The Federal Government has been urged to urgently reinforce the repayment structure of the Nigeria Education Loan Fund, NELFUND, as concerns mount that recovery of the N355.87 billion already disbursed could prove difficult once repayments commence.

According to Vanguard, this warning was contained in a policy brief released on Monday by the iRead To Live Initiative, a higher education policy think tank.

The organisation called on the government to link NELFUND with income records held by the Nigeria Revenue Service, a move it said would help track beneficiaries and support loan recovery, especially among self-employed graduates and others who fall outside the formal payroll system.

The policy brief was titled “Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme.”

Since its portal went live in May 2024, NELFUND has disbursed N355.87 billion in loans to approximately 850,000 beneficiaries.

Despite this scale of disbursement, the think tank noted that the scheme’s capacity to actually recover the funds has not yet been tested, cautioning that the existing repayment framework may leave authorities unable to locate a substantial number of beneficiaries once repayment obligations begin.

According to the group, Nigeria has about 18 months left to shore up its loan recovery systems before the first set of beneficiaries, having completed the mandatory two-year post-NYSC grace period, become liable for enforcement.

“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.

The think tank explained that connecting NELFUND to Nigeria Revenue Service income data would allow the government to monitor self-employed graduates, thereby widening recovery efforts beyond deductions handled through formal employers.

It maintained that depending mainly on employers to deduct repayments was insufficient in a country where a large share of the workforce operates informally.

“The central recommendation is straightforward: use the roughly 18 months before the first cohort’s enforcement window opens to integrate NELFUND with Nigeria Revenue Service income data, extending recovery capacity to self-employed graduates rather than relying on employer withholding alone,” it said.

The group cautioned that if this recovery gap is not addressed, NELFUND could face the same sustainability challenges that derailed earlier Nigerian student financing efforts.

“Nigeria has tried student loans three times before. Each one collapsed because loans went out faster than the government could ever recover them,” it stated.

Nonetheless, the think tank conceded that it was still too early to measure NELFUND’s performance against those earlier failed programmes, since no cohort of beneficiaries has yet reached the repayment stage.

“No cohort has yet reached the repayment window,” it noted, adding that the genuine test for the scheme would only begin once repayments start.

Among the framework’s key weaknesses, the think tank pointed to its heavy reliance on formal employment, a structure it said is poorly suited to Nigeria’s significant level of economic informality.

Referencing Section 28(4) of the Students Loans (Access to Higher Education) Act, 2024, the group argued that employer-based deduction mechanisms would fail to adequately cover graduates who are self-employed, underemployed, or working outside formal structures.

The brief noted that the employer-notification provision “is not automatic in the way payroll withholding through a tax authority is, and it does nothing for the self-employed majority Section 28(4) also depends on.”

The organisation pointed to Kenya’s Higher Education Loans Board as a comparative example, noting that it has integrated its recovery system with both the Kenya Revenue Authority and credit bureaus.

Even with this integration, the think tank observed that 32.5 per cent of Kenya’s student loan portfolio was in default as of June 2025, illustrating that tax-authority linkage alone does not eliminate repayment challenges in economies with widespread informality.

“NELFUND sits closer to grant-like systems than to the tax-integrated models that have achieved the highest recovery rates elsewhere,” the brief said.

It further pointed out that NELFUND does not yet have the kind of tax-authority integration that Kenya has, despite Nigeria’s own sizeable informal labour market.

The think tank additionally urged the National Assembly to clarify the legal standing of interest on NELFUND loans, pointing to what it called an apparent contradiction within the 2024 Act.

It observed that although the loans have been publicly described as interest-free, Section 17(1)(c) of the Act lists “repayment of capital and interest” among the Fund’s sources of revenue.

The group warned that this discrepancy could leave the scheme exposed to legal challenges from borrowers who took the loans based on its public presentation as an interest-free programme.

It concluded that NELFUND’s future would hinge on the measures put in place before repayments begin, rather than on the volume of funds already disbursed.

“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.