Cost and funding of university education: Loans to students

“Government (federal, state and local government should link up with financial institutions to provide loans at low rate as it obtains in other countries to enable them pay adequate fees to their institutions. These fees will in turn provide the necessary funds which the university needs to provide and maintain quality education”.


For some times now, I have been discussing the cost of funding of education. Today, we will be looking at the importance of loans in the funding of education.


In the past I had published the report of  the Committee of Registrars which recommended that loans be given to deserving Nigerian students to assist them achieve their educational goals and attainment, but regretfully, nothing has been done to actualize this lofty dream. Today, we will be looking at the place of loans in funding education.




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.


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.


Consequences of lack of students’ loan scheme.


As stated in my introduction, as far back as 1996, the Committee of Registrars in this country made a recommendation that loans be provided for deserving students, but I  am not aware that any government in this country has lived up to that billing by giving loans to students to aid their education.


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.


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.


Go to any public outing today, you will find it difficult to get back to your car because you would have been bombarded by beggars, even in Yoruba land where people are discreet and indeed ashamed of beggarly inclinations.


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 (federal, state and local government) should link up with financial institutions to provide loans at low rate as it obtains in other countries to enable them pay adequate fees to their institutions. These fees will in turn provide the necessary funds which the university needs to provide and maintain quality education. When government provides means of accessing / raising loans, students would be able to pay fees which would provide the necessary funds which the University needs to provide and maintain quality education. That is why in Britain today, a citizen pays as much as 9,000 British Pound Sterling (about N2 million)


It must be appreciated that education is the most expensive ventures and that is the reason why people like the President of the United States of America, Mr. Barack Obama, had to rely on loans to run his educational programme.