A Review of Student Loan in Nigeria

President Bola Tinubu on June 12, 2023, signed the Nigerian student loan bill into law. The bill was sponsored by the immediate past speaker of the House of Representatives, Hon. Femi Gbajabiamila. The Act, as its title implies, seeks to provide easy access to higher education for Nigerians through the grant of interest-free loans from the Nigerian Educational Bank in a bid to provide education for all Nigerians. There are arguments across social media platforms about whether the Act is a positive development worth celebrating or another attempt by government officials to siphon taxpayers’ funds. This article covers all the necessary information you need to know before you consider applying for the loan.

What is a student loan?

Student loan as the name implies is a government-backed loan that is usually available to students in the university with the goal of helping them to pay their expenses. The loan is usually designed to cover the cost of tuition and other related fees such as books, stationery supplies, and living expenses. The major positive aspect of student loan as proposed by the FG is that it attracts little or no interest on repayment and payment is usually deferred until the student graduates and has a stable source of income, which could be a job or business.

Who administers the student loan in Nigeria?

The Students Loan (Access to Higher Education) Bill, 2019 established the National Education Bank, which shall be a corporate body with a head office located in the Federal Capital Territory. The Bank may also establish branches in any state of the federation in other to ensure easy access to the funds. The Act also a creates Governing Board for the Bank, which is responsible for the discharge of the functions of the Bank. The Board has a diverse representation across academia, finance professionals, the Nigerian Labour Congress, legal practitioners, and ASUU. The goal is to ensure that the necessary stakeholders are present while making decisions that affect the beneficiaries of the fund.

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The student loan fund

In case you are wondering where the government will get funds to grant the loan, do not fret. The Act established the Student’s Loan Fund to which the funds of the bank shall be paid. The fund is to be derived from the following sources.

• All interest arising for deposits in the bank
• Education bonds
• Education endowment fund schemes
• 1% of all taxes, levies, and duties accruing to the Federal Government from the Federal Inland Revenue Service, Nigeria Immigration Services and Nigeria Customs Services
• 1% of all profits accruing to the Federal Government from oil and other minerals
• All sums accruing to the fund by way of donations, gifts, grants, endowment, or otherwise
• Interest and revenue accruing from savings and investments made by the bank
• Other revenue accruing to the bank from any other source.

Who can apply for the student loan?

You are already wondering if you are eligible to apply for the funds. Here are the requirements you are expected to meet under the Act for you to be considered for the loan facility.

• The applicant must have secured admission into any Nigerian institution of higher learning which includes university, polytechnic, college of education, or vocational school that is established by the Federal Government or a State Government. This implies that you are not eligible for the loan if you are in a private university.
• The income of the applicant or his family must not be less than N500,000.00 per annum. Since the minimum wage at the time of writing this post is N30,000 per month, it implies that the children of the average low-income earner who ought to be the major beneficiaries of the loan are not eligible. Do you meet this requirement? Congratulations.
• All applicants are expected to provide two guarantors each of which must be a civil servant not less than level 12 years (sic) in the service; a lawyer with at least 10 years post-call experience; a Judicial officer; or a Justice of Peace. It is doubtful if the average person targeted by the Act can get all the required guarantors, except the Act hopes to provide more jobs for professional sureties.

Grounds of disqualification from the loan

The Act did not leave us in doubt on the category of people who are not qualified to access the loan, even if they can meet the requirements above. Let’s hope you are not disqualified.

• Any applicant who is proven to have defaulted in respect of a previous loan by any organization. Have you paid all the loans you borrowed from online loan sharks? If not, you are not qualified to access the student loan.
• Any applicant who has been found guilty of examination malpractice by any school authority.
• A student who is convicted of a felony or any offense involving dishonesty or fraud.
• A student convicted of drug offenses.
• If any of the parents of the student has defaulted in respect of student loans or any loan granted to him/her. If your mum or dad is indebted to any financial institution, you won’t be able to access the student loan. How will they know? Well, the record will be spooled from the Credit Bureau.

How to apply for the student loan in Nigeria

Congratulations, you’ve scaled through all the registration hassles and now it is time to submit your application. The application process for student loan in Nigeria has been carefully detailed below to guide you to benefit from the fund.

The application is to be submitted through the Student Affairs Office of the institution. The list of all applicants is to be collated and accompanied by a cover letter signed by the Vice Chancellor, Rector, or any other person who heads the institution and the Student Affairs Officer. This shows that your name will only be on the list if you are not in the bad books of the institution, for any reason whatsoever.

The application of each student must be accompanied by the following documents.

• Copy of the student’s admission letter;
• Letter by the guarantors to the Chairman of the bank’s Governing Board to recommend the student for a loan and also accept liability in the event of default;
• The guarantor’s passport (two copies), name of the guarantor’s employer, and evidence of being employed by the employer, which is usually the offer letter showing the contract of employment, or any promotion letter.
• Where the guarantor is self-employed, the particulars of his business as registered with the Corporate Affairs Commission or any other appropriate and the particulars of his bankers are to be provided.

The loan repayment policy

Although the loan is interest-free, there is still a need for it to be repaid. Your repayment of the loan will make it accessible to the next generation and also ensure that you fulfill your part of the bargain. The loan repayment is to commence two years after a beneficiary concludes the National Youth Service Corps Scheme. The employer of the beneficiary will be notified to deduct 10% of the beneficiary’s salary from source and it will be paid to the bank directly.

A beneficiary who is self-employed at the point the loan is due for repayment is expected to remit 10% of the profit made in the business to the bank every month. With the poor record keeping of most SMEs in the country, the practicability of this provision is in doubt. Please note that anyone defaults or is found to be aiding the default of any of the provisions of the Act is guilty of an offense and if convicted shall be liable to imprisonment for two years or a fine of N500,000 or both. In simple words, failure to pay the loan as and when due is a criminal offence, and not a regular civil liability, thereby attracting imprisonment as a punishment.

It should be noted that compared to student loans in other countries such as the United States, the United Kingdom, student loans in Nigeria will not attract any form of interest. However, in the United States, the qualification of students for the loan is not based on the income of the student or their parents as obtained in Nigeria. This ensures that most of the students in the US have access to the loan while the reverse would be the case in Nigeria since a staggering 82.9 million people are living below the poverty threshold.

Other banks giving student loans in Nigeria

Prior to the enactment of the Act, it should be noted that some of the major financial institutions in the country are already issuing loans to students in higher institutions. The terms and conditions of the loan are strictly subject to the bank’s management decision, based on the industry best practice. Some of the loan facilities that could be considered include the UBA student loan facility, Access Bank student loan facility, GTBank Student loan facility and First Bank Student loan also known as the FirstEdu Loan.

Conclusion

The article has highlighted everything you need to know before deciding whether to apply for a student loan or not. Although the Nigerian Education Bank is yet to be established at the point of writing this article and the fund is yet to be established, it is important that you consider the pros and cons highlighted above before deciding whether to take the loan or not. You can explore some of the loan facilities for student available in the commercial banks while the country await the implementation of the Student Loan (Access to Higher Education) Act.