The Influence of Students’ Loans Borrowers’ Characteristics on Default Rate in Tanzania

Veronica R Nyahende

doi:10.5539/hes.v3n4p26

Abstract

The cost of students’ loans defaulting has lead to a serious discussion among participants. Substantial attention has been made on the students’ loans and its impact on higher education finances while researches on students’ loans defaults have not been taken for more than a decade. Therefore this study examines the influence of students’ loans borrowers’ characteristics on default rate in Tanzania by taking into consideration the background characteristics termed as pre-college measures, these factors includes age, gender and attitude. This study was conducted in Dar es salaam region, were by five universities from the region formed the basis of the population and respondents encompasses only students who were loans beneficiaries from these universities/colleges. Data were collected from 150 respondents. Data collected were analyzed using Software Package for Statistical Science (SPSS) and the techniques used for data analysis were regression and correlation. The study concluded that age, gender and attitude has an influence on the students’ loans default rate. The study also recommends that higher education students’ loans board (HESLB) should conduct an attitude tests among loans applicants before loans provision by using personal interview and observation by competent psychologists on behavioural science by conducting psychomotor test to understand the attitude among the loans applicants, those with negative attitude should be declared ineligible for students’ loans. Age should be given priority by HESLB before loans provision only applicants with the age of 18-24 years should be considered as eligible for students’ loans. Strict rules and regulation against males applicants should be instituted by HESLB to ensure their ability and willingness to repay back the loans for instance presence of genuine grantor and adequate collateral security. Students’ loans beneficiaries should be educated by HESLB to reduce confusion on repayment process.

Highlights

Students’ loans are loans offered to higher education students to pay off educational related expenses such as tuition fees and research expenses (Jackson, 2002)
The findings indicates the following sample characteristics (1) more than a half of the respondents were of the age of 18-24 years, the remaining less than a half were distributed among 25-30 years, 31-35 years and 36-40 years, in which respondents with 41 and above years were formed by only 3% of the respondents
This results were expected by the researcher because the age of 18-24 is a schooling age so more respondents were expected to be of the age between 18-24 years and less on 41 years and above, Refer Table 6 in Appendix II (2) respondents’ gender were fairly represented by the sample because nearly three quarter of the respondents were males where by females forms only a quarter of the respondents

Summary

Introduction

Students’ loans are loans offered to higher education students to pay off educational related expenses such as tuition fees and research expenses (Jackson, 2002). Tuition fees are going up and grants alone are not sufficient to meet the costs of obtaining higher education (Johnstone, 2006). In this aspect there is an increase in growth of students’ loans schemes to support higher education due to the increasing importance of higher education in the 21st century. According to Baum and O’Malley (2003) students’ loans borrowers have different characteristics which affects their propensity to repay back the loans accelerating the rate of defaulting These characteristics are categorised into background characteristics termed as pre-college measures, college experiences and post-college measures (Matt & Teszler, 2003). Post-college measures which are the characteristics attained by a students’ loans borrower after graduation, these includes characteristics such as highest degree attained, www.ccsenet.org/hes

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Results

Conclusion