Higher Education Loans Board (Helb) beneficiaries will have a five-year grace period for repayment if Parliament approves changes to the law.
This will be an increase from the current one year grace period within which the students in Universities and Colleges are required to start repaying their loans after completing their studies.
In the proposed changes to the Higher Education Loans Board (Helb) Act, the proponents of the bill want interest charged on the loans slashed to three per cent from the current four per cent.
The changes will cushion jobless youth from tough penalties including Ksh5,000 monthly fine for defaulters and the risk of being listed with the Credit Reference Bureau (CRB).
“The aim of this proposals is to reduce the financial burden on recent graduates who are expected to pay large sums of money to Helb even before securing employment or becoming financially stable,” the Bill that has already been tabled in parliament reads in part.
“It sets the percentage of interest that may be charged on the loan advanced at three per cent. It also provides that the penalty charged on defaulting of the loan shall be charged after securing employment or five years after completion of studies.”
If the changes are adopted, the rate of interest charged on the student loans will now be set in law, taking away the power of setting the charges from Helb—whose responsibilities include controlling credit costs.
The law will deal a blow to the state agency which relies on loan repayments to finance other students.
In November last year, Helb Chief Executive Officer Charles Ringera threatened to name and shame loan defaulters.
Helb announced a plan to publish names and pictures of defaulters in newspapers in a bid to recover money to finance other needy students in the country.
Ringera said this would affect the beneficiaries of the loan from the year 1975.
According to the loans board, some beneficiaries have not responded to calls to repay the monies owed to the government and have made it difficult for other Kenyans to benefit from the program.
“Some beneficiaries who are in default have not responded to previous communication …therefore sustained default, hinders funding of other deserving Kenyan youth,” said Helb in a notice.
According to HELB at least 85,000 defaulters owe the government 50 billion.
The board is paying Ksh11.2 billion to 277,000 students annually with the Treasury providing Ksh7.44 billion.
In the past, graduates have decried unemployment as the main reason why most had failed to repay their loans.