How will the students loan scheme work?

After procrastination for at least a decade, the government is now set to begin implementing the higher education students’ loans scheme. So some students who will be joining university starting from the 2013/2014 academic-year will now apply to a secretariat based at the Education ministry for a loan.

Shs5b has been set aside to roll out the scheme.
For a start, only 1,000 students who intend to study medicine and engineering could benefit. That means each student will be loaned Shs5m annually.
The tuition for medicine at Makerere University is Shs2.7m annually and Shs2.3m per annum for engineering, though the university could increase the tuition.

Even though the Ministry of Education has since last year had a secretariat to handle the loans scheme, it is not anchored to the law. We could not readily establish from the Ministry of Finance from which entity the students will get the money.

To qualify for the loan, the student must have studied sciences at Advanced Level. He or she must have attained two, or better still three principal passes, in the A’ Level exams, which must have been done the previous year. Above all, the applicant must be “needy”.
“If one was often sent away from school [because his or her parents had problems clearing the school fees] such a student would be considered needy,” says Ms Jessica Alupo, the Minister for Education.

She says, the ministry would track the applicant’s status right from primary school to establish if indeed that person’s has a life of financial hardship. Also, the Local Councils and the Internal Security Organisation will have to vouch for them.
Still, critics say that, just like the majority of the cases under the government scholarship, students from well to do families might dominate the loans scheme.

How it works
Alupo says, the students will be required to produce collateral in form of land titles [most likely their parents] as a guarantee they will be in position to repay the loan. The government expects all the students who borrow the money to repay them.

“We are working with a time frame of three to five years, after a beneficiary has graduated, within which they must have repaid the loans. The loans will be interest-free,” says Alupo. If one fails to get a job, the repayment would be deferred to when they get a job.

Minister for Finance Maria Kiwanuka said during the reading of the national Budget in Kampala last week that the government would employ the beneficiaries of the scheme to ensure they earn so that they can repay the loans.
The government deliberately focused on scientists, because due to their shortage, it is believed graduates of medicine and engineering would easily find jobs from which they would earn to repay.

No legal framework
Even then, Ms Franca Akello, the Shadow Minister for Education, says the government is not ready to roll out the scheme. She says for the scheme to work, there should be a legal framework.

“Without a law to guide it, whatever will be happening will be illegal,” she says. Among other issues, such a framework would outline the roles and obligations of the loan-disbursing entity, the borrowers and the employers.
In other countries such as Tanzania and Kenya, as soon as a graduate gets a job, their employer is expected to notify the loans board. The board then prepares a billing schedule that shows how much the graduate who studied on loan should pay monthly until such a time that they shall have completed paying for the loan.

In Uganda’s case, therefore, without the framework, the lending entity will not have legal backing to force employers to remit part of borrower salary to the lending entity.
Ms Alupo says the Cabinet will meet this week over a draft Bill on the scheme after which it would be taken to Parliament [next week] for debate.

But this is not the first time the government is talking about ensuring the framework is in place. According to press reports, Mr Michael Wanyama, the coordinator of the students’ loans scheme, said in May 2012 in Kampala, that the bill would be ready by October 2012.

Time running out
For a scheme that should begin in August, time is running out given that it could take the Parliament tops two months to debate and pass the bill into law.

Ms Alupo says this time she expects Parliament to move fast because the demand for higher education is increasing.
Due to the anticipated increase in demand for the loans, she says that in the 2014/2015 Budget, the allocation could be increased to Shs20b.

But judging by the number of students who apply for private sponsorship at the various public universities, even Shs20b would not be sufficient.

nwesonga @ug.nationmedia.com