Need to strengthen students’ loans structures and systems

14Nov 2016
The Guardian Reporter
The Guardian
Need to strengthen students’ loans structures and systems

Last week has been eventful for ordinary citizens, politicians and decision makers.

A students’ Loan scheme is one among many alternatives for financing higher education in various countries around the world.

First, there was a commotion and public outcry when a number of prospect students at higher education institutions in the country missed loans, secondly, after Donald Trump’s unexpected shocking win in the United States Presidential elections.

Thirdly, being the shocking news of passing away of two prominent leaders, Joseph Mungai, who was in one time a minister for education and Samwel Sitta, a former Speaker of the Parliament of the United Republic of Tanzania.

While we were still in above mentioned after shock, the Parliament of the United Republic of Tanzania, endorsed amendment of the Higher Education Students’ Loan Board (HESLB) Act to increase interest rates of students’ loans to 15 percent!

Students loans controversial in Tanzania has been an issues for a number of decades now, with the new government under President Dr John Magufuli, facing the pressure from citizens, of increasing budget to enable as many students as possible to access higher education in the 2016/2017 academic year.

Back in 2006 I did my MA (Education) Thesis on ‘Effectiveness of Students’ Loans Scheme in Enhancing Access, Equity and Operational Efficiency in Higher Education in Tanzania’; therefore, I am aware of controversies revolving around Students Loans around the world. This article, with the support from various online literatures and my experiences in this topic, discusses issues related to students’ loans in Tanzania and how best the government can make the students loans scheme more effective.

A students’ Loan scheme is one among many alternatives for financing higher education in various countries around the world. Tanzania is one of the countries that have been practicing loan scheme system for financing higher education sub-sector.

Higher education students’ loan schemes have been established in more than 60 countries around the world since 1940s. It is argued that students’ loans have emerged as one of the feasible mechanisms for financing tertiary education in the situation where by a growing number of countries throughout the world, public resources are proving increasingly insufficient to finance tertiary education. In these countries, cost-sharing between government and the students is becoming the norm.

But cost-sharing cannot be implemented equitably without adequate student support mechanisms for academically qualified but needy students. So through higher education student loan schemes that make funds available to all students who wish to borrow for their education, higher education has been accessible to everyone who wants it by qualifications. Among the aims of many higher education students loan schemes is to assist students to overcome financial barriers to undertaking tertiary study.

Despite the higher education student loan schemes being increasingly opted for in many countries across the world, their performance in some countries is discouraging due to poor performance as a result of insufficient management and administration.

In other countries, the loan schemes have proved success by meeting the intended goals and satisfying the stakeholders. It is argued that poor performance of higher education student loan schemes is more prominent in developing countries and transition countries than developed countries.

In case of Tanzania where higher education has been relatively free since independence, higher education student loan scheme can be traced back before independence. But it is argued that the scheme in those days was a short-lived programme which ended in 1974 when the government decided to solely finance higher education sector including bearing all the costs for the students.

The higher education student loan scheme was reinstated in 1992 as an element of cost sharing policy. However, since the introduction of the loan scheme there was no independent body that exclusively dealt with managing and administrating the student loans.

The loans were managed under a Students Loan unit of three people in the Ministry of Higher Education, Science and Technology (MHEST). This was causing a lot of problems in terms of loans efficacy in the country.

It is said that since the introduction of student loan scheme under the MHEST, there have been grievances from the stakeholders particularly students and parents over the loans programme operations.

The grievances have been extending far to the extent of causing student unrest and crisis. Problems associated with students’ discontent of the loan scheme operations such as demonstrations and boycotting classes have been very common in Higher education institutions in Tanzania.

The student crisis and unrest emanating from discontent to the loan scheme operations was contributed to the absence of a comprehensive and legal framework to institutionalise the provision of the Higher Education Policy of 1995 that contained the cost sharing statement. The policy advocates the establishment of students’ loans executive agency with its own autonomy and offices to deal with students’ loans. The agency was not yet established up to 2004.

Therefore, for the effective implementation of loans scheme, an independent body was to be established, mandated with all the powers of dealing with all the issues relating to student loans in the country. It is within this context that Higher Education Students’ Loans Board (HESLB) was established.

The HESLB was established in 2004 by the Act No 9 of 2004 and commenced its operations in July 2005. The Act among other things empowers the HESLB to administer and supervise the whole process of payment and repayment of loans. It is also empowered to formulate the mechanism for determining eligible students for loans.

With the establishment of the above independent entity to deal with students’ loans one would expect that the prior grievances of the stakeholders (students and their parents) to have been solved but the situation has not changed much.

In recent years students from public and private higher education institutions have been boycotting classes and demonstrating towards the HESLB offices expressing their concerns in relation to its operations. For example, in 2006/2007 academic year there was an intensive strike that started with the students from the University of Dar es Salaam and later four more higher education institutions joined. The strikes involve demonstrations, prolonged sit-ins and boycotting classes for several days.

A decade later in 2016/2017 academic year, controversial in students’ loans still persist, when hundreds of prospect students camped at the HESLB offices to follow up on possibility of obtaining loans, when they were not allocated with loans.

In addition, in recent years, the HESLB have been accused in a number of scandals including nepotism, embezzlement of resources, unnecessary delays in allocation and disbursement of funds, lack of strategies to follow up collection of loans and poor record keeping of loaners.

In order to enhance its performance, many education stakeholders suggest that the HESLB Management should be overhauled and establish the new one. Moreover, stakeholders call for revision of HESLB Act in which several areas should be re-structured including its criteria for issuing of loans and the means-testing formula in order to create more opportunities for higher education participation for students from low-social economic backgrounds.

Basing on the findings of a number of studies on students loans, it has been observed that HESLB has not been performing well in areas of the loan application procedures, criteria for allocating loans, disbursement and loan recovery. The application procedures and criteria for allocating loans are to some level not convenient to most of the targeted students.

The procedures for disbursement are also partly not convenient to the customers and the disbursement itself is encountering extreme delays. All these jeopardise the students’ investment in their future through higher education. These inconveniences may later on have a negative impact on the loan repayment process.

For instance, the inconveniences may instigate default behaviour to the borrowers especially where the borrowers incur unexpected costs in order to get the loan which finally does not help them to achieve the main objective – useful knowledge and skills from higher education institutions.

The writer is a specialist in education policy, planning, economics and finance. He is reached through: [email protected] or +255754304181