HELB CEO Gives Stand of Waiver of Interest On Principal Amount
Higher Education Loans Board (HELB) CEO Charles Ringera, during his appearance before the National Assembly’s Education Committee at Continental House in Nairobi on September 13, 2023, challenged the proposed amendment to eliminate interest on loans granted to university students.
He argued that while this amendment aims to ease the financial burden on recent graduates, it would adversely impact financing for future generations.
Ringera emphasized that the repayment of loans is crucial to HELB’s mission of establishing a revolving fund to support other deserving students. He noted that extending the grace period to five years would reduce the number of students benefiting, as loan repayments contribute significantly to funding needy students.
He stated, “Reducing the interest rate and delaying repayment, as proposed, would negatively affect cash flows, as 37 percent of the student loan budget currently relies on loan recoveries.”
In her bill, Machakos Woman Rep Joyce Kamene advocated for interest waivers for youth and Persons with Disabilities (PWD) until they secure employment. She also proposed a five-year penalty delay for defaulting on loan repayments and limiting the maximum interest rate to three percent per annum.
Committee chairman Julius Melly questioned the impact of lowering the interest rate, calling the current 4 percent rate punitive to students. He inquired about the potential loss to HELB by reducing it.
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Malava MP Malulu Injendi raised concerns about the preferential interest rates for government officials compared to vulnerable members of society.
Ringera estimated that reducing the percentage to 3 percent would cost the government Sh1.8 billion, necessitating additional funding from the exchequer to compensate for the loss. He emphasized that this reduction would negatively affect the revolving fund, given the current annual inflation rate of 7.3 percent.
Kiambu MP Anne Muratha opposed the proposal, fearing that beneficiaries might exploit the delay provision to avoid repayment. She argued that penalties deter defaulters, while interest contributes to the cost of lending.
Ringera also highlighted the absence of a mechanism to determine employment status and how to communicate such information to HELB.
In summary, the proposed amendment to waive interest on student loans has sparked a debate, with stakeholders like Ringera expressing concerns about its potential impact on the financing of future students. This issue continues to be a topic of discussion within the Education Committee.
HELB CEO Gives Stand of Waiver of Interest On Principal Amount
