Think Tank Warns N355.9bn Student Loans At Risk As Repayment Nears

About N355.9 billion disbursed by the Nigeria Education Loan Fund could be difficult to recover when repayment begins unless the Federal Government strengthens the scheme’s repayment framework, a Nigerian higher education policy group has warned.

The iRead To Live Initiative, in a policy brief released on Monday titled “Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme”, said the fund had disbursed the sum to about 850,000 beneficiaries since its portal launched in May 2024, and that recovery remained untested because no group of beneficiaries had yet reached the repayment stage.

The group said Nigeria had roughly 18 months to build stronger loan recovery infrastructure before beneficiaries who complete the mandatory two-year post-NYSC grace period become subject to enforcement. It recommended integrating NELFUND with Nigeria Revenue Service income data so the government can track borrowers who are self-employed or work outside the formal payroll system, arguing that relying mainly on employers to deduct repayments falls short in an economy where most people work informally.

“The scheme’s ability to recover the disbursed loans remains untested and structurally at risk, raising the same question that sank Nigeria’s three previous student loan attempts. What happens when repayment comes due, and the borrowers cannot be found?” the brief stated.

The think tank noted that Nigeria has tried student loans three times before and each attempt collapsed because loans went out faster than the government could recover them. It cautioned that NELFUND’s performance could not yet be judged by that standard since no beneficiary cohort has entered the repayment window.

The brief cited Section 28(4) of the Students Loans (Access to Higher Education) Act, 2024, which it said depends on employer notification rather than payroll withholding through a tax authority, leaving the self-employed majority outside the recovery net. It also pointed to Kenya’s Higher Education Loans Board, which despite integrating recovery with the Kenya Revenue Authority and credit bureaus still recorded a 32.5 per cent default rate on its student loan portfolio as of June 2025.

The group further called on the National Assembly to clarify the legal status of interest on NELFUND loans, citing an apparent inconsistency in the 2024 Act. Although the loans have been publicly presented as interest-free, Section 17(1)(c) of the Act lists repayment of capital and interest among the Fund’s revenue sources. The warning follows an earlier dispute in which NELFUND rejected a viral claim that student loan defaulters face life imprisonment, which the agency described as fake news in a report here.

“Whether Nigeria breaks its decades-long pattern of failed student loan schemes will be decided by choices made now, not by the scale of what has already been disbursed,” the brief stated.

Sources: Punch, Vanguard