Student Loan in Nigeria - All You Need to Know

Access to quality education is a crucial foundation for a nation’s development and progress. In Nigeria, like many countries around the world, the pursuit of higher education is a dream shared by numerous aspiring students. However, the rising costs of tuition, accommodation, and other educational expenses often pose significant challenges for those seeking to attain their academic goals. The recently passed Student loan in Nigeria was established to solve this issue.

In response to this pressing issue, student loans have emerged as a beacon of hope, bridging the financial gap and empowering students to pursue their dreams. This article delves into the landscape of student loans in Nigeria, exploring their importance, benefits, and impact on the nation’s educational landscape.

What is a student loan?

Nigeria boasts a young and vibrant population, with a significant percentage eager to pursue higher education. Yet, many capable students are deterred by the financial burden, leading to limited access to quality education. Student loans have emerged as a viable solution to address this disparity, allowing deserving students from various socio-economic backgrounds to access funds for their studies.

A student loan is a loan designed to assist students to pay for their post-secondary education at specified institutions.

This loan also includes other fees such as tuition fees, living expenses, accommodations, books and supplies. It is meant to be paid back in specified ways and does not differ much from other regular loans.

An Overview of the Student Loan Act in Nigeria

In 2023, President Bola Tinubu signed the Nigerian student loan bill into law to provide interest-free education loans for Nigerians in tertiary institutions. Under this Act, eligible individuals can access loans for their educational pursuits, with the flexibility to repay the loans in instalments starting two years after completing their participation in the National Youth Service Corps (NYSC) program.

The bill’s journey began in 2016 when it was first introduced by Femi Gbajabiamila, the former Speaker of the House of Representatives. After reintroduction in 2019, it gained further attention from the National Assembly and finally came to the forefront in November 2022. This timing is noteworthy, as it occurred shortly after the conclusion of an eight-month-long industrial action by the nation’s university workers’ union. The protests during this period highlighted issues such as poor working conditions, among other demands, underscoring the urgent need for initiatives like the Students Loan Act to alleviate financial burdens on students pursuing higher education.

With the establishment of the Education Loan Fund, this Act promises to provide hope and opportunities to Nigerian students, enabling them to pursue their dreams of higher education and contribute to the nation’s progress.

What is the new student loan in Nigeria Law?

Under the Act, the Nigerian Education Loan Fund is established as the primary entity responsible for handling all aspects related to education loans, including loan requests, grants, disbursements, and loan recovery.

To ensure the sustainability and robustness of the Fund, the Act outlines multiple streams of funding. One percent of all profits generated by the federal government from oil and other minerals will contribute to the Fund’s resources. Additionally, one percent of taxes, levies, and duties collected by the federal government through agencies like the Federal Inland Revenue Service (FIRS), Nigeria Immigration Service (NIS), and Nigerian Customs Service (NCS) will also be allocated to the Fund.

Furthermore, the Fund will be bolstered by education bonds and education endowment fund schemes. These instruments are designed to mobilize financial resources to support the education sector’s growth and development.

In addition to these mandated funding sources, the Education Loan Fund will be open to donations, gifts, and grants from individuals, organizations, and institutions interested in supporting higher education in Nigeria. Revenue generated from any other sources will also contribute to the Fund’s pool of resources, ensuring a diverse and sustainable financial base.

By combining multiple funding streams, the Act aims to ensure the Nigerian Education Loan Fund’s effectiveness and efficiency in providing financial assistance to deserving students pursuing higher education.

Who is in Charge of Managing and Administrating the Nigerian Student Loan Fund?

As per Section 5 of the Act, the Nigerian Education Loan Fund will be housed in the Central Bank of Nigeria (CBN) and overseen by a specialized committee consisting of 11 members. The committee will be chaired by the CBN governor and will have a secretary appointed by the chairperson.

The membership of the special committee is well-defined by the law. It includes the ministers responsible for education and finance, or their representatives, and the Auditor-General of the Federation. These individuals bring their expertise and perspectives to ensure effective management of the Fund.

