University students who are beneficiaries of the Higher Education Loans Board (HELB) loans have suffered a major setback after Members of Parliament rejected the bid to ease the repayment terms.
A committee of the National Assembly on Monday, August 30, rejected the proposed bid to slash the interest charged on HELB loans to three per cent. They also rejected the bid to increase the repayment grace period to five years.
According to the Education Committee, if the Higher Education Loans Board (HELB) Bill 2020 is adopted, the board is at risk of recording a loss of Ksh693 million annually.
“The reduction of interest rate to three percent is likely to plunge the Board into a huge student funding deficit where many needy students will miss out on the funding,” it said in a report.
Under the proposed Bill, the interest on the loans would have dropped from the current four per cent, cushioning unemployed graduates from the Ksh5000 monthly defaulting fines.
The Bill was also taking away the power of setting interests rates from HELB and allowing the changes only to be made through government laws.
The committee rejected all the proposals terming them as ambiguous.
“Subjecting applicants’ interest rate approval to a third party creates a risk of reducing Helb’s revenue in the event that the interest rate is varied downwards,” reads the report.
The committee chaired by Busia Woman Representative, Florence Mutua, defended HELB arguing that the move to take away the powers from the board are against Section 6 of the Helb Act.
“In the event that the interest rate is varied downwards, Helb’s financial capacity to fund students will be grossly affected. This, therefore, requires the National Treasury to provide more budgetary allocations to Helb,” reads the report.
“Loan recovery has been a major component of resource mobilization for Helb as a revolving fund has immensely contributed to annual students funding budget. Consequently, it has been instrumental in Helb’s pursuit to create a national sustainable revolving fund from where future generations can borrow for tertiary financing even with minimal exchequer support.”
Currently, all Helb loan beneficiaries are required to start repaying within one year of completing their studies. The proposed Bill was to allow them take a break before starting to pay the loan.