Demand for Helb loans soar despite cash crunch

Helb offices in Nairobi

Applicants visit Helb offices in Nairobi.

Photo credit: File | Nation Media Group

The Higher Education Loans Board (Helb) is overwhelmed by the high demand for student loans despite past beneficiaries owing billions of shillings amid limited funding from the Exchequer.

As a result, the board has been awarding loans that are insufficient to support students in universities and post-secondary training institutions.

For the current financial year ending in June, the board had estimated that 236,555 university students would apply for the loans, consuming Sh10.2 billion.

They ended up with 269,000 applicants. Helb had estimated that about 162,147 continuing students would apply for education loans worth Sh7 billion but the number was overshot by 14,853 while new applicants were 92,000, up from the estimated 74,408, forcing the board to reduce the amounts allocated to students.

Covid effects

Helb chief executive Charles Ringera attributed the surge in application to negatives effects of the pandemic on the economic, adding that some students had “overstayed” in their studies.

According to Mr Ringera, the board tinkered with the amount of money given to students (which reduced from Sh42,000 to Sh40,000) but still was unable to fund 75,000 applicants due to a budget deficit of Sh3.2 billion. The unfunded students have also not been considered in the supplementary budget.

“We have assessed their neediness level. They are actually needy. These students don’t even eat anything sophisticated but the cost of food has gone up. They are more vulnerable and the stipend from whichever sources is going down” he revealed.

For students in technical and vocational education and training (Tvet) institutions, the number of applicants surpassed the estimated number by 37,110 from the original 80,273. Helb had requested for Sh22 billion from the Exchequer but ended up getting just Sh11.3 billion. It was then to raise Sh4.3 billion from loan recoveries.

Loan recoveries

“We’re on course to meeting the target. All indicators are that we’ll definitely surpass loan recoveries past the Sh4.3 billion. The challenge has been on the demand side,” Mr Ringera told the Nation. The board is likely to find itself in the same predicament in the next financial year as the budget proposals presented before Parliament two weeks ago have not factored in extra financing despite an increase in the number of students who left secondary school. As a result, it is expected that there will be more students joining university and Tvets this year, further straining Helb finances.

At the beginning of March, Helb lifted the penalties on loans for past beneficiaries who would clear their balances in a campaign aimed at shoring up funds for the board. The campaign will end on 30 April. Mr Ringera said  that,by the end of March, 3,572 beneficiaries had paid Sh202 million although the target is to recover one billion shillings. Kenyans in the diaspora are reported to have better taken advantage of the penalty waiver.

Financial struggles

Even as the financial struggles go on, 107,211 past loanees owe the board over Sh10.6 billion in what the CEO described as “hardcore debts” , which are over three years since maturity but are not being serviced. Some of the loans stretch back to 1974 and the beneficiaries might be dead but the data has not been cleaned up. The high unemployment rate has also been blamed for inability to pay by some beneficiaries.

“Currently, 644,361 accounts are mature to be repaid, carrying Sh81 billion. Of these, 254,135 have since cleared their accounts worth twenty six billion shillings.

“We’re very excited about that cohort,” the CEO revealed. Politicians have turned higher education funding into a top campaign agenda, with some promising to make it a grant should they win the August 9 General Election. There have also been proposals to extend the grace period graduates are given before they can start repaying their loans until they secure employment.