Courts to the rescue: Youth laud move to limit fines on student loans

In August 19, 2022, the High Court made a ruling barring the Higher Education Loans Board (Helb) from imposing high penalties on beneficiaries of the loan.

This followed a case where three comrades protested the exorbitant fines levied upon them by the agency for defaulting on their loans.

Helb loan is a fund that was set aside by the government in 1995 to help needy students pay post-secondary education. While, to some, it’s the best thing that happened to their education, most of the young people are full of regrets and would not apply for Helb funds, given another chance.

This is due to the high penalties imposed on them despite being jobless, while others earn too little to afford repayment of loans.

This week, we spoke to some of the beneficiaries of the fund who, besides expressing support for the High Court ruling, gave their views on what needs to be done to address the challenges at the Charles Ringera-led parastatal.

Odhiambo Oduor, Communication and public relations graduate, Moi University

I started applying for the Helb loan right after I got my calling letter to join Moi University in November, 2012. However, it wasn’t until the second semester of my first year that I got the first disbursement.

The process itself was everything but seamless. I was given a six months’ grace period from my graduation, after which, the repayment plan would kick in. Sadly, I wasn’t able to adhere to the agreement and the interests have been accumulating.

Against the odds, I have been making little payment here and there, but out of great sacrifice. Upon getting my first job, I initiated direct transactions where a percentage of my salary was sent to Helb.

My bone of contention with Helb, however, is unexplained penalties levied on my account.
I have changed jobs along the way, and in such scenarios where salary is disrupted, I make efforts to send money to Helb via M-Pesa, but somehow, I have unexplained fines that I do not understand why or how they came about.

My calls, emails and direct messages to the board via Twitter have so far gone unanswered, but I haven’t given up yet. My next move will be to walk into Anniversary Towers in search of answers.
Despite the challenges, I think the board has done well in identifying the needy students who deserve the loan.

My hope is that they engage the public regarding the student loans as that is the only way to find better ways to increase repayment rate in the prevailing economic conditions.

Lucia Katile Nyamasyo, Communication and public relations graduate, Karatina University

I don’t complain about repaying the Helb loan because it was basically my lifeline. My problem is that the outstanding balance seems not to reduce.

I went to huduma centre the other day and an attendant informed me that my loan balance stood at Sh163,000 despite having paid Sh127,000 so far out of the Sh200,000 I benefited from. How is that possible?

Throughout high school, I struggled so much to stay in school. I come from a humble background and my parents could not afford fees, so the number of days I was in class were less than those I stayed at home.

But I was determined to succeed and get to the university to pursue a good course that could bring light to our family one day.

My friends sometimes would sympathise with me, especially when I reported to school on a Thursday, only to be sent back home on Saturday. I always cried on my way home, as my friends promised to keep me in their prayers.

So, I made the best of every opportunity I got in school. I never went for midterm because I knew that after the break, I would be sent home for an even longer period. I worked very hard and I performed well in the Kenya Certificate of Secondary Education (KCSE) examination.

I was placed in Karatina University, but I was still trailed by financial challenges, so I couldn’t raise fees. I got a job as an M-Pesa attendant where I was paid Sh4,000. I decided to defer my studies for one or two years as I save some cash for campus.

A classmate once visited the shop and was so excited to be joining campus. She asked for my plan but I was hesitant to say that I was going to defer.

“Do you know about Helb?” she asked me.

I didn’t know about it and upon enquiry, I was advised to visit their offices in Nairobi.

The following day, my mother and I went to Nairobi for the first time.

It turns out that we needed to first apply for the loan online, so we went back home and did as instructed.

Meanwhile, I started fundraising. I printed some cards towards the bid and distributed them in our family and friends’ circles. From the proceeds, I was able to pay the first term fees and buy some necessities.

Within the term, Helb disbursed the first Sh25,000. Sh4,000 fees were paid directly to the institution and Sh20,500 sent to my account. A Sh500 transaction fee was also deducted. I was very happy that for the first time in my life, I had such a huge sum of money.

I got Sh50,000 every academic year, so in four years, I accrued Sh200,000, which was very helpful as I had a smooth sail through campus. It contributed greatly to the person I am today and I am grateful.

However, reality struck immediately after I cleared university when I started receiving messages to repay my loan. There was nothing like a grace period. At the time, I was not employed and the messages stated that if I don’t repay, there would be a penalty of Sh5,000.

Sometimes, when I got the money, I would send Sh500 or Sh1000 to Helb, but since it was not consistent, it made little difference. They still imposed fines and penalties.

In 2019, I started working for a microfinance company where I earned Sh25,000. In December the same year, my employer started deducting Sh4,500 to repay my Helb. This was painful considering that my pay and the cost of living in this country was not commensurate.

