A bill has been proposed in parliament to cut interest charged on college students for up to 3 per cent and a loan repayment period of up to 5 years for Helb student loans.
Helb charges 4 per cent interest per annum on the loans for a maximum of 120 months after one year of completion of studies or as deemed fit by Helb. Which with the current economic challenges and unemployment rate has left thousands of beneficiaries at risk of being blacklisted with the Credit Reference Bureau(CRB).
Under the proposed changes to the Higher Education Loans Board (Helb) Act interest on the loans will fall from four percent to cushion jobless graduates from the Sh5,000 monthly fine for defaults.
The aim of this 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,” says the Bill, now tabled in Parliament. It will also help students who cannot pay off directors loan account.
“It sets the percentage of interest that may be charged on the loan advanced at three per cent. It also provides that the penalty charged on defaulting of the loan shall be charged after securing employment or five years after completion of studies.”
The rate of interest charged on the student loans will now be set in law, taking away the power of setting the charges from Helb whose responsibilities include controlling credit costs.
The bill if approved will give beneficiaries more confidence apply for the loans which most have shun away from for the fear of being blacklisted or reapying the high interests.
Helb boosts of about 1.5 million beneficiaries who have benefitted from the loans since 2012. The new rates hopefully will attract more numbers. However, you should note that there has been a sharp rise throughout the 7 years with a slow growth rate.
The changes howbeit are set to hurt Helb’s finances as it relies on loan recoveries to support university and college students with fees and subsistence loans, which rise to a maximum of Sh50, 000 annually.