Why HELB has Rejected Life Saving Plan for Graduates
The Higher Education Loans Board (HELB) has rejected the proposed amendment Bill 2023 sponsored by Machakos MP Joyce Kamene that seeks to ease the financial load on fresh graduates.
Under the current system, repayment of undergraduate loans commences one year after graduation.
Kamene’s proposal suggested extending the repayment period to five years for young adults and individuals with disabilities after they secure employment.
However, HELB CEO Charles Ringera expressed concerns that amending the Principal Act could lead to delays in loan repayment, which, in turn, might hinder the board’s ability to support other students in need of financial assistance.
Ringera emphasized that HELB relies on loan repayments to maintain a revolving fund for deserving students, and extending the grace period to five years might reduce the number of students who can benefit from the fund.
Additionally, Kamene proposed reducing the interest rate on loans advanced to young adults and individuals with disabilities from the current four percent to three percent per annum.
Also Read: Helb rejects Bill seeking to reduce loan burden on students
The board disagreed with this proposal, citing potential negative effects on its financial sustainability. They argued that reducing the interest rate to three percent could impact the revolving fund adversely, hampering HELB’s capacity to support financially needy students.
Ringera explained that the existing four percent interest rate is already in line with the annual inflation rate. Lowering the interest rate and extending repayment timelines could strain HELB’s cash flows, with a significant portion of the student loan budget relying on loan recoveries (AIA).
He pointed out that a judgment issued on August 19, 2023, by Justice Alfred Mabeya of the High Court of Kenya limited HELB’s ability to charge penalties and interest, capping them at the principal amount at the time of default.
Why HELB has Rejected Life Saving Plan for Graduates
