Students apply for Helb loans in Nairobi.
The Higher Education Loans Board (Helb) has been thrust into the centre of a widening dispute over loan interests and penalties that balloon far beyond the principal amounts borrowed by students.
This follows a High Court ruling that the agency is bound by the in-duplum rule— a principle which limits interest not to go above the principal amount originally owed. The decision has now fuelled renewed calls for a class-action lawsuit from thousands of distressed former students.
In-duplum is a Latin phrase derived from "in duplo," loosely meaning "in double." The rule states that interest ceases to accumulate once the accrued amount equals what was originally loaned.
The growing attention on the judgment has prompted Helb to clarify that it complies with the in-duplum rule following public concerns over escalating loan balances.
"This means all Helb loan accounts continue to be managed in line with the judgment. Helb remains committed to fair, lawful, and transparent loan management for all alumni and beneficiaries," said the State agency.
In a judgment delivered by the High Court in Nairobi in August 2022, the court held that Helb is bound by the in duplum rule, just like banks and other lenders. This was despite loans board’s insistence that it operates under a unique statutory regime.
The court’s verdict followed a petition filed by three former university students who accused Helb of imposing "exorbitant and punitive" interest and penalties that pushed their loans to more than double what they borrowed.
The judge agreed, calling the practice discriminatory and a violation of constitutional rights.
"Simply stated, the rule means interest stops accumulating once it equals the loan amount," the judge stated, adding that Parliament introduced the rule "to tame lenders who had turned interest recovery into a cash cow."
Students apply for Helb loans in Nairobi.
The court emphasised that Helb, as a public lender serving vulnerable young people, could not be exempted.
For years, thousands of graduates complained that penalties and interest charges accumulate so aggressively that settling Helb loans becomes nearly impossible once repayment delays begin.
The first petitioner, a youth living with disability, borrowed Sh82,980 in 2004. By 2016 — despite a two percent interest rate — the outstanding amount had soared to Sh540,464.
The second and third petitioners, who each borrowed around Sh140,000 in 2016, faced debts exceeding Sh335,000 each by 2021, despite minimal or no repayments.
The court described these figures as evidence of "imprudence" that pushed balances "beyond double the principal amount after a very short period."
Helb defended itself by arguing that penalties, including the Sh5,000 monthly fine for missed installments, were statutory and that repayment obligations were not purely contractual as defined in the Banking Act.
The agency further claimed it had already begun reviewing internal policies after receiving complaints, asserting it had started capping interest and penalties to match principal amounts even without court intervention.
"Corrective action had been taken," Helb told the court in a replying affidavit, insisting the petition was premature.
However, the court rejected this argument, ruling that students should not face harsher repayment conditions than bank borrowers, particularly given their "personal circumstances of being students from humble and financially challenged backgrounds."
It found that imposing fines and interest beyond the principal violated socio-economic rights under Article 43 of the Constitution and consumer rights under Article 46.
"This has the counter-effect of making it difficult for them and others in similar situations to repay loans," the court stated in its strongly worded decision.
In a pivotal section of the judgment, the court addressed heavy penalties under Section 15(2) of the Helb Act, which mandates a Sh5,000 fine for every unpaid monthly installment.
The court stopped short of striking down the legal provision but ruled it must be "read with the in duplum rule"—meaning once the amount owed reaches double the principal, interest and fines "shall cease to apply."
Legal analysts say the ruling benefits thousands of graduates trapped by unmanageable Helb debts.
It also puts Helb on a collision course with borrowers’ rights groups, which have long argued the agency wields statutory power punitively—even threatening to publish names and photos of defaulters in newspapers, as it did in 2020.
The petitioners told the court Helb's threats, including withholding clearance certificates, hindered graduates’ employment prospects, perpetuating hardship.
Helb denied withholding clearances, claiming it does not block job seekers, but the court maintained the broader impact of unregulated penalties was undeniable.
In its reasoning, the court cited constitutional cases affirming the transformative purpose of socio-economic rights.
"The Constitution’s transformative agenda looks beyond abstract equality," the court quoted from a prior ruling, stressing the law must uplift vulnerable citizens.
The court described the in-duplum rule as "a matter of public interest" meant to restrain lenders who turn interest recovery into "a cash cow."
“The rule was introduced in our laws to tame the appetite of lenders who had made recovery of interest on advances a cash cow,” said the court.
The court ruling aligns Helb with other Kenyan lenders regarding interest limitations—potentially slashing the agency’s penalty revenue. More critically, it sets a precedent empowering former students whose debts have spiraled over the years.
A Nairobi-based lawyer familiar with public-interest litigation said the ruling "opens floodgates for a potential class-action suit," given how many Kenyans face similar penalties.
The court concluded Helb must adjust accounts to reflect the ruling and that petitioners, having received legal clarity, "must now take steps to fulfill their contractual obligations"—repaying what they owe without punitive inflation.
For graduates squeezed by unemployment and rising living costs, the judgment offers long-awaited relief—and a path to challenge years of contested interest calculations.
Whether Helb faces broader litigation or Parliament clarifies the Helb Act remains unclear as the legal and moral debate continues.
