Ever since the swearing-in of the 16th President of Nigeria, there have been many governmental changes. However, June 12, 2023, was not only a memorable day for Nigeria’s Democracy Day, but it heralds the signing of a major loan bill into the nation’s law.
The President of the Federal Republic of Nigeria, Bola Ahmed Tinubu, signed the student loan bill to provide interest-free loans to students of tertiary institutions, through an education bank that will be established.
What exactly is this student loan act or bill?
A student loan act or bill is a law that is established to help improve the rate and affordability of tertiary education. This law helps to reduce the financial burden that may act as a constraint in acquiring education.
One of the major challenges affecting the acquisition of quality education by the majority is the lack of funds. This has affected not just the potential students but also the workers in the educational sector. This is the reason why President Tinubu believes this bill will give the willing Nigerians to pursue their desired higher education qualifications.
This bill is titled; “An Act to Provide Easy Access to Higher Education For Nigerians Through Interest-Free Loans From Nigeria Education Bank Established in this Act to Provide Education for All Nigerians and for Related Matters.”
This means that there is now easy access to funding for quality education by all that are willing to further their education up until the higher institution level.
Overview of this student loan act
In 2019, the student loan bill was sponsored by Femi Gbajabiamila, the Speaker of Nigeria’s House of Representatives. Seeing the troubles many go through to get educated, Gbajabiamila, proposed to the Education Bank, urging them to make available interest-free loans to students in higher institutions. To this effect, at the 52nd convocation at the University of Lagos, Gbajabiamila presented the topic “Building Back Better: Creating a New Framework for Tertiary Education in Nigeria in the Twenty-First Century.” Ever since then, it has passed through three readings before it was passed by the lawmakers in late May 2023, and has now been finally signed by Tinubu.
It is to be remembered that during his campaign, he promised that getting loans would be easy for every student if he wins the election and many do not see how this will be effective, especially with the ever-increasing inflation, unemployment, and low minimum wage. The daunting question most of us had can be summed up if the government will truly fund this Education Bank. This makes us believe he is not speaking realistically.
However, having gotten to know the information that I will share with you now, some of the doubts in my mind have been cleared. The signed Act recommends that these revenues and profits will be used to set up the Education Bank: A percentage of revenue from Nigeria Customs Service (NCS), Nigeria Immigration Service (NIS), Federal Inland Revenue Service (FIRS), and a percentage of profits obtained from oil and minerals. Other sources include education bonds, governmental tax, levies, duties, and donations. This fund will be held by the Central Bank of Nigeria (CBN) for this purpose.
Benefits of the student loan act
This student loan act will provide eligible students with the following benefits:
- Easy access to tuition loans for indigent Nigerian students to any government-owned university, polytechnics, or college of education.
- The loan rate is interest-free, so the amount borrowed will be the same amount refunded.
- There is equal access to the loan by all tribes, religions, and gender within the country.
Purpose of Student Loan Bill
The loan will be managed and disbursed to qualified students to solely fund their higher education, to ensure that lack of access to finances does not dash the hope of students in getting an education at the tertiary level.
Student Loan Bill Eligibility and Requirements
To be eligible for this loan, prospective students are required to fulfill the written conditions in Section 17 of the Act. Here are the conditions for each applicant:
- Each applicant must have been admitted into accredited institutions in Nigerian Federal or State universities, polytechnics, colleges of education, or vocational schools established.
- Each applicant’s individual or family annual income must not exceed N500,000.
- Each applicant must have at least two guarantors and the guarantors must fall into one of these categories: (i) Civil servants of at least level 12 in the service, (ii) Lawyers with a minimum of 10 years of post-call experience, (iii) Judicial officers, or (iv) Justices of the peace.
How to Apply for Student Loan Bill
These are the steps to be taken to apply for the student loan:
- All applications must be submitted through the applicant’s bank to the Chairman of the Committee established under the Act.
- A cover letter signed by the vice-chancellor, rector, or the head of the institution, along with the student affairs officer of the institution, should accompany the application.
