Corps (NYSC). The repayment shall be by direct deduction of 10 per cent of the beneficiaries’ salary at source by the employer and where the beneficiary is self-employed, he shall remit 10 per cent of his total profit monthly to the student loan account to be prescribed by the bank.

However, the Act proposes a two-year jail term for loan defaulters.

An educationist, Michael Sule said the scheme is to help indigent students to get an education without fear of dropping out because of funds, but that is if the system remains the same without increments and outrageous fees.

On repayment plan, he said: “I am afraid that will be a big problem considering the fact that you cannot guarantee a job for the student immediately after graduation. Secondly, the job opportunities are not readily available and many take five or more years to get a job. Would you now jail him for not having a job?”

He further said Nigerians’ attitude towards repaying loans is poor, pointing to the Anchor Borrowers, COVID-19 loans and others, adding that many will never repay even when they are doing well and that is because of the mentality that government’s property is nobody’s.

Sule, however, said the government should revive industries and factories and enable a good environment for businesses to provide employment to many before the loan scheme. “That way, you can be sure of a debtor securing a job and paying back.”

Facts about the scheme

The Act, which offers loans for poor students seeking higher education in public universities, polytechnics and colleges of education in the country is said to be an interest-free loan for indigent students in which beneficiaries will only pay back the exact amount they collected after two years of serving the nation.

Students applying for loan under this Act must apply to the chairman of the bank through their respective institutions upon satisfaction of the following conditions:

– Student must have secured admission into any public Nigerian University, Polytechnic, COE or TVET school

– 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 level 12; or a lawyer with at least 10 years post-call experience; a judicial officer; or a Justice of Peace.

 – Students who have defaulted in previous loans; found guilty of exam malpractice, felony, drug offences 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 student affairs.

Meanwhile the Permanent Secretary, Federal Ministry of Education, Andrew David Adejo said such scheme has failed in the past and as a result they want to learn from the past, saying, “We want the current act to learn from the mistake of the past where there are more defaulters than people that paid the bill, the past is like it is a government money come and take and go, free money but that is not going to be the case with this.”

He however, assured that the process would be depoliticized and that jobs would be created even though it cannot be created 100 per cent adding that universities and polytechnics are being trained to focus on innovation and produce job creators.