NELFUND: New Dawn, New Pitfalls

In May 2024, the Nigerian government introduced the long-awaited Nigerian Education Loan Fund (NELFUND) under the Student Loan (Access to Higher Education) Act 2024, a measure put in place as a game changer in increasing access to Higher Education.

While the government argues that initiatives like NELFUND can widen access to Higher education by removing financial barriers, we contend that such policies can also exacerbate the commodification of education, putting the burden of access solely on students’ and risking the formation of a debt-ridden generation.

It is the biggest hypocrisy to turn a blind eye to the very ease that the scheme is bringing to both struggling parents and students who fend for themselves. As a matter of fact, loans like this will help Nigeria in overcoming the surging cum ugly percentage of dropouts. Yet! As good and attractive the policy might sound or look at it’s face value, exploring the shortcomings is pertinent.

But before I come down to shortcomings, let’s have a clear perusal of what NELFUND as a scheme is all about.

What Does NELFUND Do?

The goal of NELFUND is to eliminate the financial obstacles that have traditionally kept students of the have-not from school. The fund offers loans to eligible Nigerians to pay for living expenses, tuition, and other essential costs of attending a recognized public university or technical and vocational school in Nigeria. Bridging the gaps between the poor and the rich.

The most recent Act amendment’s removal of income thresholds and requirement for guarantors are two important changes meant to increase the loans’ accessibility for a larger group of students. On the surface, these adjustments would greatly expand access to higher education by giving students who might not otherwise be able to afford it the chance to pursue higher education, which is still considered “free” in publicly supported institutions.

Since NELFUND starts less than a year ago, you might want to ask how we get to the demerits of a scheme that just kickstarts? Well, take a chill pill and wait as we demystify the mystery. 

A Loan and a Debt…

A closer look at the UK and US student loan systems is instructive of the future that awaits NELFUND. In the United Kingdom, while the ICL offers some relief, it has led to long-term debt for many graduates, with only a small percentage fully repaying their loans. A recent point is the work of Claire Calender and colleagues, which found that graduates aged 25 without student loans are more likely to own homes and less likely to rent or live with parents, challenging some assumptions about the financial benefits of HE and highlighting how debt can reinforce income inequalities. 

Mirroring the student loan crisis in the US, with over $1.8 trillion in outstanding loans, it also raises concerns about the sustainability of NELFUND and points to the potential risks to the Nigeria government, if not carefully managed.

Did I just say carefully managed? Well, there will be a problem. And that’s a clear truth. The UK and the US as sighted in the example above are by far more developed countries than Nigeria. Nigeria already had tons of problems to battle with the unemployment that it wallows in as a country. But then the Act (NELFUND) provides that the students would start returning the loan after graduation.

Let’s do some math. Nigeria’s unemployment rate, which was over 33% in 2021, shows that a significant number of university graduates remain unemployed. This underlies the complication of repaying student loans for students from low socioeconomic backgrounds and may deter them from applying. Without income-contingent loan (ICL) repayment options, as in England and Australia, graduates may find themselves trapped in a cycle of debt, unable to meet their repayment obligations due to a lack of steady income.

With the above, it could be aptly presumed that the scheme’s longevity is relatively minute— the chances are very slim. Doomed to fail.

Way Forward 

With utmost humility, it is aptly submitted that the student loan scheme (NELFUND) is a very promising one. I must say one of the best policy that will make a lasting impact in the lives of average Nigerians is the Nigeria Education Loan Fund.

However, the problem and pitfalls of the policy is not in any way related to the accessibility, rather it is the lack of prospect for the repayment of loan. A fear that it might catapult early graduates in unmanageable debts.