Education
Key highlights to know about the new student loan law
President Bola Tinubu on Monday, June 12, 2023, signed the student loan bill into law.
The legislation was sponsored by Femi Gbajabiamila, the immediate-past speaker of the House of Representative.
The bill, which passed the third reading in the lower chamber on May 23, 2023, seeks to provide financial assistance to Nigerian students in tertiary institutions.
The new legislation allows Nigerian students in tertiary institutions to access interest-free loans from the Nigerian education loan fund.
According to the act, all students who have secured admission into any public Nigerian university, polytechnic, college of education, or any technical and vocational education and training (TVET) school can apply for the loan.
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The act stipulates that the student’s income or family’s income must be less than N500,000 per annum to be qualified for the loan.
In addition, the applicant must provide at least two civil servants — of not less than level 12 years in service — as guarantors, or a lawyer with at least 10 years post-call experience; a judicial officer; or a justice of peace.
The document also said students with parents who have defaulted in respect of previous loans will not be eligible.
The new act establishes the Nigerian Education Loan Fund. The fund will have the power to administer, supervise, coordinate, and monitor the management of student loans in the country.
The piece of legislation mandates the body to receive applications for student loans through higher institutions on behalf of the applicants and screen them.
“The fund shall be domiciled with, managed and administered by the Central Bank of Nigeria (CBN) through the money deposit banks in Nigeria for the purpose set out under section 6 of this act,” the act reads.
“The governor of the CBN shall set up a special committee to perform the functions of the fund set out under section 6 of this act.
“The chairman of the committee shall be the governor of the CBN who shall appoint the secretary of the committee.”
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According to the act, students applying for loans must apply to the chairman of the education Fund through their respective institutions upon satisfying relevant conditions.
Also, the applicant’s application and disbursements are made within 30 days of the application reaching the chairman of the committee.
More so, the new law states that all applications will be submitted through the student affairs office of each institution via a list of all qualified applicants from the institution, accompanied by a cover letter signed by the vice-chancellor, rector, or the head of the institution and the student affairs.
It also states that students who have defaulted on previous loans, found guilty of exam malpractice, felony, or drug offences will not be qualified.
According to the law, the employers of successful applicants must deduct the loan from their salaries after they have completed their National Youth Service Corps (NYSC) programme.
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“Any beneficiary of the loan to which this act refers shall commence repayment two years after completion of the NYSC programme,” the document said.
“Repayment shall be by direct deduction of 10 percent of the beneficiaries’ salary at source by the employer. Where the beneficiary is self-employed, he shall remit 10 percent of his total profit monthly to the student’s loan account to be prescribed by the bank.
“A self-employed person shall, within 60 days of assuming that status, submit all information such as the name of business, address and location, registration documents, registered, name of bankers, names of partners, name of directors and shareholders to the commission.”
The legislation said funds provided by the education bank will consist of 1 percent of tax levies from the Federal Inland Revenue Service (FIRS), the National Immigration Service (NIS), and 1 percent from oil profits.
It also stated that defaults will be punished by the law.
“Anyone in default of the provisions of sub-section 4 above or found to be aiding the default of any of the provisions of this act is guilty of an offence and, if convicted, shall be liable to imprisonment for two years or a fine of N500,000 or both,” the document reads.