Nigeria student loan scheme: All you need to know

Many countries, including the United States of America, and the United Kingdom have something called student loans. These are loans given to students who are unable to shoulder the financial burden of tertiary education, which will be paid back at a later time usually when the student has graduated from the university and is employed. 

A few months ago, student loans seemed like something of a distant future for Nigerians, however, on Monday, June 12, 2023, the Student Loan Bill was signed into law by President Bola Tinubu. The bill was introduced by Femi Gbajabiamila, a former speaker of the House of Representatives. The bill will give Nigerian students access to interest-free loans to fund their tertiary education. 

Is the Studen loan scheme worth it?

Some would argue that student loans are not the solution to the problems Nigeria is facing, but without a doubt, the bill will be beneficial to some. Some federal universities have announced an increment in tuition fees by as high as 200 per cent. The literacy rate in Nigeria is already so low, which is mainly attributed to poverty, so increasing tuition fees will only augment this problem. But are student loans truly the solution?

We all know that one of the major problems Nigeria is facing today is the high unemployment rate. Education is encouraged to improve our literacy rate, but most times, the degrees earned in universities are left to collect dust, while the graduates are forced to look for other means of sustaining themselves. So is it worth it to borrow so much money to attain that highly valued education only to have no use for it in the future? For graduates who have no sustainable income and can barely feed, where are they expected to source the money to repay their loans?

For those truly enthusiastic to attain higher education no matter the cost, student loans will be a blessing. Whether this will make up the majority or minority is yet to be seen.   

It is important to note that a similar bill was put into law in the 1970s by the then-head of state Yakubu Gowon. Seeing that it is no longer in effect proves the futility of the endeavour. The federal student loan introduced then had a repayment period of up to 20 years. A few years later, the government pushed for “cost-reflective tuition”, which caused tuition fees to skyrocket. In 1978, the “Ali Must Go” protest started due to the frustration of the masses regarding the high tuition fees. Whether the implementation of this new student loan bill will follow the same course as it did in the past is unknown. However, we are hoping for a more positive outcome. 

In this article, I will be answering some questions many might have about the new student loan bill including where the funds will come from, who is eligible for the loan, how to apply for the loan and how the loan will be repaid. 

Where will the funds come from?

The National Education Loan Fund, which is the official name given to the fund for students loans, will be housed by the Central Bank of Nigeria, and its funding will come from 1% of the revenue of the Nigerian Immigration Service (NIS), the Nigerian Customs Service (NCS), the Federal Inland Revenue Service (FIRS), and 1% of the profits on oil and mineral. 

It is estimated that over N200 billion in revenue will be allocated to the National Education Loan Fund each year, which is more than enough to fund the education of over two million students. 

Who is eligible?

Not everybody will be able to receive the student loans. Only those who truly need it and have the potential to repay it in the future will be given loans. To be given student loans, you must meet the below requirements: 

1. You must have been admitted into a Nigerian public university, polytechnic, college of education or TVET school. 
2. Your yearly income or that of your family must be less than N500,000.
3. You must provide guarantors of either of the following: Two civil servants who have been in service for at least 12 years, A lawyer with at least 10 years of post-call experience,  A judicial officer, or A justice of the peace. 
4. You must have never defaulted on any loans, or been found guilty of exam malpractice, felony, fraud or drug offences. 
5. Your parents must have also never defaulted on any loans. 

How to apply

If you are interested in applying for student loans, you should follow the steps below: 

1. Meet all the eligibility requirements. 
2. Obtain a cover letter signed by either the rector, vice-chancellor, or head of the institution, as well as the student affairs officer of your higher institution.
3. Submit your application through the Student Affairs Office of your institute. Your institution will then compile a list containing all qualified candidates along with the signed cover letters and send it to the chairman of the education bank.

Information regarding the status of your application will be communicated within 14 days,  and the issuance of the loan will be completed within 30 days. 

How the loan will be repaid

After funding your education with a loan, of course, you will have to pay it back in due time. The loan is interest-free, meaning that you will only have to pay back the loan without additional interest. Payment will commence two years after NYSC, and 10 per cent of your salary will be deducted from the source every month to repay the loan. If you are self-employed, 10 per cent of your total monthly profit will be deducted to repay the loan. 

If you change jobs, you must notify the Chairman of the Committee and provide details of the new job within 30 days of starting employment. 

If you are self-employed, you must submit all information regarding your business, including name, address, registration documents, and names of partners, directors and shareholders within 60 days of starting the business. 

If you fail to repay the loan, you are liable to two years imprisonment, a fine of N500,000, or both. Anyone aiding your default will also be liable to the same punishment. 

Conclusion

The new Student Loan Bill will increase access to higher education in Nigeria especially for the poor, and the repayment policy seems fair. However, federal universities might see this as an avenue to increase their tuition fees to unreasonable amounts. 

Another problem with student loans is whether the debtors will be able to repay the loans or not. Two years after NYSC is a lot of time to find a job or start a business, however, a lot of Nigerians end up with low-paying jobs or even remain jobless for much longer. For someone unable to pay tuition fees, accruing capital to start a business will be very hard. A lot of Nigerian graduates hardly earn enough money to feed well, so paying back student loans will be quite difficult for them. For someone earning N50,000 a month, N5,000 deducted from that salary might put them in a pinch. 

Encouraging education is a good thing, but the high unemployment rate in Nigeria is a more pressing issue. The government should first try to ensure that graduates are gainfully employed before trying to implement strategies that will increase the number of people completing higher institutions, thereby increasing the unemployment rate.