Bright days ahead for varsity students as MP proposes law to reduce HELB loan costs

Bill wants the interest scaled down from four percent to two percent

Nominated MP Gideon Keter has proposed the reduction of interest on HELB loans from 4 to 2 percent
Nominated MP Gideon Keter has proposed the reduction of interest on HELB loans from 4 to 2 percent [Photo/ Courtesy]

In Brief

– The Bill has been sponsored by nominated MP Gideon Keter.

– HELB has however rejected the proposals saying the current rates are crucial for sufficient funding.

– If passed, the bill will also see HELB barred from imposing rates at will.

Nominated MP Gideon Keter has fronted a bill to parliament aiming at scaling down the interest charged on Higher Education Loans Board (HELB) loans from the current four percent to two percent.

The loans board has however rejected the proposal arguing that if actualized, the move could lock out about 47,000 students from accessing the crucial fund. The board stated that the current charges are instrumental to the program as they raise up to Sh3.74 billion annually which aids in subsequent disbursements.

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Further, the board states that if the Bill is to go through, the National Treasury will have to shoulder the burden and provide funds to cover the slashed revenue for smooth institutional operations.

“Any additional gap means that Treasury will have to plug in to cover for the additional funds that will be created by reduced interest rates,” stated HELB CEO Charles Ringera.

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The Bill by Keter, dubbed the Helb Amendment Bill (2018) suggests that interests to loans advanced to students be slashed to two percent, which is in essence half of the current rates.

“The maximum interest rate to be charged by the board on the principal amount advanced to a loanee shall not be more two percent per year,” reads part of the proposal.

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Data from HELB indicates that to this day, more than a million Kenyans have been beneficiaries of the loans, translating into Sh113 billion disbursed out. The total amount of debt owed to the board amount to Sh93.6 billion.

The Keter Bill also aims at ensuring that loans advanced to the youth, women, and persons with disabilities will not accrue interests for as long as these people remain unemployed. It also seeks to bar the board from arbitrarily setting interest rates as it wishes.