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Time for FG to re-establish Education Bank; provide loans for students at low rate (3)

By Afe Babalola

Last week I examined the provisions of the Education Bank and stated how the failure of government led to the inability of the bank to fulfil its statutory road. I detailed how, owing to the refusal of the government to set up the Governing Board of the Bank, it was eventually run throughout its existence by the Minister of Education contrary to the express provisions of the Bank.

However, as stated in the Government White Paper on the recommendation of the Ministerial Committee, other factors aide from government inactivity, contributed largely to the demise of the bank. Some of the findings in this respect are as follows:

A cross section of Nigerian University graduates

Some of the findings

  1. A total of 225 number of staff were verified to be on payroll of the bank extant civil servant rules and procedures were observed not to have been followed in the appointment/transfer/secondment, promotion, confirmation and discipline of some of the staff of the bank.  Some staff were abysmally stagnated for too long.  A total of 49, current pensioners; 17 referred pensioners and 6 classified as pensioners outside unified Pension Scheme were verified.
  2. The Board of the former Students Loans Board (SLD) approved in 1993, the transfer of N75m capital grant from the loans fund to be invested in mortgage finance house (most of the distressed) to the detriment of the primary objectives of the Board/Bank of financing student’s education and providing loans to the public for educational purposes.
  3. It was confirmed that the Bank Area offices tampered with loans recovered (which were meant to be a receiving loan and to be paid to the Treasury) as imprest and merely sent in papers to inform the Loans Department.  As at 10th October 2001 the bank had no additional records of loans balances in the CBN and Commercial Banks.

It is clear from the above that as has been the case with virtually anything Nigerian, the “Nigerian factor” was brought to bear on the Education Bank. How else can one explain the recruitment and promotion of staff without recourse to extant civil civil service rules and regulations?

ASUU wants FG to negotiate with union to end strike

However despite the identified flaws in the operation of the bank, and the resultant decision  of the government to wind it up, I remain of the conviction that as the reasons behind its establishment still exist, there is a need for government to revisit the issue of the Bank. Funding of education and particularly the cost of education is still a problem. At the moment, the Academic Staff Union of Universities (ASUU) has embarked on another strike to press for the same demands of increased funding to the Universities. It is for this reason that there must be renewed thinking about alternative means to fund education and one of the means identified globally to aid students in the acquisition of education is a loans scheme.

A student’s loan is designed to help students pay for university tuition, books and living expenses. This may be different from other types of loans in that the rate is substantially lower than the conventional financial institutions and the repayment schedule is deferred while the students are still in school. Suffice to say that the laws guiding such loans differ from country to country particularly in the laws regulating re-negotiation and bankruptcy.

Experiences in other climes

In Australia for instance, tertiary education is usually funded through the HECS-HELP scheme which is in the form of loans that are not normal debts and are paid over time via a supplementary tax, using a sliding scale based on taxable income.

The import of this scheme is that loan repayments are only made when the former students have graduated and have income to support the repayments. The debt does not attract normal interest, but grows with CPI inflation.

In the United Kingdom, students’ loans are primarily provided by the state-owned Students’ Loan Company. But unlike what obtains in Australia, interest begins to accumulate on each loan as soon as the student receives it, but repayment is not required until the start of the next tax year after the student either completes or abandons his education.

Since 1998 for example, repayment has been collected by HMRC via the tax system and are calculated based on the borrower’s current level of income. If the borrower’s income is below a certain threshold 15,000 British Pound Sterling per tax year for 2011/2012, 21,000 British Pound Sterling per tax year for 2012/2013, no repayments are required, though interest continues to accumulate.

In the United States of America, there are two types of students’ loans: federal loans sponsored by the federal government and private loans which broadly includes state-affiliated non-profit institutional loans provided by schools. Interest does not accrue on subsidized loans while the students are still in school. Students’ loans may be offered as part of a total financial aid package that may also include grants, scholarships and/or work study opportunities.

Korea has an ingrained philosophy

The Korean experience is not substantially different from what has been discussed above. For instance, Korea’s students’ loans are managed by the Korea Students Aid Foundation (KOSAF), an institution committed to talent cultivation in charge of student aid and established in May 2009.

It is instructive to note that Korea has an ingrained philosophy that the country’s future depends on talent development and so no student is permitted to quit studying due to financial reasons as a result of which Korea makes deliberate efforts to help students grow into talents that serve the nation and society as members of the Korean society.

Through the management of Korea’s national scholarship programmes, students loan and talent development programmes, KOSAF offers customized students’ aid services and students’ loan programme.

As the Education Bank has not been repealed, Govt must revisit it now

It is a painful truism that our economy has not been as healthy as expected. It is therefore no small wonder that Nigeria has not been able to commit 37% of its resources to education as recommended by UNESCO. As a matter of fact, more of the country’s resources have been rightfully committed to defence because of the prevailing insecurity in the country as a result of which education is unduly suffering an underserved under-funding.

Endemic and grinding poverty

There is endemic and grinding poverty all over the country and this is largely because the government spends a lot on other areas and particularly as Nigeria depends on oil as its sole source of income. For example, there are no industries and so there are no opportunities for employment and it is industries that employ most students coming out of universities and not government.

But then, it must be appreciated that quality education requires good schools, good and well equipped laboratories, good equipment, highly qualified and committed teachers to pave way for proper education that can only come to the fore where talents are expeditiously harnessed.

It is apposite to say that government should be able to provide these facilities even if students have to pay school fees to ensure a proper maintenance of these facilities. Consequently, government needs to adopt a school fee-paying system backed up with loan system which would enable students to pay fees. It is suggested that government urgently revisits the Education Bank as a means to provide loans for students at low rate as it obtains in other countries. These will in turn provide the necessary funds which the universities needs to provide and maintain quality education.

 

 


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