Student loans: Much ado about nothing

Although the recently signed Student Loan Bill has been hailed by some as the solution to the nation’s higher education problems, it isn’t. Not only is the manner in which the loans are to be disbursed inappropriate, but two of the premises used to justify the scheme are false. The first false premise is that the nation cannot afford to fund higher education. This isn’t true. Government can afford to fund higher education if they so please; what is true is that they have chosen not to do so.  

Nigeria is not a poor country, it has been correctly described as a rich country inhabited by poor people! Funding education is a matter of priority. It’s a matter of choice in which what economists describe as “opportunity cost” is considered.  What the nation really cannot afford is the continuous maintenance of a Presidential air fleet; the funding of unconstitutional Offices of First the Lady; the unjustifiable budget of the National Assembly; the ongoing oil theft; the routinely approved ill-motivated padded budgets; the worldwide gallivanting by public officials for unnecessary conferences; the massive corruption and the wholesale theft by public office holders reflected in the unaccounted for funds in Ministries Departments and Agencies (MDAs). 

Rather than addressing these seemingly intractable problems, the government chooses not to be able to afford any of those things which give citizens succour. Government increasingly appears to exist only for itself. 

The second false premise is that there is nowhere where education is free and student loans conform to “international best practices”. This is not true because countries such as Germany, Brazil, Finland, Sweden, Greece, Austria, Czech Republic, France and Norway all offer free university education for citizens.

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In Norway, in particular, there are no tuition fees for public universities or colleges, irrespective of the student’s nationality! Many other countries subsidise public university education in order to develop their human capacity and assist the next generation to attain their educational goals. These countries aren’t the richest, but the progress and education of their children are of utmost importance to them, as reflected in the greater proportion of the national budget allocated to the educational sector than in Nigeria. 

There is every reason to suspect that the real purpose of introducing student loans has less to do with making higher education easily accessible, and more about reducing governments’ financial obligations. It’s simply a method of transferring the cost of operating public universities to long-suffering citizens. It has been speculated that to cover university operating costs, the government will introduce tuition fees in federal universities. The result will be that the vast majority of students who do not qualify for loans will end up paying tuition fees. 

Student loans aren’t a new concept. They were introduced in Nigeria in the 1970s with disastrous results because defaulters outnumbered those who refunded money! There is little reason to believe history will not repeat itself. In a nation where more than half the population lives below the poverty line, and unemployment is increasing, it’s only reasonable to expect that there will be a large number of defaulters. This could easily overload the capacity of the Economic and Financial Crimes Commission (EFCC).

If the loan scheme is meant to be permanent, it gives rise to questions as to how funds will be continuously generated given the number of defaulters and time-lapse before repayment?  Questions are also being asked as to whether the loan funds, which are supposed to be disbursed by the beginning of the 2023/2024 academic session, were included in the budget. If not, and the money is to be borrowed, does it make sense to give it out as interest-free loans?  

The conditions for accessing the loan must be reviewed because there is little difference between the requirements for a successful loan application and the conditions given for bail at court or police stations! Very few “indigent people” know civil servants of at least grade level 12, lawyers with at least 10 years’ experience, or judicial officers or justices of the peace.

The authorities must also adjust the two-year repayment term. It is impracticable considering the nation’s high unemployment rate. These days, many graduates are still unemployed five years after graduating and have resorted to becoming barbers or driving taxis. They cannot reasonably be expected to repay any substantial loan within two years. Granting loans under the conditions prescribed will greatly add to the problems of Nigerian youths by burdening them with debts as they start their working life. 

With regard to implementing the loans scheme as in the USA, student loan debt is a problem for millions of Americans. Over 43 million were owing an astounding $1.78 trillion! The average US graduate with a student loan must do at least two jobs in order to meet up the repayments. Jobs are not available in Nigeria. Even when working two jobs most of them cannot repay the loan promptly and are stuck paying off in 10 years or longer!

There is also the matter of establishing the Nigerian Educational Bank which will only create unnecessary additional expenses and increase avenues for corruption. It’s important that all these factors be taken into consideration and necessary adjustments made before the scheme commences, otherwise it is unlikely to be successful and all the fanfare will end up as much ado about nothing!