Loans are crushing graduates and leaving millions in debt

KAMPALA, UGANDA — Alfred Ssekito is grateful for the government loan that enabled him to become the first member of his family to graduate from university.

The problem is that the 25-year-old has no way to pay him back.

He was granted a one-year grace period after graduating with a Bachelor of Education degree from Kampala International University in 2018. And he had to repay 130,000 Ugandan shillings ($37) every month, paying off his 7 million shillings ($1,968) student loan by 2024. But after failing to land a job as a secondary school teacher, he wins a monthly income of 600,000 shillings. ($169) by selling tomatoes – and has only made one loan repayment so far.

“I have to deprive myself of some basic needs to be able to repay this loan,” Ssekito says, adding that he has to help support three younger siblings. “It’s very hard for me.”

Uganda’s student loan scheme dates back to 2014, when parliament established the Higher Education Student Funding Council to make higher education more accessible to low-income youth. As of October 2021, approximately 11,000 students could borrow funds at an interest rate of 7% to attend 11 public universities, 11 private universities and 36 training programs. But of the roughly 3,000 who have completed their studies, only 30% are on track to repay their loans, says Bob Ambrose Nuwagira, spokesman for the council. The amount of money officials need to recover exceeds 32 billion shillings ($9 million), jeopardizing the entire scheme.

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Governments around the world are grappling with soaring student loan debt, as the share of college-age people enrolling in vocational colleges and universities has doubled from 20% to 40% in the past 20 years, according to data from the United Nations cultural organization, known as UNESCO. In the United States alone, outstanding federal student loan debt has tripled since 2007, reaching $1.6 trillion in 2020.

In Uganda, Ssekito wants to renegotiate its repayment terms, which Nuwagira says can be arranged on a case-by-case basis, especially for graduates in fields where the pandemic has severely limited job prospects. The government’s position is that any graduates who are struggling to repay their loans should notify the funding committee, he says, rather than allowing debts to pile up indefinitely.

But in light of the sheer number of outstanding loans, the council has launched more coercive efforts to seek repayments. These include contacting employers to hand over 30% of the salaries of loan recipients – and denying them passports and other government documents.

“What they repay pays for another cohort the following year,” says Nuwagira. “If they don’t pay, there will be no sustainability.”

Critics say the government should accept more responsibility for leading thousands of young adults to failure. Two of Uganda’s neighbors offer more lenient models: the Kenyan government subsidizes its student loan interest rates; Tanzania has eliminated penalties for defaulting loans.

“I have to deprive myself of some basic needs to be able to repay this loan.” University graduate

Deborah Kirabo, program manager at the Uganda Youth Network, a non-profit economic empowerment organization, said the student loan scheme faced challenges given the country’s high youth unemployment rate, cited at 13% in October by retired Colonel Okello Charles Engola Macwodogo, Ugandan Minister of State for Labour, Employment and Industrial Relations.

Even after earning diplomas or certificates beyond secondary level, the majority of Ugandan young adults end up working in the informal sector, Kirabo says, including domestic and agricultural work. For those who obtain positions requiring a university degree, earnings tend to be low during the first years of employment.

“How are they going to get the money back?” said Kirabo. “Even people who have studied science take time to find a job. How can someone repay if they cannot feed themselves or support themselves? »

Under the current loan process, applicants submit forms and are interviewed based on their academic qualifications, proposed study programs, and ability to afford tuition without assistance. Those determined to have low incomes and high academic potential are enrolled, with tuition fees covered by the loan. They still have to pay for their accommodation, food and any other needs.

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Apophia Agiresaasi, YPG Uganda

Edna Mubeezi, a nurse at CoRSU Rehabilitation Hospital in Entebbe, a town in central Uganda, paid off her student loan in two years. Other recipients have struggled to do so.

Not everyone is unhappy with the conditions. Edna Mubeezi credits her government loan with supporting her nursing education at Mulago School of Nursing and Midwifery. After graduating in 2017, she managed to pay off her 5 million shillings ($1,400) debt in two years, thanks to her monthly salary as a registered nurse at CoRSU Rehabilitation Hospital in Entebbe, a city from central Uganda.

“I kept paying in installments every month,” she says. “At one point I sold my cow for 2 million and paid the rest.”

Mubeezi says the fundraising council should be sympathetic to those who cannot afford to pay. But she thinks the board should consider tougher consequences to recover the funds for those in employment who have defaulted on their loans or who have formally requested adjusted repayment terms. She wants the next generation to benefit from the program.

But Ssekito says if the government forces him to repay his loan now, he won’t be able to cover his basic needs, like food and clothing.

He still hopes to find a teaching job now that schools have reopened. They had been closed since March 2020 due to the pandemic. The student loan plan should continue, he says, but with much stronger guidance for applicants.

“Those considering getting a loan should start planning earlier how to pay, like starting a small business so it grows as you study,” he says, “not just waiting to find a job.”

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