Uhuru rejects Bill delaying payment of Helb loan

President Uhuru Kenyatta has rejected a Bill offering all government-sponsored students higher education loans irrespective of their financial status.

The President says in a memorandum to Parliament that creating a category of students who will automatically qualify for government loans amounts to preferential treatment of applicants, which will be discriminatory and unconstitutional.

Kiharu MP Irungu Kang’ata had proposed in Clause 6 of the Bill that “all regular government sponsored undergraduate students shall upon application be entitled to an award of the loan unless the board is able to provide documentary evidence of student’s ability to pay fees without the loan.”

The President argues that even if Mr Kangata’s proposal was legally tenable, its sustainability would require substantial financial support from the Treasury, which is hardly feasible given the current budgetary constraints.

Mr Kenyatta says the criteria adopted by the board during disbursement of the loans includes carrying out a means test in respect of each applicant to determine whether a student requires government assistance to pursue the desired course or not.

“In doing so, the board is able to identify students from vulnerable economic background thereby ensuring the assistance provided goes where it is most needed. I thereby recommend that the proposed subsection 6 be deleted,” he says.

The President is also seeking removal of a clause that allows graduates, who fail to secure employment within one year of completing studies, to notify the board in writing in order to escape the penalties charged on defaulters.

Under the current legal framework, the President says, loanees are required to commence repayment of loans within one year of completing studies or within such longer period as the board may deem appropriate to recall the loan, making it unnecessary to legislate afresh on the matter.

“Repayment periods are spread out over a maximum periods of 48 to 120 months, depending on the nature and the amount of the loan and the circumstances of loanee,” Mr Kenyatta says, adding that the law empowers the board to impose penalties to deter laxity or default in loan repayments.

He says in the memo to Parliament that imposition of penalties has greatly aided the recovery of the loans, arguing that the proposed amendment risked weakening the board’s loan recovery mechanisms.

“Loanees will no longer feel pressured to complete their studies and enter into a gainful employment so that they can start servicing their loans,” Mr Kenyatta said.

Besides, he argues, the requirement that a loanee simply notifies the board that heshe is not in gainful employment to avoid imposition of penalties has the effect of shifting the burden of verifying the loanee’s assertions to the board.

“It will be extremely difficult for the board to recover funds, especially in cases where loanees are in the informal sector or are self-employed or where they live and work outside the country and is likely to cost the board a lot of valuable income.” 

READ: Pain for freshers as Helb delays cash disbursement

The Higher Education Loans Board (Amendment) Bill, 2015 sponsored by Mr Kang’ata provides that “where within one year of completion of his studies a loanee has not secured a source of income, the loanee shall notify the board in writing, supported by an affidavit and the board shall not levy penalty on the loan.” 

National Assembly Speaker Justin Muturi told Members of Parliament that Mr Kenyatta had expressed reservations with clauses 2, 3, 4 and 5 of the Bill and recommended amendments.

“The said clauses relate to the proposed change of the composition of the board, the granting of loans to students who are minors and the change of repayment mode for loanees who have not secured employment.”

The Higher Education Loans Board (Helb) has not disbursed any money to students who joined public universities this year, citing financing constraints.

Treasury secretary Henry Rotich set aside Sh7.5 billion for the year that began in July to cater for 135,000 continuing students and the freshers, but the agency says it needs additional Sh2 billion to fully finance the programme.

Mr Kenyatta has also rejected the proposal to expand the Helb membership to include two student representatives – one each from the public and private universities.