All you need to know about the new student loan law

Young Itunu dreamt it all, even dreamt of someday becoming a Doctor. Her only surviving parent, a weaver, worked tirelessly to support their family, but higher education, especially one fraught with a million expenses, seemed like an unattainable luxury. Itunu studied and maintained being a highflyer in her local secondary school, her passion for learning undeterred by the many obstacles in her path. 

Whenever she helped her mother weave intricate patterns, she imagined herself stitching lives back together in a hospital. Sadly, the dream of attending university was a distant hope overshadowed by financial realities.

Itunu’s reality is similar to that of many Nigerian students today, whose dreams are often stifled by financial barriers. As parents often say, “Who go pay for that one?” Thankfully, the new student loan law offers a lifeline to students like Itunu. 

Background 

On June 12, 2023, President Tinubu signed the Student Loan Bill into law, allowing Nigerian students to get interest-free loans. However, last week, the President asked lawmakers to revise the Bill to remove some conditions that might hinder its long-term success. On March 14, 2024, he proposed changes to the Student Loans (Access to Higher Education) (Repeal and Re-Enactment) Bill 2024. The Act created the Nigerian Education Loan Fund (NELFUND) to oversee and manage student loans in the country. A Special Committee chaired by the Governor of the Central Bank of Nigeria (CBN) was tasked with administering the fund.

Today, we will explain five key things you need to know about this new law. We’ll explore how it works, who qualifies, and how it can help students like Itunu realise their dreams. 

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7 things to know about the new student loan law

The recent changes to the student loan law can feel overwhelming without all of the legal mumble jumble. But here’s a breakdown of 5 key points to help you understand what’s changed and how it might impact your education journey.

Who can apply?

There are many types of post-secondary school educational institutions in Nigeria, including but not limited to Universities, Colleges of education, Polytechnics, and Specialized institutes, among others. It also means ownership spreads across Federal, State, Private, Corporate and Religious bodies. The Government has clarified that loans would be available to all students applying to eligible post-secondary institutions. These include Universities, Polytechnic, Colleges of Education, or schools established by the Federal or State Government. Vocational or skills acquisition centre licensed by the Federal Government were also included.

What would this loan be used for?

Although the answer to this question may seem obvious, we’d like to reiterate the proper use of student loans. Well, this loan is definitely not for funding your dream vacation or splurging on the latest iPhone. Instead, it’s meant to cover students’ financial needs, which usually include tuition fees, upkeep, and sometimes medicals. 

How would the student be verified?

Just like any other loan, verification is of utmost importance to ensure that only legitimate students who genuinely need the loan would be granted such loans. The verification of these prospective students would include KYC checks such as 

• National Identity Number (NIN)
• Bank Verification Number (BVN)
• National Examination Council (NECO)
• West African Examination Council (WAEC)
• Joint Admission Matriculation Board (JAMB)
• Evidence of admission
• Academic records (for old students)
• Credit history, if available

Who or what is NELFUND?

The repealed loan act also stipulated the setting up the Nigeria Education Loan Fund (NELFUND), an organization that can be sued or sue others. NELFUND also has the authority to acquire, own, and dispose of movable and immovable property to fulfill its functions. According to the 2024 student loan law, the student loan program will be funded by setting aside 1% of all taxes, levies, and duties collected by the Federal Inland Revenue Service (FIRS) for the Federal Government. These funds will be directed to a General Reserve Fund.

How does disbursement and repayment work?

The channel of loan disbursement is highly important to avoid intended or unintended misappropriation and to ensure that the loan is used for the intended purpose. For this reason, loan disbursement goes directly to the institution per semester or yearly. As for loan repayment, fortunately, the revised student loan law also specifies that the process of recovering loans from beneficiaries will begin two years after their National Youth Service Scheme (NYSC).

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Removal of family income restrictions

Before the 2024 student loan law was passed, an applicant’s family income had to be under N500,000 annually to qualify for a loan. However, the revised law has eliminated this requirement, meaning family income is no longer a factor in determining eligibility for a student loan.

Debt forgiveness

Lastly, the student loan law also includes a debt forgiveness provision that applies in cases of death or unavoidable circumstances preventing repayment.

Funding dreams: Lendsqr’s role in the student loan law

As the student loan law progresses to widen educational access in Nigeria, financial institutions have a vital role in supporting this effort. Whether private or government-owned, lenders and Microfinance Banks (MFBs) can contribute by funding educational goals. 

To simplify this process, they can partner with us at Lendsqr. By integrating Lendsqr’s end-to-end loan management software, institutions can efficiently handle educational loans from start to finish. This not only aids in fulfilling educational aspirations but also promotes a more educated and financially empowered society. Ready to get started? Send us a message at [email protected].