The Bill for the Students Loan Act, introduced by the Speaker of the House of Representatives in 2016, was signed into law on June 15, 2023, by President Bola Ahmed Tinubu. The Act abolishes the (defunct) Nigeria Education Bank Act, 1993. Simply, the Act focuses on matters pertaining to the application and grant of interest-free loans to indigent Nigerians seeking higher education. It gives equal right of access to students who are interested in seeking for higher education in any public institution of learning without any discrimination. One important point to note is that the loan will only be granted for the payment of tuition fees only, to the exclusion of feeding, accommodation and other expenses.
ELIGIBILITY OF APPLICANTS AND REQUIREMENTS FOR THE LOAN
By Section 14 of the Act, to qualify for the loan, admission must have been secured by Applicant from any Nigerian university, polytechnic, college of education, or vocational school establishment by either Federal or State Government. This implies that a student seeking admission into a private higher institution is ineligible to apply. The income of the Applicant or his or her family must be less than N500, 000. 00 (five hundred thousand naira) per annum. In addition, the Applicant must provide not less than two guarantors, and each must be either a civil servant of at least level 12 in the service, a lawyer with at least 10 years post-call experience, a judicial officer, or a justice of peace. An Applicant that does not meet the above requirement is patently ineligible for the loan.
By Section 15 of the Act, an Applicant will be disqualified from accessing the students loan if he or she defaults on a previous loan obtain from any organization (including online loan apps), found guilty of examination malpractice, convicted of a felony or any offence involving dishonesty, fraud or drugs, or if parents default in respect of the student’s loan or any other loan so granted.
METHOD OF APPLICATION AND DISBURSEMENT OF FUND
To apply for the loan, application signed by either the Vice-Chancellor, Rector or Head of the Institution and Student affairs officer of the institution must be submitted through the Applicant’s bank to the Chairman of the Committee. This Application shall be accompanied by a copy of the student’s admission letter, a letter from guarantors addressed to the Chairman, passport photographs of guarantors, and particulars of guarantors’ employment or business registration, in case of a lawyer. One interesting part of this process is that the guarantor in their letter shall undertake to accept liability for the loan in the event of default by the Applicant.
After all said and done, the Committee will then communicate the status of the application within 14 days of its receipt. Curiously, the Committee has the discretion to refuse the Application if funds are not available. This is simply because by Section 16(4) of the Act, disbursement is dependent on the availability of funds. However, where funds are available, disbursement shall be made within 30 days of Application – reaching the Chairman of the Committee.
REPAYMENT OF THE LOAN AND PENALTY FOR DEFAULT
Repayment of the loan must commence two years after completion of the National Youth Service Corps (NYSC) programme, and the repayment shall be made by direct deduction of 10% of the beneficiary’s salary at source by the employer and credited to the Students Loan Fund. Where the beneficiary changes his or her job, it must be communicated to the Chairman of the Committee within 30 days of such employment.
Self-employed beneficiaries must remit 10% of their total profit monthly to the Fund and must, within 60 days, of commencement of business submit all information such as business name, address and location, registration documents, names of bankers, partners, directors and shareholders to the Committee upon assuming this status of being “self-employed”.
In our respectful view, the Act does not make provision for penalty of defaulters. However, where a self-employed beneficiary fails to submit all information required within 60 days to the Committee, he or she shall be liable on conviction to a fine of N500,000.00 (five hundred thousand naira only) or imprisonment for two years, or both, as stated in Section 18(6) of the Act.
ESTABLISHMENT OF THE NIGERIAN EDUCATION LOAN FUND
The Nigerian Education Loan Fund (“the Fund”) is established by the Act, which will be managed and administered by the Central Bank of Nigeria through money deposit banks. The Governor of the Central Bank of Nigeria shall set up a Special Committee under the Act to perform the functions of the Fund. The Governor of the Central Bank of Nigeria shall be the Chairman of the Committee and he shall appoint a Secretary of the Committee.
The Committee has a duty to issue binding regulations and guidelines for the management, administration, disbursement and recoupment of students’ loans.
SOURCE OF FUND
By Section 12 of the Act, the source of the Fund includes education bonds, education endowment fund schemes, 1% of all taxes from the Federal Inland Revenue Service (FIRS), Nigerian Immigration Service and Nigerian Customs Service, 1% of all Government profits from oil and other minerals, donations, gifts, grant, endowment, and other revenue from any other source.
THE SPECIAL COMMITTEE
This is the body responsible for the performance of duties or function of the Act. The Special Committee of the Fund is composed of the Governor of the Central Bank of Nigeria as the Chairman, the Secretary of the Fund appointed by the CBN Governor, the Education Minister, the Chairman of the National Universities Commission, a representative of the Vice-Chancellors forum of all Nigeria Universities, a representative of the Rectors forum from all Nigerian Polytechnics and Provosts, the Minister responsible for finance or his representative, the Auditor-General for the Federation, representative of the Nigerian Labour Congress, the Nigerian Bar Association, and the Academic Staff Union of Universities.
The Chairman and members will serve or hold office for the duration of their substantive positions and are immediately replaced by successors and will cease to hold office if they die, become bankrupt, convicted of a felony, become of unsound mind, guilty of serious misconduct, or resign. However, the President is empowered to alter or overrule the decisions of the Committee and give directives as it deems fit in furtherance of public interest, as stated in Section 10 of the Act.
CONCLUSION
The enactment of the Act is clearly an initiative to make higher education more accessible to underprivileged Nigerians. However, the strict requirements set out by the Act for the application of the loan raises some concerns. First, the requirement for two guarantors who will make undertaking to repay the loan in case of default is challenging and it may clearly discourage many interested guarantors.
Also, the conditions stated for the loan repayment is likely to pose a great challenge with the current economic situation. Hundreds of graduates are unemployed, majority of those employed are even paid below minimum wage. Aside the fact that self-employed graduates are suffocating from lack of capital, the government needs to work on fixing the economy in order to ensure that the payment of the loan is seamless after completion of the National Youths Service.
Further, it begs the question: When is the time stipulated for graduates of National Diploma (ND) at Polytechnics or College of Education (NCE) that are beneficiaries of the loan who will not, by virtue of their program, participate in NYSC? The Act has not covered the field in this area to ascertain when they ought to commence the repayment of their loans. It is advised that the Committee through its Guideline should introduce a framework for the mode of repayment for beneficiaries who are not caught by the 2-years post-NYSC rule.
Moreover, while it is the intention of the Act to ensure repayment of the loan, there is no express penalty for loan defaulters. This may be counter-productive for the government, as education loan ought to be repaid to ensure sustainability and growth. Indeed, we are of the view that beneficiaries may be more prompted to repay the loan if there are consequences or sanctions for non-repayment. It is advised that the Committee through its Guideline should make provision for a framework that penalizes non-repayment, in a way or the other.
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