- The required documents for the loan application process include several documents; a copy of the student’s admission letter, a letter from the guarantors addressed to the Chairman of the Committee, recommending the student for the loan and accepting liability in the event of default, is required.
- Furthermore, the application should also include two passport photographs from each guarantor, information on the guarantors’ employment and proof of employment with the named organization, as well as particulars of the guarantors’ business registration or relevant authority if self-employed.
Factors Influencing Student Loan Bill Approval
Under the Students Loan Bill, these factors which serve as ethical standards can disqualify students from accessing the loan:
- When a student has previously defaulted on any loans granted in the past.
- When a student has been found quilts of exam malpractice by any school authority.
- When a student has been found guilty and convicted of felony, dishonesty, or fraud.
- When a student has been convicted of drug offenses.
- When a student’s parent has been found to default on a student loan or any other loan granted to them.
Student Loan Bill Repayment Options
The repayment terms for beneficiaries of the loan are outlined in the Students Loan Bill document which reads:
“Any beneficiary of the loan to which this act refers shall commence repayment two years after completion of the NYSC program.”
“Repayment shall be by direct deduction of 10 percent of the beneficiaries salary at source by the employer.
“Where the beneficiary is self-employed, he shall remit 10 percent of his total profit monthly to the student’s loan account to be prescribed by the bank.
“A self-employed person shall, within 60 days of assuming that status, submit all information such as the name of business, address and location, registration documents, registered, name of bankers, names of partners, name of directors and shareholders to the commission.”
However, in case of default, the document reads “Anyone in default of the provisions of sub-section 4 above or found to be aiding the default of any of the provisions of this 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.”
Pros and Cons of this Loan
Pros:
- It improves access to education for students with limited financial means.
- All indigent students have equal rights access to the loan regardless of their socioeconomic background.
- The bill is interest-free and has flexible repayment options to ease financial distress and the burden of repayment.
- Improved and increased educated workforce which will lead to human capital development for the economy.
Cons:
- The loan covers only tuition, which means students must still source funds for other academic-related materials.
- There is a potential for a high debt burden if students are not able to get a job after graduating.
- The loan program can be exploited without strong oversight.
Loan alternatives if not eligible for this loan:
Not all students will meet the criteria for this loan, therefore, here are other loan alternatives if you fall in this category:
- Part-time work can come in handy in sorting out your academic bills.
- You can create a crowdfunding platform to cater to your academic needs.
- Apply for scholarships and grants, and these can be merit-based, need-based, or for your specific interest or field of study.
- Private financial institutions or banks are another source of funding, although the terms and interest rate may vary.
- Some companies offer sponsorship for educational pursuits.
- Support from nonprofit, community programs, or local businesses financial aid.
- Family support or personal savings.
Tips for Responsible Borrowing
- Read and understand all the terms associated with any loan you want to take. This includes interest rates, repayment schedules, and punishment for defaulters.
- Take into consideration what you can conveniently repay and borrow this only.
- Create a feasible budget and plan for repayment.
- Borrow only after a thorough assessment of your financial needs.
- Compare multiple options and choose only the one that is favorable to you in terms of interest rate and terms.
Frequently asked questions?
Who is qualified to apply for a student loan?
Every indigent Nigerian that meets the specified criteria for the loan application can apply.
Which bank is best for student loans?
Several banks in Nigeria offer student loans but choose the one that best fits your requirements and repayment options.
What is the student loan bill in Nigeria?
Student loan bill in Nigeria is a law that is established to help improve the rate and affordability of tertiary education by providing interest-free loans to all indigent students in Nigeria.
How are student loans paid for?
The student loans are paid for through a 10% deduction from salaries or a 10% deduction from the salary of the self-employed.
How long does it take to pay student loans?
The repayment will commence two years after the student has completed the National Youth Service Corps program.
Conclusion
This is a major milestone for the nation and it will greatly impact and improve the educational sector for all indigent Nigerian students
