HELB To Lose At Least Ksh 15 Billion In Defaulted Students

The Higher Education Loans Board (HELB) is set to lose about 26.9percent or at least 15 billion shillings in defaulted student loans amid job cuts and a freeze in hiring in the wake of the Covid-19 pandemic.

The 15 Billion shillings account for 26.9 percent of loans that risk falling into default according to data from the Ministry of Education that was published by the National Treasury.

According to the education ministry data, it shows that this is a slight improvement from the 28 percent non-performing student loans a year earlier.

The huge loss is bound to affect HELB’s ability to offer student loans in universities and technical colleges, prompting allocation cuts.

The covid-19 has resulted in layoffs, pay cuts, and unpaid leave, making it a struggle for beneficiaries to make repayments on the strength of their payslips. Loan defaulters have weakened the HELB’s ability to support the university and technical college students, prompting allocation cuts.

Back in August, however, Helb revealed that it is set to expand its lending base despite the high default rate.

The Covid-19 pandemic that has ravaged the economy is set to see more students apply for loans due to household incomes diminishing because of job losses, pay cuts, and reduced business, according to Helb.

“Performance indicators show 26.9 percent of the Higher Education Loans Board portfolio is at risk,” reads the Education Sector Report published by the Treasury.

At 26.9 percent, the forecast Helb defaults, is double that ratio of banks’ non-performing loans that stood at 13.6 percent, the highest since August 2007. There were 492,227 mature accounts holding 58.5 billion shillings during the review period.

The Helb is supposed to be a revolving fund in which beneficiaries who have completed studies pay back the loans to support a fresh group of students.

This has, however, not been the case in an economic setting that is plagued by a hiring freeze on the back of sluggish corporate earnings.

Legislators have been pushing to increase the grace period for Helb loan repayment to five years after graduation, to allow beneficiaries time to stabilize financially.

A Labour Force Report by the Kenya National Bureau of Statistics (KNBS) released in September 2020 the rate of joblessness doubled from April to June according to quarter two.

The number of formal jobs the economy generated fell to a seven-year low in 2019 and is expected to dip further due to the Covid-19 pandemic.