Student loan systems restructured across East Africa

Student loan systems restructured across East Africa

Student loan systems restructured across East Africa

1000 students loan disbursement in kenya - Major reforms are looming for student loan schemes in East Africa as governments seek to raise enrolments and ease the fees burden on parents. Kenya, Uganda, Tanzania and Rwanda have announced plans to restructure their student loan systems or are already doing so, and are also aiming to raise more funds and achieve efficiencies in loan recovery.

Kenya’s Higher Education Loans Board, or HELB, the body that disburses student loans, recently signed a deal with the United States-based firm Latimer Education Inc to increase funding for its scheme. Latimer will provide US$11,800 to be disbursed by HELB in loans to needy students – an amount that is expected to increase substantially in the coming years.

Managers said in the fund’s latest newsletter that the Latimer partnership forms part of a chain of agreements it has negotiated with individuals and institutions to enhance the availability of funding for the rapidly growing number of Kenyans from needy backgrounds seeking to access higher education.

HELB receives at least US$18 million from the government annually to lend to students, an allocation that has grown little over the past few years and has lagged behind the number of students seeking loans, creating a huge funding deficit.

HELB has been looking for new sources of funds to wean it off over-reliance on government financing and loan recovery. Earlier, HELB indicated it would be interested in borrowing from the World Bank and the African Development Bank to increase the pool of funds, as the country prepares for a further surge in admissions this year.

It is estimated that an ordinary Kenyan household spends at least 46% of its income on education, a huge chunk of which goes to universities because of relatively high fees.

Under HELB, undergraduate students each receive between US$407 and US$698 annually. Successful applicants also receive up to US$93 in bursaries per student. This means that by the end of a four-year course, a student will have accumulated up to US$3,200 in debt.

HELB is also planning for Kenya’s 47 counties to set up a bursary and scholarship scheme for needy students, and is piloting the scheme in one county.

Rwanda

Last month, the latest assessment of Rwanda’s Students Financing Agency, or SFAR, which awards loans to students on behalf of the government, recommended far-reaching changes that would boost efficiency in running the fund.

The auditor general said that, due to inefficiencies, the Rwandan government had been struggling to recover at least US$104 million lent to students over the past two decades.

The report blamed SFAR for mismanaging the fund and faltering in recovering old debts owed by students. It also faulted employers – public and private – for failing to provide details of past students to facilitate loan recovery. Employers are required to assist SFAR in tracing former loan beneficiaries.

As a result, the government is considering strengthening the legal architecture around the loans body and tightening the noose on defaulters as well as employers who do not provide information on beneficiaries.

This is a route Kenya has successfully travelled. Today, a majority of employers deliver on their student loan repayment obligations.

In Rwanda, there are also cases of employers not remitting loan deductions from employees’ pay. The auditor general wants the law strengthened to ensure that all deductions are paid to the loans fund, and on time.

Uganda and Tanzania

Uganda is in the process of setting up a loan fund for students, joining the list of East African countries which have formed such schemes.

The Higher Education Students Financing Bill 2013, published in July, is pending in parliament. It will establish a legal framework for the scheme and form the Higher Education Students Financing Fund, or HESF, the body that will manage student loans for government.

The government has set 31 December as the deadline for the US$1.9 million fund to be operational. Although a team set up three years ago will manage the fund at the initial stage, it is not yet clear whether it will be able to be up and running within two months.

If passed, the bill will oblige loan beneficiaries to start repaying a year after completing their courses – even if they do not get a job. Beneficiaries will reportedly have to work for the government until their student loan is fully repaid.

While Maria Kiwanuka, the finance minister, has said that Uganda will charge minimal interest on the loans, details are yet to emerge. Kenya charges 4% interest on student loans.

In Uganda student loans, once approved, will be paid directly to universities to cover tuition fee expenses for students. With the US$1.9 million seed capital, Uganda hopes to initially cater for at least 1,000 students.

In Tanzania the Higher Education Students’ Loans Board, or HESLB, is well established and has so far recovered US$21 million from at least US$35.6 million disbursed in loans over the past year.

Tanzania is now handling loan applications online, as part of its loan reforms – a departure from the earlier manual process. There have been some teething problems as many student applicants were unable to access or use the new online system

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open student loan :  http://www.universityworldnews.com/article.php?story=20131113164132154