Beneficiaries of the Higher Education Loans Board (HELB) will have an additional grace period to repay their loans if a proposed law sails through parliament.
A bill presented by Igembe South MP John Mwirigi, seeks to amend Section 15 of the Higher Education Loans Board Act, subsection (1) by deleting the words ‘completions of studies’ appearing after the words ‘year of’ and substituting with the words “securing employment.”
The implication is that graduates will be required to start repaying their student loans only when they start working.
“The principal object of this Bill is to amend the Higher Education Loans Board Act in order to provide that a loanee shall commence the repayment of his or her loan once he or she secures employment,” a section of the document reads in part.
The current position is that the loanee is to begin repayment of the loan within one year of completing his or her studies.
“A relatively small percentage of graduates secure employment within one year of graduation yet the interest already starts accruing.
“This amendment is meant to cushion unemployed graduates from being charged interest on the loan before they have secured employment,” the MP noted.
Currently, interest begins to accumulate after the grace period lapses. The burden is compounded by the Ksh5,000 fine that HELB imposes every month that a loanee fails to make a service payment for the loan, leading to high default rates.
In 2019, HELB threatened to publish the photos of defaulters in a newspaper after a disagreement between the Board and loan defaulters.
“Please take note the names and pictures of HELB loan beneficiaries who have defaulted repayment of the loan from 1975 to date shall be published in the leading newspapers,” read a notice from the body at the time.
HELB also noted that the funds received from loan repayment were used to support the current needy students, therefore, ‘sustained default hinders funding of other deserving Kenyan youth.’
A similar proposal by the Building Bridges Initiative (BBI) said that the grace period to the beneficiaries should be extended to four years from the date of completing studies.