The Nigerian Education Loan Fund may be sitting on a potential N355.87bn recovery crisis unless it urgently strengthens its loan collection system before beneficiaries begin repayment, a higher education policy think tank has warned.
The iRead To Live Initiative, in a new policy brief titled Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme, said the Fund risks repeating the fate of Nigeria’s previous student loan schemes, which collapsed largely because government disbursed loans faster than it could recover them.
NELFUND has so far disbursed about N355.87bn to beneficiaries, while the earliest borrowers are expected to become subject to repayment enforcement from around 2028.
The think tank warned that the rapid expansion of the programme without a fully tested recovery mechanism could expose the scheme to serious financial sustainability problems.
“NELFUND is now moving through the same early phase that preceded every prior collapse—generous disbursement, untested recovery, and a financing base that leans more on political discretion than on the statutory formula its own founding Act sets out,” the report said.
Nigeria previously introduced student loan schemes in 1972, 1988 and 1993, but none was sustained.
According to the initiative, the critical question is whether NELFUND can avoid the same cycle of aggressive lending followed by weak repayment.
It said the country might not know whether the latest scheme has truly broken with the past until the first cohort of beneficiaries reaches the end of its statutory enforcement grace period.
“Nigeria will not know whether NELFUND has broken from the pattern of 1972, 1988, and 1993 until its first cohort reaches the end of Section 28(3)’s enforcement grace period, around 2028,” it stated.
The initiative warned that what happens before then will determine whether NELFUND emerges as a sustainable financing institution or becomes another failed government-backed student loan scheme.
“What happens between now and then—whether recovery infrastructure gets built, whether the interest ambiguity in Sections 17(1)(c) and 28(4) gets resolved, whether the Development Levy yields what Section 17(1) promises—will determine which outcome Nigeria gets,” it said.
Recovery system faces major test
The report said NELFUND has a narrow window to establish an effective repayment system before the first major wave of borrowers becomes subject to enforcement.
One of its key recommendations is for NELFUND to integrate its recovery mechanism with Nigeria Revenue Service income data to track beneficiaries and recover loans, particularly from graduates who become self-employed.
Under Section 28(4) of the Students Loans (Access to Higher Education) Act, 2024, repayments may be made through deductions of not more than 10 per cent of a beneficiary’s gross income, with employers expected to play a significant role in withholding repayments.
But the think tank said relying heavily on employer-based deductions could leave a huge gap in collections because most Nigerians work outside the formal payroll system.
It cited National Bureau of Statistics data showing that 93 per cent of employment was informal in the second quarter of 2024, while self-employment accounted for 85.6 per cent.
This, it argued, makes income tracking and recovery from self-employed graduates particularly critical to the survival of the scheme.
Without a mechanism capable of identifying borrowers, determining their incomes and enforcing repayments across the informal economy, a substantial portion of NELFUND’s loan portfolio could become difficult to recover.
NELFUND loan book expands rapidly
The warning comes as NELFUND’s programme continues to expand at a rapid pace.
The Fund opened its application portal in May 2024 and has since recorded a sharp increase in applications and disbursements.
As of September 3, 2026, NELFUND had processed 1,659,853 applications, while total disbursements had risen to N355.87bn.
The loans cover tuition and other approved student support, increasing the Fund’s financial exposure as more beneficiaries enter the system.
The Federal Government has also moved to shore up NELFUND’s funding base as its obligations grow.
In August, President Bola Tinubu directed that legally cleared liquid funds recovered by the Economic and Financial Crimes Commission and unclaimed dividends from designated trust funds be channelled to NELFUND to support the student loan programme.
But the latest report suggests that securing more money for disbursement may be only half of the challenge.
The bigger test could be whether NELFUND can build a system capable of putting the money back into the fund when borrowers begin earning.
The iRead To Live Initiative therefore urged action before repayments begin, warning that waiting until 2028 to discover weaknesses in the recovery system could be costly.
For NELFUND, the next 18 months could consequently prove more important than the billions already disbursed.
The success of the scheme may ultimately depend not on how much government lends, but on how much it can recover.
