Interest-free loans: Access versus long-term indebtedness?

A bill seeking to provide education loans to students in Nigeria’s institutions of higher learning has received a mixed reception as stakeholders differ on the potential benefits it proposes to offer.

The Students’ (Access to Higher Education) Loan Bill was passed by the country’s National Assembly, comprising the Senate (upper legislative chamber) and the House of Representatives (lower legislative chamber) at the end of November.

The proposed legislation is titled: ‘Bill for an Act to provide for easy access to higher education for Nigerians through interest-free loans from the Nigerian Education Bank, established in this Act with a view to providing education for all Nigerians and for other purposes connected thereto’.

The overall objective of the bill is to provide equal education access to Nigerian students, regardless of their gender, religion, tribe, position or disability of any kind.

It will achieve this objective through the provision of interest-free education loans to students in tertiary institutions through the Nigerian Education Bank, which shall be established for this purpose.

The House of Representatives had passed the bill earlier this year and forwarded it to the Senate for concurrence in November. Subsequently, the bill was transmitted to President Muhammadu Buhari for assent.

Presidential spokespersons Garba Shehu and Femi Adesina did not respond to enquiries by University World News as to if or when Buhari will assent to the bill.

The sponsor of the bill and Speaker of the House of Representatives, Femi Gbajabiamila, and some analysts believe the president will sign the bill into law, arguing the proposed legislation will ease the hardship being faced by many students who have had to abandon higher education because of poverty.

Gbajabiamila said a well-educated citizenry is critical to Nigeria’s development and its ability to compete in the global economy and that “higher education should be regarded as a public good benefiting the entire country rather than a commodity solely benefiting the individual recipients”.

Should Buhari sign the bill into law, the Nigerian Education Bank will be established, to which interested students can apply for education loans.

The beneficiaries are expected to begin repayment two years after they finish the mandatory one-year National Youth Service Corps programme, a scheme founded in 1973 for graduates for the integration and unity of the country after the civil war (1967-70).

Bill opposed by lecturer, student unions

Curiously, the education loan bill has been met with stiff opposition by the Academic Staff Union of Universities (ASUU) and the National Association of Nigerian Students (NANS).

ASUU, which has consistently been at loggerheads with the government over the poor welfare for lecturers and poor funding of universities, described the move as an attempt by the government to wash its hands of university education. The union also claimed the scheme has not succeeded in countries where it is being practised.

“We find it troubling that the proponents of the policy are so eager to foist it down the throats of Nigerians when they have done more to push the working people of this country into poverty through sheer incompetence in handling the economic fortunes of our nation,” ASUU President Emmanuel Osodeke said in a statement.

“ASUU will never support the issue of an education bank because the poor would not benefit from it. The best solution is adequate funding for universities,” Osodeke stated.

Similarly, Usman Barambu, the NANS president, kicked against the loan scheme, saying it is a strategy to increase tuition fees in Nigerian higher institutions.

Education Rights Campaign (ERC) deputy national coordinator Ogunjimi Isaac Ayobami and acting national mobilisation officer Adaramoye Michael Lenin, in a co-signed statement, said putting students into indebtedness would do more harm than good.

“A students’ loan bill will not solve the problem. Rather, it would throw students from poor working-class and middle-class families into generational indebtedness that would adversely affect their quality of life after graduation,” the ERC said.

“Additionally, this bill is nothing but a back-door means to increase the fees payable in schools and make it hard for children of the poor masses to have access to higher education.”

Implementation concerns

For some education analysts, an education loan is a good idea, but the implementation of the scheme is a source of concern, given that similar initiatives in other sectors of the economy have not been totally successful.

“The idea or policy may be fine but the implementation may be faulty; people who understand that this is for the promotion of education and to help the poor should be in charge of it,” Professor Tunde Adeniran, a former minister of education, told Punch.

Maxwell Uwaifo, a lawyer and education advocate, wrote in a blog post that he expects the federal government and other relevant stakeholders to work together to put in place mechanisms to ensure the smooth running of the initiative if it becomes a law.

If the bill is signed into law, Nigeria will join countries like the United States, Australia, Canada, Germany, South Korea and the United Kingdom, which provide loans for students to access tertiary education.

But, research also points out that loans are not without pitfalls, in particular as they may contribute to long-term indebtedness.