The Students’ Loan Scheme is a financial arrangement under which Ghanaian students enrolled and pursuing approved courses in tertiary institutions in Ghana are granted loans to assist with the financing of their education. Essentially, the loan is meant to supplement students’ own private resources; such as the financial support parents already give them. The Social Security and National Insurance Trust (SSNIT) has since the 2006/2007 academic year stopped granting loans to fresh students. This responsibility has been taken over by the Students Loan Trust Fund (SLTF).
The Students’ Loan Scheme has somewhat become an avenue to extort money from the very poor students for which it is meant to assist. Interest starts to accrue from the moment the cheque for the initial installment is sent to a student’s bank. So, after your loan application is approved and you start receiving payments, interest starts accruing each month – even before you graduate and find yourself a job. With this situation, the total interest that accrues during a bachelor’s degree is twice as much as the principal.
In a situation where a graduate finds job years after school, interest still accrues on all those years of unemployment. Even when a graduate finds a job, the income is very low so that the person lives from ‘hand-to-mouth’. Studies emphasise that one of the factors which hamper graduates from marrying is the student loan, due to the huge debt which is a burden for most graduates.
What is fascinating about the loan is that interest is applied at the beginning of the month, say March 3, and this same interest is moved to the end of the month, say March 25. So, if you take a statement of the loan on March 5, you will see the interest has been applied on March 3, and when you take a statement on March 30, you will see the interest has been moved from March 3 to March 25. This means that if you pay all your debt on March 2, you will still have interest to pay which was applied on March 3, because your payment on March 2 will reflect on March 5.
The Students Loan Scheme which seeks to provide financial support for students has now become an avenue to extort money from graduates who find it difficult to find a job and struggle to pay the loan. It is time the SLTF explained to us why they apply interest at the beginning of the month and then move the interest to a later date in the same month? If not for their own selfish interests, why would they do such a thing? Why not wait and apply the interest at the end of each month?
Further, the SLTF states that names of defaulters will be published in the national dailies if they fail to repay their loans on time. However, the time is not specified – making it unclear when their names would be published after graduating. It is not with intent that these individuals still find themselves on the defaulters list – many graduates are unemployed and struggle to feed themselves– but we treat them as criminals or crime suspects on a wanted list.
First, the publication of names of defaulters in the National dailies by the SLTF only seeks to ridicule the very poor graduates who are struggling to pay back their loan. The question we should ask is: has publishing of names of defaulters in the dailies achieved a significant reduction in loan debt? Of course not!
Second, such a publication affects one’s ability to obtain loans from any other financial institution since it creates an impression that these persons will not pay back any loan given to them. However, this is not the case since many graduates take loan to start a business idea in order to make life for themselves.
Third is the embarrassing moments at the workplace or among peers. We may not realise it, but such individuals are made fun of at the workplace or among their peers. Even at school, when you answered a question wrongly, people made fun of you.
I would urge the SLTF to channel their efforts into the various ways by which the Students Loan Trust Fund Act stipulates loans can be collected, since publication of defaulters’ names in the national dailies does not achieve significant reductions in loan debt and only ridicule poor graduates who are struggling to pay back their loan. The Students Loan Trust Fund Act needs amendment to restrain the SLTF from publishing names of defaulters in the dailies.
In addition, the SLTF should provide the public with explanations on why interest is applied at beginning of the month, and the same interest is moved to end of the month. Many graduates who share same concerns might not be able to share their frustrations and stories in the media because of stigmatisation or ridicule.