Call For Modification Of The Student Loan Scheme

Ghana’s higher education sector is made up of five state owned universities, ten polytechnics, and about a dozen privately owned tertiary institutions. This is obviously a tremendous achievement on the part of the country. Starting in 1948 with the nation’s first diploma awarding institution, then called the University College of Gold Coast, the country supervised the development of both public and private tertiary institutions until now. Statistics available as far back as 2000 indicates that enrolment at the tertiary levels rose from 13 415 in 1992/3 to 44 386 in 1998/9. But with the University of Ghana alone having a total enrolment of over 26 000 students, and the explosion in the number of institutions as well as enrolment in both the private and public tertiary institution, the total enrolment figure may well have tripled if not quadrupled.

It is however, very disheartening to note that roughly about 60% of qualified students do not get access to tertiary education for several reasons. Apart from the limited capacity of the various tertiary institutions, poverty and affordability is the predominant factor responsible for the difficulty in accessing higher education.


Indeed many Asian countries including Malaysia around 1957 when Ghana gained her independence had the same per capita as Ghana. But realizing the critical role education plays in human resource development, Malaysia is reported to have invested its scarce resources very heavily into education. Records available 20 years later indicate that this investment greatly paid off in that nations’ development transition from third-world to second-world status if not first world. I am absolutely certain that this explains why Ghana decided to adopt the British system of financing higher education; i.e. free tuition, free board, free room, and even extra allowance for higher education students at the time.


Many years later in the history of the country, it became evident that all the top politicians, industrialists, health professionals, academics, lawyers, etc who have contributed and still contributing to the nation’s development are beneficiaries of this scheme.


The question one can legitimately ask is what then is wrong with this scheme? In fact if the state is serious about developing its human resource, why are we not prepared to bring back the free higher education system? Legitimate as this question may be, it is also important to recognize the present difficulty the nation finds itself in. In those days, Ghana’s population was a paltry 5million people. And tied up to the young days of independence, there were enough resources available for the country to embark on such agenda. Viewed from this angle, it would be extremely difficult for the country to freely educate a population of about 20milliom presently, and this is a fact.


There are however several other arguments for and against free education at the tertiary level. But that is not my intention in this paper. As the title suggests, my aim is to introduce a debate for THE MODIFICATION OF THE STUDENT LOAN SCHEME FACILITY in financing tertiary education in the country and to present arguments for such. And this is exactly what I would be doing in the subsequent paragraphs.


It is widely acknowledged that funding is the greatest nerve-breaking challenge confronting higher education in the country presently. Statistics indicate that in 2000, the approved recurrent budget for universities did not cover more than 56 percent of the universities’ requirements. However, polytechnic institutions received considerable support from the government, and their budgets were increased from covering 30 percent of their estimated costs in 1998 to 50 percent in 2000. It is also worthy of notice that even though the last couple of years saw increasing government budgetary support for higher education, all the public universities and polytechnic institutions are still grossly under resourced.

Meanwhile, financing tertiary education is the most crucial investment any nation could make in its human resource development. As such, governments over the years have tried to device ways of meeting the teething financial crises confronting the various public tertiary institutions. Among these were increasing the involvement of private sector in higher education; increasing the number of universities in the country, and introducing cost sharing in financing higher education.


In January 1988, the government of Ghana reintroduced a Students’ Loan Scheme which was first initiated by the Dr. Kofi A. Busia’s regime in funding higher education. The aim was to compliment the students’ private resources, especially parental support for food, lodging, transportation costs, and other expenses that were difficult for many families due to extreme poverty.


The scheme was a financial arrangement under which all Ghanaian students who are enrolled and pursuing approved courses in an approved public tertiary institution were eligible to receive a loan regardless of their real financial needs. The loan was made available to full time students, but part-time students could also receive a loan with the approval of the Minister of Education. However, the government in 2002 decided to extend the facility to students of the emerging private universities under the Ghana Education Trust Fund. This could be nothing more than a good thing. Under the arrangement, The Social Security and National Insurance Trust (SSNIT) was assigned to provide the loans, which were repayable at a fixed, and substantially subsidized, interest rate: originally 3 percent but increasing to 6 percent in the mid 90s and now about 10%.


But the student loan granted under the scheme is woefully inadequate and constitutes only a minute aspect of student expenditure on campus. The average student, which form about 80% of the total population in the various institutions are expected to pay their academic and residential facility user fees, buy course materials, make photocopies, buy food and even clothing for four months all from the 3.5 million cedis loan granted per year. Apart from the undue delay in the release of the loans, it is statistically nonsensical vis-à-vis the average student expenditure.


At the same time, the loans attract a compound interest of 10% every month to the extent that the underprivileged average student leaves school with a huge debt burden on his/her head. Considering the current situation of high unemployment, high cost of living and unavailability of opportunities in the country, only God knows how the state expects the average student to pay over 12 million cedis, eight months after completing school. This is absolutely unreasonable.


