Financing higher education in Tanzania: Exploring Challenges and potential student loan models

University essay from Lunds universitet/Innovationsteknik

Abstract: The demand for higher education is quickly rising in the Sub-Saharan Africa region and the question of giving access to all members of society often comes down to financing. Many countries, including Tanzania, have opted for cost-sharing policies where the cost of education is split between the state and the individuals - leaving many without the possibility of attending higher education. This master thesis, conducted together with Swedish NGO Help to Help, aims to research the challenges students in Tanzania face when financing higher education, and understanding the implications of different student loan terms and policies in the Tanzanian context. This study is based on a literature review, qualitative interviews, both with students in Tanzania and experts in the field, and a quantitative analysis of different loan models. The loan model analysis examines the perspective of both main stakeholders of a student loan - the lending entity and the student - by looking at key measurements such as repayment burden and built-in subsidies. Students in Tanzania encounter several challenges when they are trying to finance higher education. Given that the main realistic financing alternative is the governmental student loan institution (HESLB), many of these challenges are related to their operations. The preeminent one is that HESLB lacks the supply to grant everyone who needs a student loan. There are many factors in a student loan design that have a large operational and financial impact. The primary ones include the repayment plan, the interest rate, and the policy of payment deferment. These terms have a great impact on the repayment burden of the loan beneficiary and the number of built-in subsidies that the lending entity allows. Organizations giving student loans are faced with the dilemma of keeping themselves financially sustainable while also taking social responsibility by supplying fair loans. Balancing these two sides could lead to long repayment horizons, large capital risks, and much uncertainty. Keywords: student loans, Tanzania, loan policies, repayment burden, income-contingent loans

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