The New Student Loan Bill: 5 Benefits And Disadvantages

THEStudent Loan (Access to Higher Education) Act (Repeal and Re-Enactment) Bill, 2024, which Nigeria recently passed, looks to be a major step in the right direction toward expanding access to higher education.

This bill aims to establish the Nigerian Education Loan Fund (NELFUND) as the primary source for financing tertiary education, vocational training, and skill development. It replaces the current legislation with a more comprehensive framework.

There are, nevertheless, both promising opportunities and possible difficulties ahead, just like with any legislative change.

We examine the main benefits and drawbacks of this revolutionary legislative effort below, providing insights into the implications for Nigerian students and the education system at large.

Advantages:

1. Improved Organizational Structure:

Potentially improving operations, the new bill resolves issues with the Nigerian Education Loan Fund's (NELFUND) administrative structure.

2. Expanded Eligibility: The new measure extends eligibility to all students at accredited tertiary and vocational institutions, potentially improving access to higher education. This is in contrast to the old law, which imposed severe income and guarantor criteria.

3. All-inclusive Loan Protection:

Students' financial difficulties are reduced as they can now apply for loans to cover maintenance allowances and other institutional costs in addition to tuition.

4: Elimination of Parental Loan History Disqualification: The new measure does away with the clause that disqualifies students based on the loan history of their parents. This ensures that worthy students are not punished because of their family's financial situation.

5. Deferred Loan collection: This provision helps borrowers who are temporarily experiencing financial difficulties by postponing loan collection actions until after the National Youth Service Program is completed and granting extensions for unemployed individuals.

6. Revised Criminalization Clause: The law offers tolerance to borrowers who are suffering legitimate obstacles like unemployment, incapacity, or death, while restricting criminal sanctions to those who make false representations.

7. Loan Forgiveness: The bill shows sympathy for borrowers who are experiencing insurmountable obstacles by allowing for loan forgiveness in cases of death or uncontrollable circumstances.

Disadvantages

1. Potential Risk of Abuse: By loosening eligibility requirements and broadening the scope of loans, there is a chance that there will be more instances of loan default and abuse, which might put a strain on the fund and compromise its long-term viability.

2. Decreased responsibility: Converting from an administration headed by a committee to a corporate organization might result in less supervision and responsibility, which would raise questions about how best to use money and resources.

3. Difficulties with Postponed Loan Recovery: Postponing loan recovery initiatives and granting extensions could lengthen the payback period and create problems for the fund's financial stability, which would limit its capacity to assist upcoming students.

4. Fraud Risk: Being forgiving to borrowers who are having financial difficulties could open the door to making false claims or declarations, which could compromise the credibility of the loan system and the fund's capacity to remain viable.

5. Effect on Fiscal Responsibilities: Forgiveness in some situations is a humanitarian gesture, but it can also encourage careless borrowing practices and put more pressure on the fund's finances, making it harder for it to serve students in the future.

6. Possible Legal Complexity: The change in criminalization clauses and the addition of forgiveness provisions may present difficulties and legal complexities when enforcing loan repayment, which could result in disagreements and postpone the recovery of cash.

7. Issues with Long-Term Financial Sustainability: Even while the measure seeks to promote access to education, questions remain regarding the fund's long-term financial viability, particularly in light of the possible rise in loan disbursements and the difficulties in managing the fund and loan recovery.