Higher Education Loans Board in crisis as more apply for varsity loans

Monday November 17 2014
By Benjamin Muindi

More than 30,000 First Year university students may miss out on government loans in January due to an unprecedented number of applications.

The Higher Education Loans Board on Monday disclosed that it had received 110,000 first-time applications so far, against a projected figure of 79,000.

Submissions will close at the end of the month, meaning the numbers could rise, further complicating matters for a board currently struggling with low funding from the Exchequer and short on alternative sources.

Although Helb boss Charles Ringera said it was too early to talk about “a funding gap”, he noted that the agency was “heightening recovery mechanism” as one way of meeting the high demand.

Mr Ringera attributed the surge in the number of applicants to the double-intake programme, which sees public universities admit two groups of freshmen within the same academic year.

The rising number of universities in the country — now standing at 68 — also pushes up demand for loans and bursaries.


Some 124,000 continuing students in both universities and colleges have applied for loans, while 4,500 are pursuing their masters and doctorate programmes financed by the board.

In total, it means that Helb is currently processing loans for 338,000 students.

The head of the board said it would cost Sh9.714 billion to meet the demand.

“We are now analysing the numbers of first-time applicants to send to the ministry (of Education) for funding support.

“Meanwhile, we are heightening our recovery mechanism with a target of double digit growth this year,” Mr Ringera said.

The board finances more than 80 per cent of the university students dependent on the loans.

In September, another group of freshmen who had reported to university waited for two months for the board to release their loans and bursaries.

Currently, more than 60 per cent of Helb money comes from payment by past borrowers. But success has been minimal as only Sh3.4 billion has been recouped from the lot this year — a mere fifth of the debt.

At the moment, the student population in all the Kenyan universities stands at 520,000 compared to 147,991 students in 2008.

This enrolment was expected to increase to 1.5 million students by 2024, with a loan financing requirement of Sh247 billion a year, Mr Ringera said.

“The National Treasury gave Sh3.34 billion and we expect to collect Sh3.4 billion. If we factor in operating expenses, then we have a net of Sh5.7 billion to take care of all continuing students,” Mr Ringera said.


Following this rise in demand for student loans and low funding by the national government, Helb said it is considering increasing interest rates on the loans as well as seeking funds from the county governments as a part of its alternative sources.

At present, undergraduates pay four per cent interest rate, while the post-graduate students are charged 12 per cent on the loans.

A source privy to the proposal said once approved, the new interest rate will stand at eight per cent for the undergraduate applicants on maturity of their loans.

“Consultations are actually going on between the board and the Ministry of Education to come up with the new policy on the interest rates,” the source said.

Education Cabinet Secretary Jacob Kaimenyi and Principal Secretary Belio Kipsang did not respond to queries on the proposed interest rate increases.

However, Mr Ringera said that apart from increasing the interest rates, he was partnering with county governments as another means of alternative funding.

So far, Tinderet, Nyamira, Kakamega and Meru counties joined a plan that will see the agency manage their scholarship funds.

“We expect good funding from devolved funds; we have realised good success stories on the same so far,” he said.

Another plan to address the funding gap is through concessionary loans where it is currently seeking such loans from both the World Bank and the UK’s Department for International Development.

“This will enable the board to increase the number of middle-level college students funded from the current 20,238 to 259,000 and university students from the current 118,483 to 1.5 million by 2024,” Mr Ringera said.

By the time of going to press, the chairman of the Public Universities Vice-Chancellors’ Association, Prof Fred Otieno, of Masinde Muliro University of Science and Technology, had not returned our calls to comment on the issue.

But Kenyatta University Vice-Chancellor Olive Mugenda said commercial banks should open up loans to students and insure them against risks of non-payment.

“Many banks fear that students will not be able to pay the loans because of unemployment. This is a wrong perception as many graduates are getting employed.

“The banks can put a mechanism in place with employers and government arms to ensure that they repay the loans,” Prof Mugenda said.

So far, Helb has spent about Sh47 billion on 430,000 students.

As of June this year, about 93,000 loanees had cleared their dues amounting to Sh8.7 billion while 100,000 others are currently paying up.

Undergraduates get between Sh35,000 and Sh60,000 annually alongside a bursary of up to Sh8,000.

The board’s maximum allocation has been Sh60,000 for a long time and there has been proposal to raise the ceiling to Sh72,000 to reflect the rising living expenses.

At the same time, self-sponsored students say the money allocated is not sufficient to cater for even one semester, with fees ranging from Sh120,000 for Humanities degree programmes to Sh450,000 for specialised science courses like medicine and engineering programmes.