College and university students will be handed a reprieve if a bill slashing interest charged on higher education loans is enacted.
The Higher Education Loans Board (Amendment) Bill, 2020, increases the grace period for repayment of the loan to five years.
“The principal object of this bill is to amend the Higher Education Loans Board Act to waive the imposition of interest on the principal amount of a loan advanced to the youth and persons with disability until such a time as they have secured their first employment,” the bill reads.
The bill reduces interest on the loans from the current four to three per cent and shields jobless graduates from fines imposed on defaulters.
Currently, Helb loan beneficiaries are required to start repaying the loans within the first year of completing their studies or graduating, a requirement that has left thousands of jobless beneficiaries in default.
Helb imposes a Sh5, 000 monthly penalty for defaults. In addition, the defaulters are at risk of being listed with the Credit Reference Bureau.
“The aim of these proposals is to reduce the financial burden on recent graduates who are expected to pay large sums of money to Helb even before securing employment or becoming financially stable,” the Bill reads.
“The maximum interest rate to be charged by the board on the principal amount advanced to a loanee shall not be more than three per cent per annum. It provides that the penalty charged on defaulting of the loan shall be charged after securing employment or five years after completion of studies ”.
The proposed law is sponsored by youthful nominated MP Gideon Keter who seeks to cushion young graduates. The Bill has been introduced in the National Assembly for the First Reading.
The bill will likely hit Helb finances as it relies on loan recoveries to support other needy students.
Helb is designed as a revolving fund where beneficiaries who have completed their students pay back to support a fresh group of students.
The board is struggling loans, some as old as 30 years. Early this year, the agency announced that it was pursuing some 78, 328 defaulters holding Sh7.7 billion as at December last year.
Edited by Henry Makori
