Here’s why Nigerians are running away from student loans!

Are the rumors true? Can these student loans send you to prison?

You must have heard (or probably even said yourself) that you have no business taking out this student loan if you don’t want to land in prison. It’s important to clarify this widespread interpretation that’s taken on a life of its own. The reality is that the Act does not explicitly address the fate of those who default on repayment; although I can’t imagine it’ll be pleasant.

The reference to a prison sentence is related to subsection (5) and (6) under the Repayment section of the Act:

Subsection (5): “…a self-employed person shall within 60 days of assuming that status submit all information such as name of business, address and location, registration documents, if registered, name of bankers, names of partners, name of directors and shareholders to the Committee.”

Subsection (6): “Any one in default of the provisions of subsection (5), or found to be aiding the default of subsection (5), commits an offence and is liable on conviction to a fine of N500,000 or imprisonment for a term of two years or both.”

So yes, the Act does mention a prison sentence, but this is for borrowers who are self-employed and fail to provide the required information about their business, as well as those who aid them in the avoidance of this responsibility (the things we do for friends eh?) So as long as you submit the necessary document within the permitted 60 day period, you’re ‘safe’ – until you find out what happens when you don’t repay the loan that is. 

So what’s to fear about these student loans?

It’s no secret that as Nigerians, we can be a very dramatic people. However, there are a number of undeniably valid concerns and even more unanswered questions about this Act. 

Let’s go ahead and look this particular gift horse in the mouth: 

Maximum income level to qualify 

One of the conditions stipulated in the act is that an applicant’s household income should be less than N500,000/year or N47,000/ month. It only makes sense for us to use the minimum wage to assess this condition. With the legal minimum wage currently at N30,000, assuming a two-parent household which should bring us to about N60,000/ month, even the lowest-earners in the eyes of the law do not qualify for these student loans. Huh? 

Of course, we’re not going to pretend that many households don’t earn less than this, after all, over 133 million Nigerians are living in poverty. However, are we to assume the government is being ‘inclusive’ with this subtle acknowledgement or is there something else at play here?

It looks great that the student loans will target the lowest of low income earners.

But …

Burden of documentation

Naturally, those who claim they meet the income requirement have to prove it. Right? Here’s where it gets a little funny. Proof of income requires bank statements and maybe even tax clearance certificates. 

The problem is less than half of the Nigerian populace have bank accounts and majority of the working population in Nigeria work in the informal sector . Where will people without bank accounts get bank statements from? Where will people who work outside registered organisations get tax clearance certificates from? 

These are the issues.

Unicorn guarantors

I’m a Nigerian living in Nigeria. Needless to say, I have trust issues. I’m sure you do too. The average Nigerian has a problem with standing guarantee for people they grew up with and have probably even known their whole lives. How much more a total stranger? 

A student loan applicant under this Act is required to provide at least two guarantors who must be either a civil servant of at least level 12, a lawyer with at least 10 years post-call experience, a judicial officer or a justice of peace. How are the poorest Nigerians expected to have direct access to such people? The most attainable of these is probably a lawyer with 10 years post-call experience but are people expected to just accept liability for the debts of strangers?

We also can’t forget that as a people, we are quite entrepreneurial and won’t hesitate to monetize any situation we can. I can’t help but worry that this opens up already struggling families to the risk of being extorted by those who decide to take advantage of the difficulty of the situation to charge them a fee for guarantor ‘services’. 

Availability of funds 

Think about the last time you went through a process driven by the public sector. Acquiring your Permanent Voters Card (PVC), driver’s license …. voting???

The thing is, when you’re going through that frustrating experience, you know you have to keep going because the only scarier than trying to get something done with the public sector is having to try to get it done more than once. Has a civil servant ever told you “come back next week” after waiting at a government office all day; maybe even for two consecutive days? That’s its own special kind of pain and there’s adequate space for it in the student loans process too. 

After jumping through all those flaming hoops, whether or not an applicant gets a loan balls down to the availability of funds. I- I have no words.

Let’s see it first – believing is another matter

I’m all for bridging the opportunity gap between the income classes in Nigeria. This has to be done for sure. However, the approach taken with the Student Loans (Access to Higher Education) Act, 2023 doesn’t inspire confidence. We’re told the purpose of this is to provide access to higher education for the poor but it’s structured in a way that pushes the opportunity so out of reach for most , regardless of their academic merit. 

A process that excludes those who need it the most: is this a misguided but genuine attempt or is the government playing mind games? Or perhaps the government knows something we don’t. I’m genuinely curious. 

I guess we’ll find out in September.