A graduation ceremony. The Helb Act requires employers to notify the board within three months of employing a beneficiary of the scheme which grants subsidised loans to needy students to pursue university education. Helb then confirms whether the employees benefited from the loans and advises the employer how much to deduct until payment is made in full. File
What you need to know:
Rising demand for student loans has forced Helb to step up its recovery programme with defaulters paying a penalty of Sh5,000 per month, a charge that automatically stops once payments begin.
Defaulters on Higher Education Loans Board payments could soon be locked out of private sector jobs if employers heed an appeal by President Mwai Kibaki.
People seeking employment in the public sector are already required to be cleared by the Higher Education Loans Board (Helb) before they can take up the appointments, a procedure President Kibaki wants effected by the private sector.
“I encourage the private sector to support the government’s initiatives to recover education loans by requiring those seeking to work with them to clear with Helb in order to motivate all those who may not be servicing their loans to do so,” Mr Kibaki said, during the award of a charter to the Great Lakes University of Kisumu on Friday.
The Kenya Private Sector Alliance said it would have to discuss with employers before it implements such a policy.
“If the process has to be changed then we need to sit down and deliberate on how exactly it is going to be done,” Kepsa CEO Carol Kariuki said. She said employers always comply with the
requirements of the loans board and that changes in the recovery system would affect mostly employees.
“New employees are normally required to inform their employers of outstanding balances with the Higher Education Loans Board so that deductions can made and remitted,” Ms Kariuki said.
Helb has been struggling to recover collections from past beneficiaries with annual collections falling short by a half. According to data from the Ministry of Higher Education, the board collected Sh4.1 billion in 2011/2012, against a target of Sh8 billion.
Recovery has in most cases been hindered by beneficiaries of the loans not being in gainful employment to start servicing their loans. The board has, however, been encouraging the unemployed to keep it updated of their status because the law requires the loans to be repaid one year after completion of a course, not upon securing a job.
Helb’s tracking system is also wanting, leading to many beneficiaries in informal or self-employment not repaying the loans.
The Helb Act requires employers to notify the board within three months of employing a beneficiary of the scheme which grants subsidised loans to needy students to pursue university education. Helb then confirms whether the employees benefited from the loans and advises the employer how much to deduct until payment is made in full.
The penalty for not doing so is Sh3,000 per beneficiary for every month that the employment goes unreported.
In a notice carried earlier this month, Helb said it would send inspectors to ascertain compliance by employers.
Rising demand for student loans has forced Helb to step up its recovery programme with defaulters paying a penalty of Sh5,000 per month, a charge that automatically stops once payments begin.
In 2010, the agency recovered Sh2.3 billion from past beneficiaries and disbursed Sh3.5 billion in fresh loans, leaving a gap of Sh1.2 billion that the government filled through grants. The student population in both public and private universities has risen sharply after several universities undertook a double intake last year to clear a two-decade admission backlog.
