Graduates who benefit from Higher Education Loans Board funding will soon benefit from lower interest rate and delayed repayment if an amendment bill by nominated MP Gideon Keter sails through.
The interest charged on student loans will be cut to 3 per cent and the repayment grace period extended to up to 5 years after graduation.
Under the proposed Higher Education Loans Board Act changes, interest will be reduced from the current 5 percent in a bid shield jobless graduates from the Sh5,000 monthly fine for defaulting.
Presently, graduates are mandated to start repaying their loans within a year of graduation, a move the legislator says it’s not only punitive but also cruel.
Many jobless graduates have been disgruntled and condemned into the CRB books as a result of the punitive penalties.
Gedion Keter says the amendments are aimed at reducing the financial burden on graduates who are expected to pay huge sums of money to Helb even before they secure gainful employment.
“It sets the percentage of interest that may be charged on the loan advanced to a student at 3 per cent. The bill also provides that the penalty charged on default shall be charged after securing employment or five years after graduation,” said Keter.
If passed, interest rate charged on the student loans will now be fixed at 3 per cent, thus taking the power from HELB which has come under criticism for being insensitive to the plight of students.
While the amendments may come as a relief to students who have had to endure stiff penalities, it may hurt HELB’s cash flow and hamper its ability to extend loans to many students.
Early this year, the board estimated HELB defaulters to be around 78,328 with cumulative balance of Sh7.7 billion as at December 31 2019.
HELB’s cash flow is also likey to be affected by the Corona virus pandemic which has led to over 2.22 million workers losing their jobs in the past six months to September.