Yoke of Student Debt

Education, especially good education, is not cheap. Thanks to free secondary education which was introduced in 2008, more Kenyan high school leavers are qualifying for and seeking post-secondary education.

The Higher Education Loans Board (Helb) has been at the forefront of financing university and college education in Kenya, especially for students who come from economically disadvantaged backgrounds, and who would otherwise not afford tuition and accommodation fees in university. Besides Helb, other players such as Kenya Student Loan Programme and KCB Masomo loan offer students loans.

But in the present economic climate where jobs are hard to come by, and the few lucky employees get started on minimal salary, how big of a burden are student loans? Four recent graduates share their stories.

Doreen Khakula, 30               
Business banker
Doreen received her first Helb loan in 2013. By the time she graduated in 2015, she owed the Board Sh160,000. And by the time she started paying it off in 2020, the amount had jumped to Sh236,914 due to interest and penalties.

“Having a loan hanging on my shoulders soon after graduation worried me. I didn’t like the idea of being listed by the Credit Reference Bureau as a defaulter because that would have an impact on my employment options as well as my ability to borrow in future,” she says.

To avoid joining the defaulters’ list, Doreen needed to get a job or a business to help her pay back her loan. Luckily, she got a job and started paying her loan. She pays Sh4,800 every month. The amount is deducted straight from her pay slip via a check-off. This ensures she does not skip her repayments.

“Without a source of income, even if I wanted to, I certainly would not have been able to pay,” she says.
Before she started repaying her Helb loan, Doreen had been listed by CRB.

“A CRB listing soils your character and affects your ability to borrow in future. I am happy that I have now cleared my record on CRB and my status was updated, thus improving my credit score. Being on track with my Helb payments also gives me peace of mind and I am able to access loans,” she says.

Doreen now works in a financial institution and knows how important trust is. If your financial records are not clean, it is not easy to be entrusted with money.

“I believe that as individuals, it is not possible to grow without loans. But how you use the money you borrow greatly determines whether the loan works for your good or not. If you take loans for vacations or shopping instead of investing the amount in buying land or growing a business, then you are being unwise,” she advises.

Doreen’s tips for debt management are: Look for best interests when taking a loan, live within your means and if you have a loan, try to pay back every month. In case of financial challenges, inform the financial institution about your struggle so that they can restructure your loan and give you more time.

“I wouldn’t have completed my education without the Helb loan. If you are a beneficiary of Helb, try as much as possible to repay. Most importantly, use the loan wisely. You can even start a small business such as a movie shop or a juice parlour. Also remember to buy the books you need for your course. Do not drink or spend all the money at parties. Ensure you complete your studies and do not take the loan if your parents are able to pay. The future is uncertain,” she says.

Eugene Molenje, 35                                  
High school teacher
“By the time I was beginning to repay my Helb loan I had an accrued debt of Sh205,000. This was out of a total allocation of Sh150,000,” Eugene says. Having a loan that was accruing interest and penalties every other month really bothered him.
“I sympathise with those graduates who have never found a way of servicing their student loans,” he says.

Eugene’s plan was to begin repaying the loan immediately he got employment. Unfortunately, this did not happen because the schools under whose boards he initially worked never remitted his payments to Helb despite making deductions from his salary.

“I only started making payments when I was employed by the Teachers Service Commission in 2014, two years after graduating. My monthly deduction was a flat figure of Sh4,600. I couldn’t enjoy my full salary, but I was glad because I was doing away with the loan,” he says.

Now that he has finished making his payments and received his clearance certificate, he feels as though a heavy load has been lifted off his shoulders.

“I literally breathed a huge sigh of relief. Clearing the loan gives one more opportunities in terms of promotions and further education where one is required to present Helb clearance certificate,” he says.

While having a loan did not directly slow down Eugene’s financial growth, he says that stepping out of school when you already have a loan can impede your financial growth.

“Any loan, whether or not it shows on the pay slip, translates to less net earnings. A thin pay slip means struggling to settle bills, pay utilities, grow and survive,” he says.

His top three tips for managing debt are: First, avoid getting into debt as much as possible. Borrow only when it is completely unavoidable. Don’t rush to apply for Helb loan if you can afford higher education without the loan. Helb is a debt that must be paid back with interest and, it attracts penalties.

Secondly, have a clear repayment plan before you get into debt. Any responsible adult must have a debt repayment plan which they implement to the letter, except in exceptional circumstances. Don’t borrow unless you know how you will pay back. In fact, have a repayment plan A and B. Otherwise, you will suffer. Third, spend what you borrow wisely.

