Loan scheme: How ready are beneficiaries to pay back?

In 2014, the Government of Uganda rolled out the higher education student’s loan scheme with intent to address the problem of inadequate access to higher education.

The scheme, which supplements other free education opportunities such as Universal Primary Education and Universal Secondary Education, covers tuition, functional and research fees.

It also caters for learning aids and appliances for persons with disability.

Joel Kagina, a final year student, pursuing a Bachelor of Science in Education (Biology) at Makerere University, was among the 1,269 pioneer beneficiaries of the scheme.

With only 14 points in Physics, Chemistry and Biology, Kagina was not admitted to any university on government merit.

He had completed his Senior Six at Bugema Adventist Secondary School on a bursary offered by the school, as a result of his good performance.

But for someone under the care of his elder brother, Kagina had lost hope of attaining university education because his brother could no longer afford to pay for his education.

All the same, he applied for a course under private sponsorship and was admitted. “One day when I was reading a newspaper, I came across an advert calling for applications for student loans. I had never heard about the loan scheme, but I gave it a shot anyway,” he says.

Lists of successful candidates were not released in time, as promised by the advert.

“Three weeks later, I received a message from the Higher Education Financing Board confirming my admission to the loan scheme. I reported to Makerere immediately and started school,” he narrates.

Penalties involved
According to the higher education students’ financing agreement signed at the start of the course, Kagina, who will complete his course in a few weeks’ time, is expected to start repaying the loan with interest in June next year.

A student is given up to seven years to repay the loan, however, in case they default when the loan is due, the whole amount shall become due and payable at once.

Each academic year, students are also required to pay at least 0.5 per cent of their annual loan, which is about Shs23,000 per beneficiary.

“I have been receiving a loan worth Shs2,055,000 per year. By the end of my course (next month), the loan will be Shs7.2 million including the interest,” Kagina says.

On whether he has a repayment plan, Kagina says that is the least of his worries at the moment. “Considering my tuition fees was not so high, when the time for repayment comes, I will start paying,” he notes.

Unlike Kagina, Nicholas Aijuka, a third year Makerere University Civil Engineering student, still has a year to complete his course.

By the end of his course, his loan will have accumulated to Shs12 million. He prefers not to think about repayment of the loan now, as it is not a priority.

Nonetheless, Aijuka, who also heads the Makerere University loan scheme students’ association, says students under their association plan to start up projects to help loan scheme graduates to deal with the challenges of unemployment.

“We know that the rates of unemployment in the country are high, but we also know that we have a debt to pay after school. We intend to start projects as a group, because we know that opportunities come to organised groups,” Aijuka says.

Payback is important
On whether the financing board is prepared to start receiving repayment from the beneficiaries, Michael Wanyama, the executive director Higher Education Students’ Financing Board (HESFB), says the board has started profiling students in order to update the information provided at application time.

“After school, we give the beneficiaries a grace period of one year. Thereafter, one is expected to update us on their progress on a quarterly basis,” Wanyama says.

Upon employment, a beneficiary of the loan scheme is required to instruct their employer to make a monthly deduction of 30 per cent off their salary towards repaying the loan.

Wanyama adds that the board is in the process of listing all beneficiaries on to the Credit Reference Bureau, in order to ensure their credit worthiness. “We are also sensitising the students about the importance of repaying these loans,” he says.

Only 15 universities, 20 other tertiary institutions, nine technical institutions and four teachers’ colleges have so far been approved to participate in the students’ loan scheme.

Makerere University students graduate last year. Pioneer beneficiaries of the student loan scheme will be graduating soon.