Additionally, the committee comprises key stakeholders in the education sector. It includes the: Chairman of the National Universities Commission (NUC), representing the interests of universities.

A representative from the forum of university vice-chancellors, advocating for the concerns of universities across the nation.
A representative from the forum of polytechnic rectors, bringing the viewpoint of polytechnics to the table.
A representative from the forum of provosts of all colleges of education in the country adds valuable insights from the college of education sector.
A representative of the Nigeria Labour Congress (NLC)
A representative of the Nigerian Bar Association (NBA)
A representative of the Academic Staff Union of Universities (ASUU)

With such a diverse and experienced committee, the management of the Nigerian Education Loan Fund is set to be well-rounded, ensuring a balanced approach to handling loan requests, grants, and disbursements.

The committee will determine the loan application process, eligibility criteria, and repayment terms, among other essential details.

“…the Committee shall establish regulations and guidelines for the management, administration, disbursement and recoupment of students’ loans under this Act, and all stakeholders including parents, students’ applicants, beneficiaries of the students’ loans and deposit banks shall comply with the regulations and guidelines,” Section 5(5) states.”

According to Section 5(2) of the Act, the Nigerian Education Loan Fund shall be managed and administered by the Central Bank of Nigeria through the country’s money deposit banks. This arrangement is intended to fulfil the objectives outlined in Section 6 of the Act.

As for the members of the special committee, Section 8 states that their tenure lasts as long as they hold their respective positions. When a member is replaced, retires, or leaves the position for any reason, their successor will assume their role in the committee.

Furthermore, a member automatically ceases to be part of the committee if they become bankrupt, are convicted of a felony or any dishonest or fraudulent offence, or if they become of unsound mind or are incapable of fulfilling their duties for any reason.

Who can Apply for a Student Loan In Nigeria?

According to the act, here are the requirements to apply for a student loan in Nigeria:

Eligible applicants for the loan are students of government-owned tertiary institutions.
All students seeking higher education in public institutions of higher learning in Nigeria have an equal right to access loans without discrimination based on gender, religion, tribe, position, or disability.
“Institutions of higher learning” as per the Act include public universities, polytechnics, colleges of education, and vocational schools established by the government.
To be eligible, an applicant’s income or family income must be less than N500,000 per annum.
Applicants must provide at least two guarantors, each meeting specific criteria: 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.
Students found guilty of examination malpractice by any school authority or convicted of a felony or any offence involving dishonesty or fraud will be disqualified from receiving the loan.

What is the Student Loan In Nigeria Repayment Plan?

The Act does not set a specific limit on the amount students can access through the loan or a defined repayment period. However, it states that repayment of the loan will commence exactly two years after the completion of the National Youth Service Corps (NYSC) program.

Under the Act, beneficiaries are required to remit 10 per cent of their income to the Fund at the end of each month as part of the repayment plan. For self-employed individuals, 10 per cent of their total monthly profit shall be remitted for the same purpose.

It is essential for beneficiaries to comply with the repayment plan, as defaulters risk facing a N500,000 fine, a two-year jail term, or both in case of failure to repay their loans as per the Act’s provisions.

How Can I Apply for a Student Loan In Nigeria?

According to the Act, the mode of application for the education loan involves the following steps:

Candidates must submit their applications to the chairperson of the committee, who is the CBN governor, through their respective banks.
The application should be accompanied by a cover letter signed by the head of their institutions (e.g., vice-chancellors for university students, rectors for polytechnic students, and provosts for students of colleges of education) and the students affairs officer of the institution.
Students are required to submit a copy of their admission letter along with the application.
At least two guarantor letters addressed to the chairperson of the committee should be provided by the students.
Each guarantor must also submit two passport photographs.
For employed applicants, evidence of employment from their employer is necessary.
In cases where the guarantor is self-employed, their business registration with the Corporate Affairs Commission (CAC) or any other appropriate authority, as well as information from their bankers, will be required.

