Why HELB Disapproved the Graduate Lifesaving Plan
The proposed change to Bill 2023, backed by Machakos MP Joyce Kamene and intended to lessen the financial burden on recent graduates, has been rejected by the Higher Education Loans Board (HELB).
Under the existing structure, student loan repayment starts a year after graduation.
In Kamene’s proposal, after young adults and those with impairments find employment, the repayment time would be increased to five years.
However, HELB CEO Charles Ringera raised worries that changing the Principal Act would cause loan repayment to take longer than expected, which might make it more difficult for the board to support additional students who want financial aid.
Ringera underlined that by extending the grace period to five years, fewer students may be eligible for the HELB’s revolving fund for deserving students because the fund depends on loan repayments to remain operational.
Kamene also suggested lowering the existing four percent annual interest rate on loans provided to young adults and those with impairments to three percent.
Also read: Helb opposes student loan burden-reduction bill
The board rejected this idea, citing potential harm to the organization’s long-term financial viability. They suggested that dropping the interest rate to three percent might have a negative effect on the revolving fund and limit HELB’s ability to assist students in need of financial aid.
According to Ringera, the current interest rate of 4% is already in line with the yearly inflation rate. Given that a sizable amount of the student loan budget depends on loan recoveries (AIA), lowering the interest rate and lengthening the payback period may put a pressure on HELB’s cash flow.
He emphasized that a decision rendered on August 19, 2023 by Justice Alfred Mabeya of the High Court of Kenya constrained HELB’s power to impose penalties and interest, capping them to the principle amount at the time of default.
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