The Higher Education Loans Board has rejected the proposed amendment Bill 2023 sponsored by Machakos MP Joyce Kamene.
The Bill proposed to reduce the financial burden on recent graduates who are expected to pay large sums of money to the Higher Education Loans Board even before securing employment or becoming financially stable.
Currently, undergraduate loan repayment starts within one year of completion of studies.
Kamene had proposed an extension of five years for youths and persons with disabilities for them to be able to repay the loan after securing employment.
However, Helb CEO Charles Ringera said if the Principal Act is amended, other students in need of funding will not be able to get the funds as there will be a delay in loan repayment.
He said Helb relies on the loan repayment to fund other students in need of the money.
“Loan repayment is key to Helb’s mandate of creating a revolving fund for the benefit of another deserving student," Ringera said.
"Extending the grace period to five years will mean funding fewer students because income from loan repayment goes towards funding other needy students.”
Kamene had further proposed the reduction of interest rate on the principal amount of loan advanced to the youths and PWDs, from the current four per cent to three per cent per annum.
“The percentage of interest that may be charged on the loan advanced to be fixed at not more than three per cent per annum,” reads the Bill.
However, the board disagreed with the proposal adding that it compromises the sustainability of the management.
The Board noted that reducing the current rate to three per cent will negatively impact the revolving fund, hence negatively affecting Helb’s ability to finance needy students.
Ringera said the current four per cent is already an annual inflation rate.
“Reviewing the interest rate downwards and the proposed delay in repayments will have an adverse impact in terms of cashflows to fund students where currently 37 per cent of student loan budget is from AIA (Loan Recoveries),” Ringera said.
“It means Helb will need more capitation from the National Treasury to make up for the loss in interest.”
“A judgment delivered on August 19, 2023, by Justice Alfred Mabeya of the High Court of Kenya fixed Helb interest and penalties charged, in that the maximum that Helb can charge penalties and interest is limited to the principal amount as the time of default.”