These steps ensure a well-documented and organized application process, allowing the committee to evaluate applicants’ eligibility and qualifications for the education loan effectively.

Quoting the Act – “The Committee shall communicate to the applicant on the status of his application within 14 days of the receipt of any application,” the act states, adding that “disbursement shall be on the availability of funds.”

What are the features of a student loan?

Student loans may seem like a lot but here are some features they exhibit:

a. The interest rates:

Interest rates may differ from bank to bank. Interest rates may be compounding (where the accrued interest is added to the amount originally borrowed) or flexible (where the interest rate increases or decreases during the life of the loan.

b. Loan period

This involves the time it takes for the lender of the loan to repay the loan in full.

c. Loan limit:

This shows the maximum money that can be lent to the borrower.

d. Annual:

This involves the maximum amount of the loan in an academic year.

e. Aggregate:

This encompasses the maximum amount a student can borrow.

f. Grace period:

This is the period after the funds have been disbursed where the borrower is not required to pay anything on the loan.

Basically, concerning student loans, this is the time period after the borrower is not enrolled or is enrolled less than halftime or graduated during which requires no payment on the loan.

Which bank gives Students Loan in Nigeria?

Some of the banks that give student loans in Nigeria include:

1. GTBank Student loan

GTB offers special loans to parents to help pay upfront for their children’s fees. It is accessible based on preset criteria like earnings, length of account, type of account, etc.

What are the Features of GTB student loans?

GTBank’s student loans are designed to help customers give their children or wards up to N5 million in student loans.
They give a maximum of 4 months as tenure per loan request.
They provide a competitive interest rate and grant customers immediate access to the loan.

What are the requirements to access GTBank Student loans?

There are several requirements an applicant must meet to access GTBank Student loans for one’s child or ward. They include:

You must fill up the application form and ensure your employer fills out the undertaking form.
The applicant must also provide the documents containing the child or ward’s school bill and credit insurance.
The applicant must either ensure that his staff terminal benefit is domiciled in GTBank or obtain a Corporate Guarantee

2. Access Bank Student Loan

This student loan is set aside to finance students with short-term loans covering their tuition fees.

What are the features of Access Bank student loans?

Some of the most important features of Access Bank student loan include:

The loan gives up to N5 million.
There is the option to refinance the loan (replacing their current debt obligation with one that has more favourable terms).
There is the availability of remittance services.

What are the requirements for accessing Access Bank Student loans?

The requirements to access bank student loans include:

You must present a copy of the child or ward’s admission letter.
You must complete the application form.
You must present the bank with your tuition advice.
A letter of domiciliation of your salary account or your parent’s/sponsor’s salary account must be presented to the bank.
You must provide copies of a valid means of identification for you or your parent/sponsor.
Credit checks for your finances should be provided.
Your Bank Verification Number (BVN) should be provided.

3. Federal Government Education Loan

Provided by the Federal Government, and run by states, this loan is backed by education banks and student loan boards.

It allows students easy access to funds at concessionary interest rates.

The loan scheme places special emphasis on funding teacher development and secondary education, as well as establishing a special intervention fund for individuals with special needs.

4. First bank Eduloan

First Bank has a type of educational loan that is the uncanny opposite of the student loan. First Bank’s FirstEdu loan instead is targeted at proprietors of schools to help them upgrade school facilities and fund gaps pending the time they receive school fees from their students.

What are First Bank Eduloan requirements and features?

It has a repayment plan covering 3 months (90 days).
It applies to schools registered under the Corporate Affairs Commission (CAC) and the state government.
The school must have been a customer of First Bank for 6 to 12 months.
Domiciliation of school fees with First Bank is also a requirement.
The loan gives up to N10 million in funds.
It also requires the school to have a minimum of a hundred students.

Bottom Line

There are other financial institutions with student loans which we cannot cover, you can find out more about these loan schemes by visiting their branches, official websites or calling their customer care numbers.