The Higher Education Board says that more than 25,000 beneficiaries are unable to pay their loans due to the COVID-19 pandemic as they have been affected by payouts and job losses.

A survey conducted by TIFA Research indicated that as at end of June this year, 69 percent of Kenyans had reduced income, while 43 percent had lost it completely

So what does this mean?

Higher education Loans Board (HELB) says that most of the beneficiaries have submitted requests to either halt their payments or reduce their payments.

HELB partly depends on loan repayments to provide loans for new applicants. For the financial year that started on July 1, says Mr. Ringera, the National Treasury allocated HELB Ksh 16.8 billion.

Of that amount HELB is expected to raise Ksh 6 billion through loan repayments by students who have graduated and, hopefully, found jobs or gone into self-employment and are able to pay.

"We have incurred a funding loss of Sh 1.8 billion so far, and we have over 40,000 students waiting on us to fund their education," says Mr. Ringera

If the job losses and pay cuts continue, loan recoveries will fall short of budget, meaning that the more than 40,000 students who have applied will compete for the Ksh 11 billion that Treasury could hand over.

The shortfall will affect both the new and old students

The loan application deadline for post-graduate students who are attending the 2020/21 academic year was this week, while continuing students have another month to apply. Freshers have up to five months to apply.

Why HELB is a crucial lifeline

HELB loans are a crucial lifeline to tens of thousands of families sending their children to public universities every year.

Undergraduate students placed by the Kenya universities and Colleges Placement Service (KUCCPS) are eligible to borrow a minimum of Ksh 40,0000 and 60,0000 per year.

For government sponsored students, part of this amount goes towards tuition and is paid directly to universities, and the rest is paid directly to students for upkeep.

Self-sponsored students, who are also referred to as parallel students, as they are not sponsored by the government, get Ksh 40,000.

The loans are repayable over 10 years at an annual interest rate of four percent, the best deal available of any lending institution .

For self-sponsored students salaried employees, HELB offers a loan that covers up to 90 percent of the tuition fee at an annual rate of 10 percent.

The loans are repayable over 12-48 months.

HELB has stated that it will maintain the current interest rate of four percent, and the principal will be re-scheduled once the country recovers from COVID-19.

The advantage of HELB loans is that they are cheap compared to those offered by commercial banks and they have flexible and predictable repayment plans as they are fixed rate loans.

The application process is hassle-free with no requirement for security. All a student needs are proof of admission by an accredited university and the required documentation.

With the cash-crunch facing HELB, it is unclear how Post Graduate Scholarships of between Ksh 200,000 and Ksh 450,000 offered to masters and PHD students will be impacted

What it means for you ….

If you have a loan to clear and you’re financially constrained, you can reduce the amount you pay to prolong the repayment period, but the loan will continue to attract interest .

Financial experts however advise that is better for one to reduce the amount paid in order to maintain the consistency of repaying the loan rather than halting the payments, this will also keep your credit scores compared to stopping the payment.

Gloria Owino, a former beneficiary of HELB loans concurs with this,

“It is better to continue paying with the little you have rather than halting because at the end of the day it’s a loan , you will end up paying more and attracting penalties “

In may this year HELB invited applications for second and subsequent applicants, with a total budget of Sh 12.3 billion.

Sh 7.6 billion was allocated to support 196,613 students and Sh 4.7 billion was made available for 11,250 first time applicants to universities and colleges. However, the current situation is set to make it more difficult for the institution as they are yet to meet their targets of loan repayments.

So far 160,076 loan accounts valued at Sh 24.5 billion which had matured are being serviced. However, 752, 327 Kenyans are yet to complete their payments whose loans account for Sh 96.3 billion.

The state agency missed its half year collections target by around Sh 100 million to collect Sh 2.2 billion against the targeted Sh 23 billion .

The institution has currently been leveraging on digital technology , through their App to streamline loan applications and payments processes , while hoping the beneficiaries will settle their loans to keep the revolving fund running , even as more continue to request the institution to halt or reduce their payments .