The Federal Government has been urged to integrate the Nigeria Education Loan Fund (NELFUND) with the Nigeria Revenue Service (NRS) income database to strengthen the recovery of student loans and ensure the long-term sustainability of the scheme.
The recommendation was made in a policy brief released on Monday by the Nigerian higher education policy think tank, The iRead To Live Initiative, which warned that the country's student loan programme could face significant repayment challenges if its recovery system is not strengthened before beneficiaries begin repayment.
According to the report titled “Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme,” NELFUND has disbursed N355.87 billion in loans to approximately 850,000 students since the portal was launched in May 2024. However, the think tank cautioned that recovering the funds under the current repayment framework remains uncertain.
The organisation noted that Nigeria has about 18 months to improve its loan recovery infrastructure before the first batch of beneficiaries completes the mandatory two-year grace period after the National Youth Service Corps (NYSC) and becomes eligible for repayment enforcement.
It argued that integrating NELFUND with Nigeria Revenue Service income records would enable authorities to track borrowers who are self-employed, operate in the informal sector, or earn income outside conventional payroll systems.
According to the brief, relying primarily on employer-based deductions is inadequate in a country where a significant proportion of graduates work outside the formal employment sector.
“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 report stated.
The think tank said the proposed integration with tax records would broaden NELFUND’s recovery capacity beyond employer withholding and improve compliance among borrowers with non-traditional sources of income.
It warned that failure to implement the reforms could undermine the sustainability of the programme, recalling that Nigeria’s previous student loan schemes collapsed largely because the government struggled to recover disbursed funds.
“Nigeria has tried student loans three times before. Each one collapsed because loans went out faster than the government could ever recover them,” the report added.
Despite the warning, the organisation stressed that NELFUND cannot yet be judged by the failures of previous schemes because no beneficiary has entered the repayment phase.
The brief explained that the existing repayment framework under Section 28(4) of the Students Loans (Access to Higher Education) Act, 2024, is built around employer deductions, leaving major gaps for graduates who are self-employed, underemployed, or working in the informal economy.
It described the employer notification provision as less effective than payroll deductions administered through a national tax authority, saying it does not adequately cover the majority of borrowers expected to operate outside formal employment.
Drawing lessons from international experience, the think tank cited Kenya’s Higher Education Loans Board (HELB), which integrated loan recovery with the Kenya Revenue Authority and credit bureaus. Even with that system, about 32.5 per cent of Kenya’s student loan portfolio was reportedly in default as of June 2025.
The report said the Kenyan example demonstrates that tax-authority integration alone cannot eliminate repayment challenges in economies with large informal sectors, but it still provides a stronger recovery framework than Nigeria’s current model.
The initiative also urged the National Assembly to address what it described as an apparent contradiction in the Students Loans Act, 2024, regarding interest on NELFUND loans.
While the scheme has consistently been presented to the public as interest-free, the report noted that Section 17(1)(c) of the Act lists “repayment of capital and interest” among the fund’s revenue sources.
According to the think tank, the inconsistency could expose the scheme to legal disputes if borrowers challenge repayment terms based on the government’s public messaging.
The report concluded that the long-term success of NELFUND will depend not on the volume of loans already disbursed, but on reforms implemented before repayments begin.
“Whether Nigeria breaks its decades-long pattern of failed student loan schemes will be decided by choices made now, not by the scale of what has already been disbursed,” the brief stated.
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