The number of former university students defaulting on the Higher Education Loans Board (Helb) dropped 14 percent following a four-month penalty waiver that ended June 30.
The latest data from Helb shows loan accounts in default currently stand at 94,216 from the 109,661 recorded by February, with unpaid loans standing at Sh10.2 billion.
Helb offered a 100 percent penalty waiver from March 1 to encourage beneficiaries to repay following the impact of the Covid-19 effects on the economy.
“The Covid-19 penalty waiver brought down the hardcore debt from 109,000 to 94,216 loanees valued at Sh10.24 billion as of June 30,” said Helb chief executive Charles Ringera.
The penalty waiver campaign dubbed ‘Kamilisha Malipo ya Helb’ collected Sh559.72 million, contributing to the overall Sh5.2 billion loan recoveries for June 2022.
Mr Ringera said this was the first time the agency had collected more than Sh5 billion in loan recoveries, highlighting commitment from beneficiaries to repay their loans.
Helb is supposed to be a revolving fund in which beneficiaries who have completed studies pay back the loans to support a new group of students.
“The additional amount collected from the penalty waiver campaign enabled us to fund 21,000 out of the 75,000 students who were at risk of not being funded in FY 2021/2022,” he said.
Most loan applicants come from poor households and require financial support from Helb to pay for their tuition and upkeep.
At the beginning of February, some 75,000 university freshers were yet to get State funding to pay for their tuition and upkeep following cash flow challenges at the Helb.
The agency said it required Sh3 billion from Treasury to process loan applications for university and college students.
Mounting defaults, inadequate allocation and delayed release of cash by the Treasury have weakened Helb’s ability to support the university and technical college students, prompting allocation cuts.
Helb funds needy students to the tune of between Sh35,000 and Sh60,000 per year, based on their economic background. The average allocation has however dropped from Sh43,000 to the current Sh37,000.
Of the total loan disbursed, Sh8,000 is sent directly to the university as tuition fees and the balance to the beneficiary’s bank account in two equal tranches covering the first and second semesters.
In 2013, Helb offered a 100 percent penalty waiver which resulted in 10,110 beneficiaries paying off their loans valued at Sh1.3 billion. A similar waiver in 2018 saw 9,998 beneficiaries pay loans valued at Sh870 million.
Helb loan deductions are required to be remitted by the 15th day of every month. Failure to remit, or delayed remittance, attracts a five per cent penalty of the total amount due.
