Varsity loans crisis as Helb cash crunch bites

Treasury secretary Henry Rotich (left) and Helb CEO Charles Ringera. PHOTOS | FILE
Treasury secretary Henry Rotich (left) and Helb CEO Charles Ringera. PHOTOS | FILE 

Treasury secretary Henry Rotich has accused Higher Education ministry officials of failing to develop long-term plans for disbursement of student loans, causing incessant funding shortfalls that are hurting learners from poor backgrounds.

Thousands of students, including first years, have yet again missed out on the critical funding this year — a situation that has played out over the years, sparking student protests.

“We have been telling them to draw a cash plan covering the whole financial year based on a growing student population instead of making requests every other month when they run out of cash,” Mr Rotich said in an interview.

It has become the norm for the Higher Education Loans Board (Helb) to request top-ups from the Exchequer at the eleventh hour, upsetting fiscal planning at the Treasury.

Most of the students in public universities come from underprivileged backgrounds and require financial assistance to pay tuition fees and upkeep. 

The erratic funding therefore poses a challenge to Kenya’s quest to build a large pool of trained manpower — especially in the sciences — that is needed to get the economy industrialised by 2030. 

Thousands of freshmen are yet to receive a penny from Helb a month  after joining university in September despite making requests for the assistance — setting them on a turbulent beginning of their studies.

Higher Education principal secretary Colleta Suda and Helb chief executive Charles Ringera did not respond to questions on the matter.

Loan runouts

Mr Rotich said the frequent student loan runouts violate the government’s policy to prioritise education capitation, security, health and food as primary needs in the economy.

First years have in recent years been forced to wait for government loans long after reporting to university, a departure from the past when the cash was credited to their accounts before admission dates.

Helb is this year expected to disburse Sh3.3 billion to about 80,000 freshmen. The delays have forced the learners to find alternative means of paying for their tuition, accommodation and upkeep as they await funding.

Similar delays have been experienced in previous years as Helb struggled with difficulties chasing past beneficiaries, who have refused to pay their loans, and meeting the demands of a rapidly growing student population.

Mr Ringera, the Helb chief, early this month announced that the freshmen will have to wait longer for the loan disbursements, citing failure by some of them to sign loan application forms.

The agency said awarding of the loans could not start until all applications are signed and submitted.

The freshmen joined university in September and are relying on parents and guardians for upkeep and fees, stretching family resources to the limit in a tight economy that has seen the Treasury revise 2017 growth forecasts from 5.9 per cent to 5.5 per cent.

Mr Rotich said that the Ministry of Education had not made an official request for Helb cash to finance the new students, meaning the student loans could delay further.

“They have not made a formal request through the IFMIS [the Integrated Financial Management Information System],” he said. All public institutions are required to conduct transactions through the electronic platform, IFMIS, as a measure to boost accountability and curb fraud.

Loan recovery

The student financier relies on loan recoveries and government capitation to fund new and continuing students.

The Treasury allocated Helb Sh10.1 billion this financial year, half the amount it requires, including loan recoveries. Efforts to get top-ups through a supplementary budget flopped after the National Assembly declined to approve the increments.

The agency recovered Sh4.1 billion last financial year ending June, up from Sh3.9 billion a year earlier. Some 85,000 loan defaulters owe it Sh9.6 billion.

The agency last month raised the alarm over massive job cuts in the economy that have seen beneficiaries of student loans stop repaying midway, boxing it in a tight fiscal corner.

Helb advances needy students between Sh35,000 and Sh50,000 per year, based on their economic background.

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.

Helb loans come at an interest rate of four per cent per year and beneficiaries are expected to start servicing them a year after graduation. Failure to do so attracts a penalty of Sh5,000 every month.