MALAWI: Student discontent over strict new loan terms

Malawian students are up in arms with the government after it introduced a punitive loan scheme on the back of the treasury losing millions of dollars due to defaulting alumni who had previously been extended a helping hand.

The newly set up Public Universities Student Loan Scheme among other things requires students to pay 17% annual interest on tuition and book allowance loans.

Students will also be required to start servicing loans immediately after finishing university regardless of whether or not they secure employment.

Student unions argue that not only are many of the new scheme's terms vague but overall it inhibits access to higher education - a sensitive issue in Malawi.

The student dissatisfaction comes a few months after government set aside a 220% university fee hike, following protests from the general population, political parties and student organisations on the grounds that it would affect access to higher education.

The fee issue added to longstanding discontent related to a controversial quota system that pegs university entry on one's area of origin instead of merit.

Due to the fact that the majority of parents in this African country are poor, support from government is a lifeline for many to go to university. Students have since demanded a meeting with the government in an attempt to get some of the new scheme's clauses amended.

The Malawian government decided in 2010 to start channeling funds this year through the Malawi Savings Bank with the punitive terms, after being overwhelmed by defaulters on its previous scheme - the Public Universities Students Loan Trust, or PUSLT - which ran for nearly two decades.

"The loan shall attract interest amounting to 10% plus a margin [of] 7% while the student is studying and the interest will be adjusted to Malawi Savings Bank's lending rate plus 5% after the student graduates," reads part of the loan application form. "Repayment period for the loan is during the period of study plus four years after graduation or being withdrawn from university."

The government, led by Bingu wa Mutharika, recently announced plans to construct five new institutions of higher education within a decade, starting with a science university. But noble efforts by the authorities to increase access are being hampered by lack of funds and failure by parents, who are mostly poor, to raise funds.

Last November, 100 nursing students found themselves unable to attend lectures after the state withdrew funding and their parents and guardians failed to pay.

The issue of student loans in developing countries is often a thorny one: how the loans should be administered, eligibility and terms of repayment, appropriate rates of interest, and how to ensure that alumni repay.

There are also questions as to whether schemes should be run by central government, universities, banks or independent bodies. Further, as a result of brain drain, the other thorny issue in developing countries offering students loans is failure by most governments to craft mechanisms for collecting loan repayments from graduates working abroad.