According to the Parliamentary Budget Office estimations, every financial year the number of students advanced loans adds up to 50,000 with each loanee getting an average of Sh200,000 to finance the completion of their higher education.
The board has suffered continued funding shortfalls due to loanees defaulting on repayment in what has worsened the plight of students from humble backgrounds, as it depends heavily on loan recoveries, government financial support.
Presently, the student financer has disbursed Sh24 billion to 300,000 students in various institutions of higher learning. The beneficiaries are expected to start servicing the loan, a year after school completion.
With over 74,000 HELB defaulters owing the government Sh7.2 billion in debt, recovering the loans will be a tough job despite ministry of education’s threats to invoke the police muscle and put in government resources to hunt the stubborn beneficiaries down.
Nominated MP Gideon Keter sponsored a bill proposing the interest on HELB loans to be slashed to 2% from the current 4% per annum.
“The aim of these proposals is to reduce the financial burden on recent graduates who are to pay large sums to the Higher Education Loans Board even before securing employment or becoming financially stable,” said nominated MP Gideon Keter.
The revision of this HELB Act aims to scrap off interest on loans offered to women, youths and people living with disabilities a move which will affect the financer’s annual earnings.
An analysis by the Parliamentary Budget Office reckons the interest cap at two per cent will leave the Higher Educations Loans Board with a financial gap of Sh543.5 million with the total interest rate amounting to will be Sh543.5 million.
If the newly proposed law is accepted by the high court, amendment of the HELB Act will be a motivation for defaulters to reconsider repaying the loan, cutting down on the cost of recovering the loans by the board.