MPs want jobless graduates spared from paying interest on Helb loans

Helb offices in Nairobi

Applicants for student loans queue for services at the Higher Education Loans Board offices in Nairobi in September 2014.

Photo credit: File | Nation Media Group

A third attempt has been launched in Parliament seeking to amend the Higher Education Loans Board Act (1995) in order to waive interest on loans for graduates and people living with disability until they secure their first employment.

Machakos Woman Representative Joyce Kamene is banking on support from the Kenya Kwanza Alliance, which expressly promised in its Education Charter to “restructure [Helb] to offer interest-free loans”.

If it sails through Parliament, the Bill will present a test for President William Ruto, considering that his predecessor, Mr Uhuru Kenyatta, twice rejected attempts to amend the Act, saying, they would affect the sustainability of Helb as a revolving fund.

On the campaign trail last year, Dr Ruto also promised to convert the student loans to a grant. Beneficiaries are required to start repaying their loans one year after graduation. They are on average given about ten years to repay.

Ms Kamene’s Bill also seeks to lower the interest charged on student loans from four to three per cent. She also proposes that the penalty charged for defaulting on the loan be effected after securing employment five years after graduation. Helb charges a Sh5,000 monthly penalty for defaulters.

“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,” Ms Kamene says in her memorandum of objects and reasons.

According to data from Helb, 125,609 beneficiaries have defaulted on loans amounting to Sh15.22 billion. The total amount owed by the former students is over Sh60 billion.

The accrued debt is part of the reason why the board has cash-flow challenges that have at times seen students take to the streets over late disbursement of funds. Helb CEO Charles Ringera recently revealed that over 140,000 students in universities and colleges are unfunded because of the cash crunch at Helb, which needs Sh5.7 billion.

Past attempts to amend parts of Section 15 of the Principal Act have failed. In 2015, then Kiharu MP Irungu Kang’ata proposed an amendment seeking to prevent Helb from charging penalties until a loanee had secured employment. It was passed by Parliament but Mr Kenyatta declined to assent to it.

In 2020, a proposal by Igembe South MP John Paul Mwirigi that beneficiaries start repayment of their loans when they secure employment was rejected by the Departmental Committee on Education. However, he proceeded with it and got it finally passed by the House last year.

However, in June, Mr Kenyatta did not assent to it and returned it to Parliament with reservations. But since the 12th Parliament was in recess ahead of elections in August, the Bill lapsed.

Many employers especially in public sector require new employees to get clearance from Helb, a condition that has become difficult to meet as thousands of graduates are in default, owing to the high unemployment rate in the country.

The Bill comes at a time when former students reportedly owe Helb over Sh60 billion with some of the loans dating back to pre-Helb times. The board operates as a revolving fund but also gets support from the government. From the 2023/2024 budget, it expects to receive Sh14.8 billion from the Exchequer, but this will still leave many students without financial support.