However, I thought it was a fair move since I was mindful that other needy students needed the loan as I did. The deductions went on until May 2021 when I got another job and stopped paying for a while. I resumed this February.

I was shocked the other day when the huduma centre attendant read an outstanding debt of Sh163,000. Asked to clarify, she told me that the statement is split into two: the loan I was given from 2013-2016, then the one I received in 2017.

I had no problem with that. My greatest concern was that Helb has made Sh90,000 profit from the Sh200,000 they advanced me. Such an overcharge!

Even with the four percent interest per annum, the math would not add up to anything near Sh90,000. So, how did that come about?

The attendant responded that there are other fees like ledger and penalties from the time I stopped remitting amounts between June 2021 and January 2022. The explanation was not satisfactory, so I sent an email to Helb CEO and got the same response.

I feel the fines Helb are imposing to be a rip-off. They are over-punishing the beneficiaries considering that in our country, getting employment is not easy and creating one needs capital. 

More agonising is that even when employers delay sending the money to Helb, we are still fined yet the deduction from our pay slips is done early enough. With split loan statement, when the payment is delayed, they both accrue fines.

I hope the High Court ruling will be implemented. It will give beneficiaries a sigh of relief. This will even motivate people to repay their loans. It will reduce the default rate and many more people will benefit.

If one is actively paying off their loan monthly, then fines should not be imposed.

The interest rate can also be reduced if not totally scrapped off, considering that many youths take longer before getting employed.

If the fines and penalties continue, I may end up paying my loan 10 times more than what I received. I may pay this loan for the rest of my life. Therefore, I wish that this ruling is implemented and fairness applied.

Mike Ouma, graduate of industrial chemistry with management, Kenyatta University

My four-year campus experience was amazing and I’m grateful to God, my parents and well-wishers for having stood with me throughout.

Even so,Helb loan played a bigger role in the attainment of my degree. At that moment, my guardians didn’t have sufficient money, so the loan was a handy supplement and my learning was facilitated smoothly.

I applied for the loan in July 2016, in readiness for my first semester in September, but it was not disbursed on time. It was not until January 2017, after I completed the first semester, that I received Sh18,500 for the concluded period.

Throughout my study period, Helb used to disburse Sh22,500 for the first semester and Sh22,000 for the second half every academic year. Cumulatively, I received Sh178,000 for the four years.
I was to repay the amount after employment, together with an interest of 4 percent per annum, repayable in a maximum of 120 months.

Ideally, I think the penalties should be lifted to give a grace period to unemployed youth until they find jobs and pay at least 5 percent of their income monthly.

Most importantly, the government should consider recruiting such students for opportunities that can enable them repay their Helb loan in a timely manner.

My plea to the Helb board is that they continue sponsoring every needy student and make them realise their dreams and career goals. However, adjustments need to be made for penalties such that each applicant is able to frame and plan for interest well.

For my case, I had planned to clear the debt one year into employment, but to my disappointment, I have not had a chance of being employed. I have skills needed in the quality control of any chemical related industry, be it in processing, manufacturing, food or non-food industries.

I long to clear this debt so as to give a chance to other comrades to benefit from the kitty.

Moses Wahwai Njuru, co-operative management graduate, Kisii University.

At first, my 2015 application for Helb funds did not go through, so I contacted someone to fast-track it for me. While other students received their money in February the following year, mine was released later in September.

I received Sh35,000 per academic year for four years, which amounted to Sh140, 000. The repayment plan was to start a year after completion of my studies. But close to a decade later, I haven’t begun paying since I’m yet to secure a job.

With the accumulating interests, my fear is that by the time I commence, the outstanding figure will be humongous.

I think it will be fair for Helb to eliminate interest if at all the loans are meant to help students. However, imposing a fair penalty in case of default sounds fair enough.

Given a chance to go back to 2015, I wouldn’t seek help from Helb because it is useful for the majority but not to all. Anybody can lie about their status while applying for it.

However, if proper mechanisms are put in place, there will be more transparency and honesty amongst the beneficiaries.

Defaulters

Annually, the loans board assists more than 100,000 college and university students to pay tuition and accommodation fees among other necessities.

According to the board, some beneficiaries deliberately choose not to pay their loans and engage in a cat and mouse chase.

In April 2022, Helb CEO Charles Ringera announced that they had commenced legal action against 109,000 “hardcore” defaulters who had not serviced their loans 10 years.

The move was aimed at collecting Sh10.2 billion outstanding amount.

Current data from Helb shows that 94,216 accounts are in default compared to 109,661 accounts recorded by February.

This is a 14 percent drop following a four-month penalty waiver that sought to encourage beneficiaries to repay amid the negative impact of the Covid-19 on the economy.

[email protected]