Helb fights Parliament bid to cut interest rates on loans

The Higher Education Loans Board (Helb) has opposed a bid in Parliament to cut interest rates on students’ loans by one percentage points, fearing loss of Sh693 million

The Board’s chief executive Charles Ringera told Parliament Wednesday the shortfall will force Helb to trim the number of students it offers loans by 18,730, hurting learners quest to achieve higher education.

Under proposed changes to the Helb Act, interest on the loans will fall to three per cent from the current four per cent and defaulters will be exempted from paying the Sh5,000 monthly fine.

“The reduction of interest rates is likely to plunge the Helb into a huge student funding deficit where over 18,730 needy students may miss out on funding annually,” he said.

Helb is meant to be a revolving fund where beneficiaries who have finished their studies pay back the loans to support a fresh group of students.

Currently, graduates are required to start repaying the loans within a year after graduation in what has left thousands of beneficiaries in default and at risk of being blacklisted with the credit reference bureaus (CRB).

Helb data tabled in Parliament shows loan accounts in default increased to 116,642 from the 78,328 recorded in December 2019. The increase in defaulters was caused by Covid-19 pandemic triggered layoffs, business closures and freeze in hiring.

Loan defaulters have weakened the agency’s ability to support university freshers and continuing students, prompting reduction in allocations.

The average loan allocation in the current financial year is Sh37,000 per student per year, down from Sh45,000 the previous year.

Mr Ringera noted at an average of Sh37,000 per student annually, Sh693 million is adequate to fund 18,730 needy students in a year.

The proposed changes to the Helb Act come against the backdrop of job cuts and a freeze in hiring plans in corporate Kenya, denying fresh graduates the employment income they need to settle their student loans.

If lawmakers approve the changes to the law, the rate of interest charged on the student loans will now be set in law, taking away the power of setting the charges from Helb—whose responsibilities include controlling credit costs.