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HELB’s Higher Interest Rates cause for defaults


The Higher Education Loan Board (HELB) has relatively higher interest rates compared to other student financing institutions in other countries, which might be the reason for rampant defaults. Since it was established in the year 1995, it has managed to lend 40.2 billion to 375,783 students, but only 68,522 have repaid their loans.

HELB does not offer loans at the same rates to undergraduate and postgraduate students. Undergraduates are offered at an interest rate of 4 percent p.a while postgrads get loans at 12 percent. Students get between Ksh 35, 0000-Ksh 60,000 annually which later translates to a minimum of Ksh 140,000 to a maximum of Ksh 240,000 for a four year course.

In Africa, South Africa, Tanzania and Kenya are some of the few countries that have managed to put in place proper university-fee lending institutions in place. Tanzania is slowly making progress in this subject area.  South Africa has the cheapest and most affordable rates.

40 percent of the loans for students who pass module exams are turned into bursaries. The NFSAS (National Student Financial Aid Scheme) loan amount varies between R500 –R20, 000 whose rate is repayable at an interest rate of 1 percent.

In the US, out of nearly 20 million, 60 percent of students get loans from the US Government. For the subsidized rate, if you borrow $10,000 you pay back $ 10,000 without any additional interest. While for the unsubsidized, federal loan if one borrows $ 10,000 you pay back $ 10,000 with an additional $2,000 totaling to $12,000.

In Europe education is highly subsidized as students are funded by the government. In UK particularly, the rate of inflation determines value of currency and also is key determiner in ensuring students pay back exactly the same amount they borrowed.

But despite the low interest rates, student loan has soared across the first-world mainly due to unemployment rates which has hit in the past five years. In the US, student loan is over USD1 Trillion, higher than credit card credit, according to the economist.


By   Roseann Ng’ang’a,

Daystar University.





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