Fresh graduates who are loanees of Higher Educational Loans Board (Helb) may be given a grace period of four years after which they can start repaying their educational loans.
The Building Bridges Initiative (BBI) report proposes amendment to the Higher Education Loans Board Act to hand a reprieve to the fresh graduates and those without jobs.
“A loanee shall be required, subject to and in accordance with this Act or any regulations made thereunder, not earlier than four years from the date of completion of his or her studies, or such other later period as the Board decides to recall its loan,” the report partly reads.
The BBI further proposes that students whose grace period have expired and have not secured jobs or sources of income will still be exempted from repaying their loans until such a time that they have an income source.
It states, “A loanee without a source of income, and whose loan is due for repayment under this Act, shall not be liable to pay interest on the loan until such time that the loanee shall start earning an income.”
In the event that a student without a job is willing to repay the loan to the board after the four-year grace period, he or she will be able to do so without having to pay the interest.
“The Board shall not uphold its approval unreasonably to an application by a loanee for an exemption to pay interest under subsection,” the BBI report proposes.
However, the report further recommends that the Helb may review the exemptions granted to the loanees so that it can use such data to make a determination on who merits to be given the loans.
Currently, students receive loans of a minimum Sh43,000 to a maximum of Sh68,000. The Helb has mandated them to repay the loan after one year grace period coming post graduation.
High interest rate
Those who have defaulted paying the loans have been slapped with a Sh5,000 fine piling up every month. This adds onto the interest of 4 per cent already being imposed on the total amount received for the academic years.
The exorbitant interest and penalties have attracted criticism and led to the sponsorship of a Bill by nominated legislator Gedion Keter, who opposes the interest rate in place. Mr Keter’s Bill wants the interest slashed to two per cent, arguing that most loanees are subjected to lengthy repayment periods because loans are turning to be expensive.
The Bill partly reads, “The maximum interest rate to be charged by the Board on principal amount advanced to a loanee shall not be more than two per cent per annum.”
This has been opposed by the Helb CEO Charles Ringera, who argued that any bid to lower the interest rate would limit the revenue of the board and it will not be able to fund all the applicants. He said that the government would have to chip in to reduce the deficit.
“Any additional gap means that the Treasury will have to plug in to cover for the additional funds that will be created by reduced interest rates,” he said, as he responded to the Bill.
The report was received by President Uhuru Kenyatta and former Prime Minister Raila Odinga at Kisii State Lodge on Wednesday.