Introduction
The Students Loan (Access to Higher Education) Act (the ‘Act’), 2023 seeks to provide a comprehensive framework to facilitate access to higher education by offering financial support to Nigerian students through loans. The Act aims to balance affordability, borrower’s protections, and repayment options to alleviate the financial burden on students while promoting responsible borrowing and successful loan repayment[1]. This article will now shed light on some salient provisions of the Act as well as make further analyses.
Salient Provisions of the Act
- The Nigerian Loan Fund
The Act establishes the Nigerian Loan Fund (the ‘Fund’) which will be managed by the Central Bank of Nigeria’s (CBN) Governor[2]. The functions of the Fund include receiving and screening loan applications, approving and disbursing loans to successful applicants, monitoring the academic records of loan grantees, and ensuring adequate security on loans granted; among others.[3]
The financing of the Fund would be from:
- Education bonds
- Education endowment fund schemes
- 1% of taxes, levies and duties from the Nigerian Immigration Service and the Nigerian Customs Service
- 1% of profits accruing from oil and minerals
- Donations, gifts and grants[4]
2. Special Committee
A Special Committee will be setup and headed by the Governor of the CBN to create guidelines and regulations for the management and disbursement of the loans[5]. This committee will consist of relevant stakeholders in the education sector.[6]
3. Eligibility for Students’ Loan
The criteria for eligibility of the students’ loan include the following:
- The student must have secured admission into any Nigerian University, Polytechnic, College of Education or Vocational School;
- The Applicant’s family income must not be less than N500,000 (Five Hundred Thousand Naira) per annum;
- The Applicant must provide at least 2 guarantors who are either civil servants at level 12, 10 year post call lawyers, judicial officers or a justice of peace[7]
4. Disqualification from the Students’ Loan
In certain instances, a student may be disqualified from accessing student loan. Some of these instances include:
- Student’s or their parent’s default in a previously granted loan
- Conviction of a felony or any offence of fraud
- Conviction of a drug offence[8]
5. Application for the Students’ Loan
From the provisions of the Act, applicants may apply for student loan in the following manner:
- Apply to the CBN Governor, through the financial institutions the applicant banks with
- Attach a cover letter signed by the Vice Chancellor of the desired institution and the appropriate Students Affairs Officer.
- Attach admission letter
- Attach letter by the applicant’s guarantors addressed to the CBN Governor, along with 2 passport photographs of the guarantors, the guarantors employers name and employment letter.[9]
- Await communication on the status of the application after 14 days of the receipt of application[10] and disbursements shall be done 30 days after receipt of the application[11].
6. Loan Repayment and Instances of Defaulting
The repayment of the loan shall start 2 years after the completion of the applicant’s NYSC. The loan shall be repaid by 10% deduction from the applicant’s salary. Default of payment makes the applicant liable to a fine of N500,000 (Five Hundred Thousand Naira) or 2 years imprisonment[12].
Relevant Facts and Legal Analyses
The Federal Government of Nigeria has now adopted an approach which would enable young people take better advantage of tertiary educational opportunities in Nigeria. This conversation must be viewed against the backdrop of the possible total or partial removal of the long-standing subsidy regime in the education sector. A number of tertiary institutions having already increased tuition fees, students will now brace up and face the reality of a high cost of tertiary education. This situation would encourage private sector-led funding/investment in education, which has the potential to improve the quality of education in the country. Under this new regime, collaborations and technical partnerships are expected between educational institutions, the private sector, and the government, to develop specific aspects of tertiary education in Nigeria.
It is also expected that the use of credit scoring will now have a wider application in the Nigerian financial sector, in the course of screening and approving loan applications. Among other legal provisions, this will flow from Section 15 (a) of the Act which provides for one of the factors for disqualification in the student loan application process, as default in previously granted loan.
Furthermore, the legal requirement of guarantors as security for the loan may be seen as inadequate. However, it is understandable that the least stringent of conditions must be applied for this purpose, in the spirit of making the opportunity available to those who truly need it. It therefore, obviously, goes to say that would-be guarantors should carry out their due diligence on persons they offer to stand in for, as all liability from the defaulted loans will fall on the guarantors, in the absence of the applicant/student.
It is important to note that the Act has not made clear provisions for dispute resolution, except for provisions touching on pre-action notice before a suit is instituted against a member of the Special Committee. This therefore means that the parties will agree on suitable dispute resolution procedures, in a contractual context at the point of application for the loan by students/applicants.
Application of the concept in other climes
The Act coming into effect is a good step towards making education accessible to more people in Nigeria. However, it is pertinent that we learn from the application of the Student Loan concept in other climes, particularly in instances where it became rather disadvantageous. A good example is the United States of America where students have accumulated so much debt that President Joe Biden now takes steps to forgive the loans which are becoming more and more seemingly impossible to repay by the students in the US[13].
Students have had accumulated debts several years into their careers, and are still unable to repay the loans, leaving them no other choice but to make appeals to the government for loan forgiveness. According to US News & World Report, over 43 million students had their loans ‘paused’ by the government of the United States due to the effects of COVID-19, and will now resume paying back at 0% interest, in September 2023.[14] This was after the plan of the US Federal Government, to forgive student loan up to $20,000 for over 43 million students, was struck down by the US Supreme Court,[15] declaring same illegal.
Conclusion
The Students Loan Act represents a significant step forward in addressing the challenges faced by students seeking higher education. By implementing this legislation, the government aims to improve access to education, reduce the financial burden on students and graduates, and enhance the overall affordability and sustainability of student loans. While the full impact of the Students Loan Act will require time to assess, it is hoped that its implementation becomes a true testament to the government’s promised renewed commitment to supporting education and providing opportunities for all students to thrive in their academic pursuits and future careers.
[1] Sections 1 & 2 of the Students Loans (Access to Higher Education) Act, 2023
[2] Section 5 (1) of the Students Loans (Access to Higher Education) Act, 2023
[3] Section 6 of the Students Loans (Access to Higher Education) Act, 2023
[4] Section 13 of the Students Loans (Access to Higher Education) Act, 2023
[5] Section 5 (2-5) of the Students Loans (Access to Higher Education) Act, 2023
[6] Section 7 of the Students Loans (Access to Higher Education) Act, 2023
[7] Section 14 of the Students Loans (Access to Higher Education) Act, 2023
[8] Section 15 of the Students Loans (Access to Higher Education) Act, 2023
[9] Section 16 of the Students Loans (Access to Higher Education) Act, 2023
[10] Section 16 (3) of the Students Loans (Access to Higher Education) Act, 2023
[11] Section 17 of the Students Loans (Access to Higher Education) Act, 2023
[12] Section 18 of the Students Loans (Access to Higher Education) Act, 2023
[13] ‘Biden’s New Student Debt Relief Plan Will Likely Face Legal Challenges’ by Akayla Gardner, and Madlin Mekelburg accessed at https://www.bloomberg.com/news/articles/2023-07-05/biden-s-new-student-debt-plan-likely-to-face-legal-challenges on the 24th of July, 2023 at about 5:40pm
[14]‘ Biden’s Student Loan Forgiveness Plan: Your Questions Answered’ accessed at https://www.usnews.com/education/best-colleges/articles/federal-student-loan-forgiveness-your-questions-answered on 24th of July 2023 at about 5:40pm
[15] Ibid