Consequently, it is reported that the loan recovery rate by SSNIT has been very low. Evidence has it that the government of Ghana in 2001 owed the trust $23.9 million, which represented part of the interest it had agreed to subsidize on students’ loans (Rossouw, 2001). Under the circumstances SSNIT was unable to turn to the guarantor’s pension unless he/she is retired—which postpones any loan recovery for at least 15 years more.

There were also allegations of administrative ineffectiveness, with some students who paid their loans still shown as owing a balance on the SSNIT loan account and others wanting to repay up front, but discovering that the Trust did not have a formula for bulk repayments. Consequently over 500 billion cedis in outstanding debts had accrued under the SSNIT loan scheme, putting enormous pressure on the operations of the Trust and threatening the sustainability of the scheme.


In maneuvering a way out of the difficulties that continue to confront the SSNIT implemented loan scheme, government in 2005 introduced legislation in parliament to replace the existing scheme with the new STUDENT LOAN TRUST (SLT). The objective was to immediately increase the volume of students loans by ¢1 million to ¢3.5 million through the GETFund. This represents about 40% upward adjustment in the students’ loan and for that matter a considerable relief to both students and poverty ridden parents.


Under the SLT both public and private sector students will be able to access the loans without the three guarantors required under the SSNIT scheme. But as one scholar puts it, “it is not clear what the new guarantee arrangements will be, the status of existing guarantees and the guarantor’s pension liabilities, the interest rate and other terms of the new loans, or the prognosis of the student loan recovery rates”


Ghanaian student have been promised that the said new scheme was taking effect as soon as possible but until now, there is absolutely no news about this issue. It is pretty clear that students will go back to school in late August this year to meet the same old story. This indeed is very discouraging.


It is my honest opinion first and foremost that Ghana at this time cannot afford a free higher education for the teaming number of qualified students. Secondly, I think the current SSNIT loan scheme is not only moribund, but also statistically nonsensical. It is along these lines that I think the said introduction of the new students’ loan scheme was initially heart-warming. But if students will have to pay the same interests at the compound levels on the loans they take as is currently the case, then this is also repugnant. Personally, I don’t have any problem with the system of guaranteeing for the loan scheme. In fact it only goes to secure the scheme.


Meanwhile if indeed we are serious as a nation about our commitment to human resource development; if all the claims about the development of our manpower still remain political rhetorics; and if we indeed understand the value of higher education in the development this country, then there is a very simple, elementary or basic solution to the problem of funding tertiary education. Thus a complete modification of the Students Loan Scheme and the scraping of the compound interest in the loans granted.

I am proposing that this nation can lift itself from the doldrums of poverty by making a little more sacrifice towards its human resource development. This can be done by the state deciding to scrape-off the interest payment on the student loan scheme. In other words, the state must grant interest-free loans to students to pursue higher education. As I said earlier it is not reasonable for a poor and underprivileged student to complete schools with a debt burden of over 12million cedis while still unemployed. This also contributes immensely to the high loan default rate on the part of students.


Under this proposal, the said new Student Loan Trust must grant the amount of money necessary for the student to comfortably afford tertiary education without any difficulty. Since there will be no interests calculated on the loan granted, the guarantee system must be strengthened. A tracking system must be developed for every beneficiary, for the Trust to monitor repayment, and the systems must be made to work. This modification to the scheme will develop a new sense of confidence and nationalism in the students and will make it possible for every qualified individual to have access to tertiary education. This will be considered a great investment in the human resource development of the nation.


Finally, this arrangement however must be complimented by a corresponding investment into the improvement of the infrastructure of the various public tertiary institutions. This will lead to expansion of capacity and for that matter increase in the in-take. I strongly believe this proposal will also make it possible for those who would want to attend private universities to also afford their education. This is possible. The state can afford it. And it will greatly pay-off in a few years to come. The earlier we think about this, the better it will be for the country


I welcome all criticisms of this proposal. Please channel your thoughts, contributions and criticisms to me through: sir_lord_jimmy @yahoo.co.uk

References:

SSNIT (2003). Students’ loan – the Law. Downloaded from SSNIT Corporate Website www.ssnit.com on June 26, 2003.


Effah, Paul . (2003). Ghana. In D. Teferra and P. Altbach (Eds.), African Higher Education. Bloomington: Indiana University Press. World Bank. (2003).World Development Indicators. Washington, DC: World Bank.


Rossouw, Henk. (2001). Bad Loans Burden Ghana’s Student Aid. The Chronicle of Higher Education, November 2

SSNIT to Recover Student’s Loans: Ghana high commission, London. May 9, 2004. Retrieved from www.ghana.co.uk in May 2004.