Beneficiaries of loans from the Higher Education Loans Board (Helb) may soon start repaying four years after graduation.
The Building Bridges Initiative (BBI) team has proposed changes to the Higher Education Loans Boards Act, to allow graduates a longer grace period.
“A loanee shall be required, subject to and in accordance with this Act or any regulations made thereunder, not earlier than four years from the date of completion of his or her studies, or such other later period as the Board decides to recall its loan,” reads the proposed amendment.
University students receive between Sh43,000 and about Sh68,000 loans per year to finance their education.
Beneficiaries who will not have any source income will be exempted from paying interest on the loans advanced to them, till such time when they get jobs.
“A loanee without a source of income, and whose loan is due for repayment under this Act, shall not be liable to pay interest on the loan until such time that the loanee shall start earning an income,” reads the proposed changes.
This means that after the fourth year grace period, students’ without jobs may start repaying their loans but can apply to be exempted from paying the interest.
“The Board shall not uphold its approval unreasonably to an application by a loanee for an exemption to pay interest under subsection,” reads the proposal.
The proposed amendments further say that Helb shall periodically review the exemptions granted in order to determine the suitability of applicants to continue enjoying those exemptions.
The proposals come at a time when there are attempts to reduce the interest chargeable on Helb loan.
The Bill by Gideon Keter (nominated) seeks to expressly set maximum rate of interest to be charged to higher education loans granted under the Act to at most two percent.
“The maximum interest rate to be charged by the Board on principal amount advanced to a loanee shall not be more two per cent per annum,” reads the Bill. Currently, students who default loan repayment are slapped with four per cent interest rate per annum.
Helb has opposed the Bill saying it would deny it the much-needed revenue to sponsor more students.
The Board argued that the National Treasury would have to plug the funding deficit that would be occasioned by slashed revenue, if the interest rate is reduced by half.
Analysis shows that even with the four per cent interest rate charged, the Treasury is already plugging in the difference of 3.5 per cent given that the cost of the Helb fund is 7.5 per cent.
“Any additional gap means that the Treasury will have to plug in to cover for the additional funds that will be created by reduced interest rates,” said Helb Chief Executive Officer Charles Ringera.
Mr Ringera said that students will be the biggest losers if the Bill is passed because it shall reduce the revenue base of the Fund. “And as students are increasingly taking more loans, the gap will continue to widen. This year, the fund was allocated Sh16.5 billion,” he said.
Courtesy The Standard
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