Since the launch of its student loan portal in May 2024, the Nigerian Education Loan Fund (NELFUND) has emerged as one of the Federal Government’s most ambitious interventions in higher education financing, disbursing N355.87 billion to students and institutions across the country.
The scheme, designed to expand access to tertiary education and ease the financial burden on students, has processed more than 1.6 million applications and supported hundreds of thousands of beneficiaries. Yet, as the amount disbursed continues to rise, attention is gradually shifting from access to a more difficult question: Can the loans be recovered?
That question is at the centre of a new policy brief released by The iRead To Live Initiative, a Nigerian higher education policy think tank, which has warned that the long-term sustainability of the student loan programme may depend on decisions taken before repayments begin.
The policy brief, titled “Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme,” argues that while the programme has achieved significant reach, its repayment framework remains largely untested.
According to the report, no beneficiary has yet entered the repayment phase because the law provides a two-year grace period after the completion of the mandatory National Youth Service Corps programme. As a result, the real test of the scheme is still ahead.
The think tank estimates that Nigeria has roughly 18 months to strengthen its recovery infrastructure before the first cohort of beneficiaries becomes subject to repayment enforcement.
A major concern raised in the report is the reliance on employer-based deductions as the primary repayment mechanism. Under the Students Loans (Access to Higher Education) Act, 2024, employers are expected to deduct loan repayments from the salaries of beneficiaries working in the formal sector.
However, the think tank argues that such an approach may be inadequate in a country where a significant proportion of graduates operate outside formal employment structures.
“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.
To address this challenge, the organisation recommended the integration of NELFUND with Nigeria Revenue Service income data. According to the think tank, such a system would improve the government’s ability to track and recover loans from self-employed graduates and others who may not be captured through traditional payroll systems.
The recommendation reflects concerns that the informal nature of Nigeria’s labour market could limit the effectiveness of employer-based recovery mechanisms.
The report also drew lessons from international experience. It cited Kenya’s Higher Education Loans Board, which integrated its recovery system with the Kenya Revenue Authority and credit bureaus. Despite those measures, the Kenyan scheme reportedly recorded a default rate of 32.5 per cent as of June 2025.
For the think tank, the Kenyan example illustrates both the importance and limitations of tax-linked recovery systems in economies with large informal sectors.
Beyond loan recovery, the report also highlighted what it described as a legal ambiguity in the student loan framework. While NELFUND loans have consistently been presented to the public as interest-free, the think tank pointed to provisions in the 2024 Act that reference the repayment of both capital and interest.
According to the organisation, clarifying the issue is important to prevent future disputes and ensure transparency for beneficiaries.
The report noted that the future of the scheme will ultimately be determined not by the amount already disbursed but by the effectiveness of the structures put in place before repayments begin.
“Nigeria has tried student loans three times before. Each one collapsed because loans went out faster than the government could ever recover them,” the brief stated.
While the think tank acknowledged that it is too early to judge NELFUND by the failures of previous schemes, it argued that the coming months will be critical in determining whether the current programme can avoid a similar fate.
For now, NELFUND remains one of the most significant education financing initiatives in recent Nigerian history. But as disbursements continue and the repayment window draws closer, the conversation is increasingly moving beyond how much money has been distributed to a more fundamental question: whether the system can recover enough funds to remain sustainable for future generations of students.
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