To university students who are receiving Helb or any form of student loan, this is Eugene’s advice: “Don’t blow your Helb on partying, wardrobe upgrades or gambling only to miss end of semester exams or defer studies because of lack of fees. Once you get Helb, settle your school fees and accommodation. Start repaying immediately after you complete studies, even with as little as Sh200 every month.”

Wambui Susan, 28                             
Public relations strategist
Wambui had a total Helb loan of Sh99,000 by the time she completed university in 2016. The sum has now earned interest to make it Sh111,000.

“When I checked what people were saying on social media, especially on Twitter, I felt that Helb was not really a loan. If you search Helb on Twitter, there is hype about why you don’t have to pay back the loan, with justifications such as lack of jobs. This made me feel that even if I didn’t pay, nothing would happen,” she says.

But this palliative effect only lasts for as long as you are on social media or in a crowd. She soon realised when applying for a job that she needed to comply with Chapter Six of the constitution to qualify for a job, including having the Helb clearance certificate.

“When you are alone and reality hits that you need the compliance and clearance certificates when applying for jobs, you have to find a way to pay the loan,” she says.

“Additionally, Helb carried out a campaign called “Twende Tulipe Helb”. The campaign had an emotional touch that convinced me to pay. They showed young people in the remotest parts of Kenya who depended on me to repay for them to access education. I saw paying the loan as a way of helping someone else achieve their dream.”

Right after university, Wambui got an internship with a stipend of Sh10,000 and soon after, a job where she earned Sh15,000. None of these was enough for her to start paying her Helb loan. She paid Sh1,000 and this got her a compliance certificate. This is what she used while applying for jobs.

“Paying Helb was not my priority initially. I had rent to pay, and house bills. But at the back of my mind, I knew I had to pay,” she says.

Wambui started paying her Helb loan two years after she completed university, in March 2018. The figure had gone up to Sh128,000 because of penalties.

“I was paying Sh4,000 a month. I got a better job where I was earning Sh35,000 a month. It was now easier for me to pay and still have money for my bills and my parents. I had to forfeit saving more for my future needs or invest in assets,” she says.

Besides the Helb clearance certificate, now that she has completed her payment, seeing other young people in her village, in Kuresoi North Constituency, accessing higher education gives her enormous satisfaction.

“Many young people cannot account for how they spent their money, besides having a degree certificate. Most graduates can only account for 40 per cent of the money,” she says.

Her top three tips for managing debt: Live within your means, have a budget, and look for extra income. If you have a debt, allocate money in your budget to clear it.

“In case you see a beautiful dress that is outside your budget, you can afford it with the extra income,” she says.
Wambui says many people apply for Helb simply because they qualify, and not because they actually need it.

“If you have the Helb loan, appreciate that it is a debt you will have to repay. It is better when that loan is used to benefit you as a person by growing your skills and career. Ensure when you look back, you will be proud of what you did with the money. If you do not need Helb, do not apply for it. You may not be lucky to get a job immediately after university or a stable one to allow you to pay,” she cautions.

Newman Ambani, 31    

Programme Coordinator
By the time Newman completed university, he had a loan balance of Sh257, 175. The principle loan was Sh200, 000 while the rest was interest.

“I was extremely concerned that I had that much money to pay back. Although grateful to Helb for their immense help in getting me through university, the thought of where and how to start making the payments weighed on me,” he says.

But despite this huge debt, Newman was determined to clear the loan because he knew that failing to do so would deny another student a chance at an education.

“I know many students rely 100 per cent on the loan to complete their studies in university. I was one of those students,” he says.

Before getting a stable job, he would pay through MPesa from the savings he made as an intern. The fact that his repayment would, in a small way, help another needy student access university education, was and is still very rewarding to Newman. He felt relieved when he cleared off the loan.

“I would make payments of as little as Sh500. When I got employed, my monthly average deductions were slightly above Sh4,000. It took me five and a half years to pay back,” he says.

Newman believes the first step towards financial independence is staying debt-free. Therefore, he felt bad about starting his career life off with a loan.

“Financial responsibilities increase as one ages so it is crucial to stay debt-free,” he says.

Appreciating that many young people today have had to learn financial management on their own and through their own mistakes, his top three tips for debt management are:

Budget for your money, pay off bills on time and save for a rainy day.

And, if you are in university right now, his advice is, begin planning for your future by making sound financial decisions. It is not too early.

“Prepare to start paying your Helb loan immediately after university. Paying off what you owe is a good financial habit. Building up good financial habits is a sure step towards financial independence,” Newman says.