EXPLAINER: All you need to know about the student loan law

The enactment of the student loan law is a unique initiative that provides students from low-income families access to higher education through interest-free loans and the financial flexibility it offers. Here are key provisions and consequential implications of the law

On the 12th of June, 2023, the Access to Higher Education Bill, popularly known as the students loans scheme, was passed into law with the assent of President Bola Ahmed Tinubu. The Act aims to create a legal framework for the granting of loans to indigent or low-income Nigerians to facilitate the payment of their tuition fees.

Objective and key provisions…

The primary objective of the Nigeria Student Loan Act is to foster the accessibility of higher education for Nigerian students. By recognizing the link between education and national development, the Act aims to establish a framework that provides financial assistance to eligible students, ensuring that academic pursuits are not hampered by financial hardships and other economic constraints.

A key mechanism of the Act involves the creation of a dedicated fund, managed and administered by the Central Bank of Nigeria (CBN). This fund serves as the backbone of the student loan program, ensuring the availability of resources for disbursement and underlining the government’s commitment to supporting education.

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Sources of funding…

The sources of funds for the loans scheme, according to Section 12 of the Act, include education bonds; education endowment fund schemes; 1% of all taxes, levies, and duties accruing to the Government of the Federation from the Federal Inland Revenue Service (FIRS), Nigerian Immigration Service (NIS), and the Nigerian Custom Service (NCS). Others are 1% of all profits accruing to the Government of the Federation arising from oil and other minerals; all sums accruing to the fund by way of donations, gifts, grants, endowments, or otherwise; and other revenue accruing from any other source.

How to access the loans…

The Act outlines a transparent process for the application and approval of student loans. However, this process is designed to cover tuition fees only according to Section 3 of the Act. This approach is one of the lacunas of the Act because tuition covers 50% of every student’s need in school. Indigent students must purchase textbooks, book accommodation, and for some institutions, and pay dues to allow them focus on their academic pursuits. However, to access these loan, the following procedure must be followed:

1. Students must first obtain admission into a public Nigerian university, polytechnic, College of Education (COE), or Technical and Vocational Education and Training (TVET) school;
2. The applicant’s income or family income should not exceed N500,000 per annum;
3. The applicant must provide a minimum of two civil servants as guarantors. These guarantors should either be at least at level 12 in service or meet the following criteria: a lawyer with at least 10 years of post-call experience, a judicial officer, or a Justice of Peace;
4. Students who have previously defaulted on loans or have been found guilty of exam malpractices, felony, or drug offenses will not be considered eligible for the loan; and
5. All loan applications should be submitted through the Students Affairs Office of each institution. The applications must include a list of all qualified applicants from the institution, accompanied by a cover letter signed by the Vice-Chancellor, Rector, or the head of the institution and the student affairs office

Also, the Act does not provide a merit-based approach as part of the eligibility criteria. It is important to incorporate the criteria of both academic excellence and financial need. By doing so, the Act would reward students who demonstrate dedication to their studies.

Monitoring and repayment…

Repayment of the loan will commence two years after the completion of the National Youth Service Corps (NYSC) programme, and the repayment amount will be deducted directly from the beneficiary’s salary at a rate of 10% by the employer, while self-employed beneficiaries will remit 10% of their total monthly profit to the designated Students Loan account prescribed by the Bank.

Furthermore, Section 6 (f) of the Act incorporates a system for continuous monitoring of academic records of the grantees of the loans. It, however, does not provide any approach towards reviewing the courses and curriculum of the students to reflect economic realities to achieve the successful repayment of the loans.

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To ensure the sustainability of the program, Section 8 of the Act establishes clear repayment terms. These terms, including interest rates and grace periods, are crafted to strike a balance between the financial viability of the loan system and the post-graduation economic circumstances of the beneficiaries.

Penalties for default….

While providing support to students, the Act also addresses the importance of repayment responsibility. Penalties for defaulting on loan repayments are stipulated in Section 18 (6), discouraging negligence and reinforcing the understanding that student loans are a shared responsibility between the government and the recipients.

It provides that defaulters are liable to pay a fine of 500,000 naira or imprisonment for a term of two years or both. This creates a ripple effect on potential beneficiaries because Section 15 (e) provides that a student is disqualified from accessing the loan if any of the parents have defaulted in respect of a previous loan granted.

A good law but what next?

The Nigeria Student Loan Act of 2023 emerges as a progressive stride towards educational inclusivity and national development. By promoting and ensuring financial sustainability, and incorporating mechanisms for adaptability, this legislation lays the groundwork for a brighter educational future for Nigerian students. But a good law is nothing if badly implemented – it is now up to Nigerians to test this new legislation to ascertain its real benefits.