Economy

Helb now goes after guarantors in student loan recovery plan

helb

Helb loan defaulters queue at the board's offices at Anniversary Towers in Nairobi: The agency seeks to recover Sh4.12 billion in the current fiscal year ending June 30, 2017 and efforts to get guarantors involved are part of that plan. FILE PHOTO | SALATON NJAU

The Higher Education Loans Board (Helb) has begun pursuing guarantors of student loans as it seeks to recover billions of shillings from past beneficiaries.

The higher education financier has been piling pressure on the loan defaulters and guarantors, marking a change of tack in its strategy to collect the money it needs to plug a funding gap.

It has written to the loan guarantors reminding them of their legal obligation to ensure the loans are paid as specified in the contract agreements.

“We are contacting guarantors of those who are not easily traceable, probably living in a foreign country, or those who have failed to pay for more than 10 years,” said Helb chief executive officer Charles Ringera.

“The beneficiaries are expected to contact Helb and start paying the loan a year after completing college. In cases where we do not hear from them even after contacting them we are forced to contact the guarantors.”

Last year, Helb began blocking disbursements to applicants whose parents had failed to repay the loans advanced to them during their time as students.

The agency said money would only be released into such students’ accounts after their parents resumed paying their loans.

The agency has over 85,000 loan defaulters owing Sh9.7 billion.

So far a total of 159,997 graduates have fully repaid their loans worth Sh12.3 billion while a total of 132,233 beneficiaries are servicing loans worth Sh19.8 billion.

Helb seeks to recover Sh4.12 billion in the current fiscal year ending June 30, 2017 and efforts to get guarantors involved are part of that plan.

The Treasury in its 2017/2018 budget proposal allocated Helb Sh10.1 billion, half the amount it requires in the coming fiscal year.

Part of the allocation from the Treasury is Sh2.5 billion from loan recoveries and Sh6.6 billion from direct Treasury allocation.

READ: Varsity students face cash crunch after Helb budget cash falls short

ALSO READ: Uhuru opens up Helb to Kenyans studying abroad

However, the Treasury allocation and loan recoveries are not enough to finance the agency’s Sh19 billion budget in the next fiscal year.

Mr Ringera said Helb will continue to explore various options to have the defaulters settle outstanding debts. Helb has in the past involved employers in its funds recovery effort and traced defaulters using digital footprint, names and personal identification number at the Kenya Revenue Authority.

The agency has also offered amnesty in the past, allowing defaulters to pay a lumpsum without the accrued interest. Helb has also blacklisted loan defaulters with credit reference bureaus.

Two years ago, Helb hired debt collectors to track loan defaulters living abroad and the effort has so far helped recover Sh500 million. The revolving fund is set to hire additional debt collectors to smoke out loan defaulters.

Helb requires the money to finance students at mid-level college and foreign universities and enable it to adopt a funding model based on the cost of university degree a student is pursuing. 

In October, President Uhuru Kenyatta directed Helb to begin funding Kenyan students studying in universities outside the East African Community.

Helb projects that loans to students in technical and vocational education and training (TVET) institutions is set to grow to Sh1.3 billion in the coming year, up from the current Sh900 million, as the government puts focus on producing skilled labour.

READ: World Bank shines torch on Helb cash and high expenses

The Kenya Universities and Colleges Central Placement Service has announced that all the 88,929 candidates who scored between A and C+ grades in last year’s KCSE exams will get a place in public universities, 20 per cent more than the 74,389 who took the test in 2015 and joined public universities last year.

University admission has grown from 67,790 students in 2015 and 53,010 in 2014, to the current levels, stretching Helb’s funding capacity.

The loans agency in 2015 cut the highest allocation per student to Sh50,000 from Sh60,000 per academic year for freshmen who joined university last year. Most of the students come from poor backgrounds and require financial assistance for tuition fees and upkeep.

Official data shows that public universities had 512,924 students last year, up from 195,528 in 2012.

Demand now comes from 68 universities and 130 colleges yet Helb is only able to finance 30 per cent of the student population based on their vulnerability.

The underfunding has prompted protests from students in recent years due to delays in disbursing the loans. The delays mean students, must rely on other means to cater for their tuition, accommodation and upkeep as they await the government funding.

The freshmen have particularly been hit hard, with the majority missing out on university accommodation.

The failure to meet the growing financing needs of students has also forced continuing students to stay away from learning institutions until they can raise the required fee for admission.

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