Reform the student loan system to relieve crushing debt

More and more students are enrolling in higher education and graduating in Ghana. Both enrolment growth and the rise in graduation rates are linked to the phenomenal increases in the number of higher education institutions in the country over the past two decades.

For example, it has become standard practice in Ghana for every political administration to add to the existing stock of public universities. Private entrepreneurs also continue to obtain accreditation to set up higher education institutions of their choice. A combination of these factors has contributed to the mushrooming of higher education institutions in Ghana.

While higher education clearly equips graduates with the skills, knowledge and attitude to get well-paying jobs and make positive contributions to civic life and the national economy, it often leaves students with crushing debts. This may deter potential students who could make a greater contribution to community and national life on graduating.

Moreover, borrowers often face unethical and sometimes illegal loan servicing and debt collection practices. Predatory loan repayment practices take advantage of students desperate to repay their loans and become debt-free.

Graduate unemployment

Enrolment in higher education in Ghana has increased exponentially over the past 40 years. For instance, higher education enrolment has increased from 41,899 in 2005 to 157,626 in 2015, according to a UNESCO report.

Similarly, a National Accreditation Board of Ghana report on tertiary education states that graduate output in 2014-15 was 65,333 and for 2015-16 the figure is 90,526. These numbers put considerable pressure on Ghana’s small jobs market in which the government is the dominant player.

Consequently, with the demand for jobs outstripping supply, many higher education graduates are unemployed. At present, the number of unemployed graduates is estimated to be 700,000 and it takes an average of 10 years for a higher education graduate to find graduate-level employment.

This is seemingly a paradox in a society that hitherto believed that graduates are never unemployed and that higher education is a passport out of poverty and a pathway for social mobility.

More student loan defaulters

Researchers agree that the exponential growth in higher education enrolment can be attributed to generous student loans. Under the Students Loan Trust Fund (SLTF), the government provides loans to higher education students to pay for tuition, boarding, lodging, books, equipment and other related expenses.

Borrowers are required to repay the loans upon completion of their studies. The legal framework that regulates the student loan scheme is called the Students Loan Trust Fund Act 820.

Section 26 (subsection three) states that “if the borrower or guarantor fails to repay or make satisfactory arrangements to repay the loan after demand notices, the name and picture of the borrower or guarantor shall be published in a state-owned daily newspaper, along with the amount owed”.

According to subsection four, the amount owed plus 5% must be paid within one month of publication. Failure to do so will result in an application to a circuit court judge for this to be registered against both the borrower and guarantor. This judgement allows the state to deduct the loan from the pension payments of either the borrower or guarantor.

Despite the threat of naming and shaming and legal action, the number of defaulters when it comes to student loans continues to grow. For one thing, publication of defaulters’ names and pictures has been ineffective in compelling defaulters to repay their loans. This is because newspapers in Ghana have a limited readership, even among the educated population.

Second, Ghanaians generally do not perceive non-payment of student loans as a criminal offence. This further explains why the SLTF has not yet taken legal action against defaulters or guarantors.

Third, defaulters may be underemployed or unemployed and may be financially supported by their parents or relatives. In that case, they are unable to make repayments for their loans.

Fourth, the exponential rise in higher education enrolment can be seen as an indicator of social progress. Given the availability of student loans as the primary driver of the huge increases in higher education enrolment, any legal action against defaulters might be a disincentive for prospective students to enrol in higher education.

Finally, defaulters are likely to console themselves with the fact that government officials, including ministers, are involved in various corrupt practices that have siphoned tens of millions of cedis from the state’s coffers and that their loans are just a drop in the ocean.


Since naming and shaming isn’t effective, I make the following suggestions on how to ensure the sustainability of the SLTF:

  • • Loans should be given exclusively to students enrolled in higher education programmes with strong links to the Ghanaian labour market. This suggests that students must enrol in programmes with the greatest prospects of obtaining employment by a maximum of two years after graduation.

  • • Incentives should be built into the student loan scheme. Students who are paying their loans on a regular basis should have about 20% of their loans written off.

  • • The government should create community-based jobs for higher education graduates to enable them to repay their loans.

  • • At present the government provides much of the funding for the student loan scheme. The SLTF should engage in rigorous biannual fundraising events inside and outside Ghana.

  • • The government and higher education institutions should work together to institute alternative sources of financing education such as grants, scholarships, bursaries and work-study opportunities.

Higher education is an investment with high economic and social benefits in the form of higher earnings, status and the potential for upward social mobility. However, when low-income students carry disproportionately large financial debt burdens, something that is exacerbated by their inability to find jobs, it creates a disincentive for people who genuinely require loans to access higher education.

Fund managers should work towards changing the attitudes of some Ghanaians who see government loans as a source of free money.

Samuel Kwaku Ofosu is an academic affairs manager at Ghana College of Physicians and Surgeons. E-mail address: