Interest on HELB Loans Will Fall From 4% Under the Proposed Changes

By Getrude Matayo

If lawmakers approve changes to the law, the interest charged on college student loans will be cut to three percent and the grace period for repayment increased to five years after graduation.

Act interest on loans will fall from 4 percent under the proposed changes to the Higher Education Board (HELB) to cushion jobless graduates from the 5,000 shillings monthly fine for defaults.

According to the Bill that has been tabled in Parliament, the aim of this proposal is to reduce the financial burden on recent graduates who are expected to pay large sums of money to HELB even before securing employment or becoming financially stable.

It sets the percentage of the interest that may be charged on the loan advanced at three percent. It also provides that the penalty charged on defaulting of the loan shall be charged after securing employment or five years completion of studies

Currently, graduates are required to start repaying the student 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)

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

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.

Early this year, the agency said it was pursuing some 78,328 defaulters holding 7.7 billion shillings as of December 31^st last year.

It said it has been forced to write off loans worth 55.6 million shillings after it established that 653 beneficiaries have since died.

Stats show more than 347,315 loanees are not yet due for repayment as they are either still students or within the grace period before repayment is due.

Due to the pandemic, about 2.23 million workers lost jobs in six months to June when Kenya imposed a lockdown that led to layoffs and pay cuts.

According to HELB, beneficiaries are currently expected to start repaying one year after completing studies and risk blacklisting with CRBs for defaulting.