Students’ Loan: FG Focusing on Branch Instead of Tree, Says Agora Policy

•Argues scheme prone to abuse

Emmanuel Addeh in Abuja

Agora Policy, a Nigerian think tank and non-profit organisation, has characterised President Bola Tinubu’s student loan scheme as a ‘right policy for the wrong reason’, stressing that although laudable, the federal government was focusing on the branches, rather than the entire tree.

The organisation in a report on the scheme, argued that focusing on the programme without taking the entire issue of higher education funding into full focus, will not markedly make any difference.

“The student loan scheme is, arguably, the flagship education policy of President Bola Tinubu in his first year in office. However, by focusing only on the loans without bringing the entire issue of higher education funding into full focus, government has only paid attention to the branch, rather than the tree itself,” it stated.

The president had on June 12, 2023, within days of assuming office,  signed into law the bill which provides for interest-free loans to students in higher education institutions in the country.

Agora pointed out that while the action was generally well received, it was also dogged by a few criticisms.

However, unlike the previous law which explicitly described the loan as interest-free, the new law, it said, implies that interests will be charged on the loans, but without stating the percentage .

It argued that from what the president and the lawmakers have said, the impression is that the student loan scheme is a social intervention programme designed for the sole reason of granting access to higher education to students from poor homes.

Viewed in historical and global context, it stressed that this would be a strange reason, explaining that the world over, conversations about student loans have always taken place in the context of ‘cost-sharing’.

It listed six factors that could aid the success of student loan schemes to include: Sound institutional structure for management of the loans; sound financial management that protects against depreciation of the capital base and sound legal framework to ensure that loan recovery is legally enforceable.

Agora listed others as: Effective mechanism for selecting recipients based on financial need or manpower priorities; effective machinery for loan recovery and; publicity campaign to promote understanding of its principles and the obligations to repay .

It stated that the 2024 Act had minimised the risk of political interference contained in the earlier Act that left the control with the Central Bank of Nigeria (CBN), explaining that this should strengthen the management and administration of the fund.

It added that the financial management model is also likely to protect against currency volatility, noting however, that there is nothing in the new law that guarantees better recovery than in the earlier attempts.

Agora stated that even if the legal framework for recovery is strong enough, actual enforcement could still be problematic, pointing out that  the financial, social and political cost of collection may overwhelm whatever benefits the government set out to derive from the scheme.

It added: “In addition, unlike the 2023 Act, the 2024 law does not discriminate based on social-economic background. This may turn out to be a major drawback. A system that is free for all creates a situation whereby those who can afford to pay are still the ones that benefit from the loan, especially when they think there is a chance to get away with repayments.

“ The earlier Act that allowed only those whose family income does not exceed N500,000 per annum to apply excluded nearly everyone. But making the loan available to everyone, whether they are in need or not, is regressive and potentially disadvantages those who really need the loans, especially when too many people are applying to the same limited pot of fund.”

It recommended that as a cost-offsetting instrument, the scheme should  be tied to the need to increase funding to higher institutions rather than for merely expanding access.

Agora argued that expanding access into it without expanding funding for the higher institutions undercuts their capacity to deliver quality education. 

It said that loan or tuition does not substitute for government allocation, noting that funding system should be based on per-student costing which should also reflect changes in operating cost on annual basis.

Using per-student costing approach, it said, will ensure that higher institutions have adequate funding to deliver quality education and greater value to the students and the country. 

“Tuition or other fees need to be formalised and standardised to minimise discretionary charges which leave the students at the mercy of the institutions and to increase the pool of funding available to the institutions.

“The Student Loans Act, 2024 is still replete with several weaknesses that opens the scheme to abuse both at the levels of loan award and recovery. These weaknesses should be addressed at the policy implementation level.

“Making the loan available to everyone potentially disadvantages those who actually need it. Some kind of means-testing instruments need to be developed to ensure that loans are targeted at those who need it most and recovery is also tailored to their realities.

“Loans should be combined with merit and need-based grants to make it more effective and equitable.  A deliberate policy of positive discrimination needs to be adopted to reflect the needs of gender, disability and the priorities of the country,” it explained.

The think tank stressed that the scheme needs to be driven by a robust communication strategy to ensure that those who are culturally averse to loans are not excluded and to drive messages that could aid recovery.