State opposes change to Helb loans terms
The Higher Education Loans Board offices in Nairobi.
What you need to know:
- Helb Act seek to reduce the interest rate charged on student loans and extend the grace period before repayment starts.
- Committee deputy chairperson Malulu Injendi questioned the rationale behind charging 4 per cent interest on Helb loans.
The government is opposed to amendments to the Higher Education Loans Board (Helb) Act that seek to reduce the interest rate charged on student loans and extend the grace period before repayment starts.
Appearing before the National Assembly’s Education Committee yesterday, Higher Education and Research Principal Secretary Beatrice Inyangala said such changes would affect Helb’s loan collection and threaten its sustainability.
The amendments are contained in two Bills that seek to reduce the interest rate from 4 per cent to 3 per cent and increase the grace period before loan maturity from one year to five years, and to exempt borrowers under the age of 35 years from repaying their loans before they are employed.
The Higher Education Loans Amendment Bill (2022) and the Higher Education Loans Amendment Bill (2023) were authored by Machakos Woman Rep Joyce Kamene.
Committee chairman Julius Melly said the Bills should not have been given a first reading in Parliament before it was referred to the committee for review.
“Notwithstanding the provisions of subsection (1)(b), no interest shall be charged on the principal amount advanced to the youth and persons with disabilities until they have secured their first employment after completing their studies,” the 2023 Bill reads.
Helb CEO Charles Ringera said loan recovery accounts for 37 per cent of Helb’s budget and if the grace period is extended, the National Treasury will have to allocate more money to the board. He said that if the interest rate is reduced to 3 per cent, Helb would lose Sh1.8 billion annually in recoveries. He added that the default rate is currently at 27 per cent and that the board’s coffers are shrinking due to inflation.
Ms Kamene argued that some students miss out on jobs because they are listed by credit reference bureaus.
“Let’s be more lenient with them. We’re going through a financial crisis. Let’s look at our youth. Let’s relax some of the strict laws so that they can have access to education,” she said.
Committee deputy chairperson Malulu Injendi questioned the rationale behind charging 4 per cent interest on Helb loans.
Mr Ringera also revealed that the board had not disbursed loans to either continuing or first year students.
