Students loan repayment, employers’ liability
Across the globe, many countries along the development ladder have resorted to the provision of student loans designed in different forms as a structure to support students, particularly those in tertiary education, to enable them to meet their financial needs while in school.
One fundamental feature of every student loan system is the obligation to repay once a beneficiary is out of school.
This feature is premised on the fact that every student loan fund is a generational fund and as a result, requires sound management for the benefit of generations unborn, thereby making it mandatory on grounds of law and morality for every single beneficiary of students loan to demonstrate responsibility towards their repayment obligations.
In Ghana, the Students Loan Trust Fund (SLTF) is mandated under the Students Loan Trust Fund Act 2011, (Act 820) to provide financial resources and the sound management of the fund for the benefit of students in accredited tertiary institutions pursuing accredited tertiary programmes and to promote and facilitate the national ideals enshrined in articles 25 and 38 of the 1992 Constitution.
In principle, Act 820 mandates the Students Loan Trust Fund to provide subsidised loans to Ghanaian students at the tertiary level and recover same upon maturity.
The students loan scheme under Act 820 is a system where the Fund (lender) undertakes to lend an amount to students (borrowers).
It must be emphasised that an agreement constitutes a valid contract between the parties to the agreement carrying with it the intention that each party undertakes to discharge the stipulated obligations and that the law would provide a remedy if breached; or recognise an obligation if performed.
In line with the doctrine of sanctity of contract, persons with capacity to contract expect the courts to enforce the contracts they enter into, unless the contracts are vitiated by factors including fraud, frustration and duress.
Accordingly, where a party to an agreement performs his or her obligation under the agreement and the other party fails to perform his obligations, a cause of action will accrue against the non-performing party.
It must be emphasised in addition that where an obligation is imposed on a person or an entity, a right accrues to the beneficiary of that obligation in that regard.
The effect then is that where that obligation is not performed to the detriment of the beneficiary, a cause of action accrues and the breaching party is amenable to the law in that regard.
It is not denied that a contract, subject to some exceptions cannot as a general rule confer rights or impose obligations arising under it on a third party.
However, it must be emphasised that every contract is subject to public policy.
One effect of this is that, if by the nature of a contract, public policy confers a right or imposes an obligation on a third party, generally that party has no right of escape. It is common knowledge that every contract of employment in Ghana creates obligations on both the employer and employee.
Nevertheless, same contract imposes a duty on the employer to deduct income tax and pay to the Ghana Revenue Authority.
This amounts to a typical definition and reflection of public policy objective in statute.
In such instances, the law takes away from the hands of the employer or employee the power to determine compliance regardless of contractual privity. Equally, it does not admit of any suggestions or opinion from any employer or employee other than what the law says.
By the nature of students loan contract, Act 820 imposes a statutory obligation on every employer in Ghana to effect monthly deductions from the salary of an employee indebted to the SLTF without any limitation whatsoever.
Section 24 mandates employers to effect monthly deductions from the salary of the employee where the employee ‘borrower’ is still indebted to the fund.
Failure to perform this obligation constitutes a breach of section 24 of Act 820.
At section 37 of Act 820 penal consequences have been provided to the effect that any employer who fails to pay monthly deductions effected from the salary of a borrower to the SLTF within fifteen days after the deduction, commits an offence and where the employer is a corporate body, each director or manager and the secretary of that body commits the offence and in the case of a partnership, each partner also commits the same offence.
The employer is liable in civil action for the recovery of interest on the amount deducted at prevailing rate plus five per cent penalty.
On the other hand, a recourse to criminal prosecution shall be resorted to, where an employer fails to make monthly deductions from the salary of a borrower to repay the loan.
It is important to notice also, that the option of criminal prosecution is also applicable to instances where the employers have failed to remit any amount deducted to the fund.
As a standard of practice among nations that disburse loans to students, it is employers who remit repayments to relevant institutions in instances where any of their employees benefited from student loans while in school.
Secondly, Students loan scheme is a support system for generations whose family are unable to meet funding requirements for their further studies.
Finally, students loan system operates as a scheme to bridge the inequality gap existing among the citizens within nations.
Therefore, failure of any employer to discharge a lawful obligation of deducting and remitting student loans is a demonstration of gross irresponsibility on the part of that employer, a conduct that should not be countenanced within our Republic.
The writer is an officer of the Repayment and Resource Mobilisation Directorate of the SLTF.