Why that education loan may cost you more

Wednesday January 13 2021
Loans board
By Jacob Mosenda

Dar es Salaam. Some recipients of higher education loans could find themselves paying more than they expected due to non-compliance with the relevant guidelines, the Higher Education Students Loans Board (HESLB) said yesterday.

 HESLB corporate communications head Omega Ngole said in an exclusive interview with The Citizen that a number of measures have been taken to promote loan repayment and sustain the board’s operations.

He spoke following what the board has termed “false information” circulating on social media regarding the repayment of higher education loans.

They include the narration of a person who identified himself as Mussa Iddy, a teacher at a secondary school in Geita Region.

Mr Iddy said he requested for a statement on his outstanding debt, which, he added, was indicated as Sh4.46 million on his salary slip dated December 31, 2020.

 He said he was shocked when HESLB sent him a statement showing that he owed the board Sh12.087 million, contrary to what was shown on his salary slip. 


However, HESLB said  it had contacted Mr Iddy, and clarified the matter.

Another report circulating on social media, and whose source could not be immediately established, said that the amended HESLB Act, 2016 was burdening loan recipients to the extent that some may have their pension savings deducted to repay their loans.

But HESLB said the information was misleading, and urged the public to ignore it. “Many beneficiaries don’t bother to read and understand  higher education loan guidelines, and instead choose to mislead the public through social media.

These are mostly people who delay their loan repayments, and therefore find that their debts have grown further,” Mr Ngole said.

He said in order to sustain itself, facilitate its operations and hold beneficiaries accountable, the board had introduced some additional charges.

“Without these charges, nobody would see the need to repay their loans. I can confirm that  most beneficiaries are now consistently repaying their loans to avoid their debts from accumulating.”

Mr Ngole added that HESLB had introduced three charges, including a six per cent value retention fee (VRF) charged annually on the out- standing loan balance, and not the principal loan. It was introduced in 2012/13, and is aimed at increasing the value of loan financing offered to beneficiaries.

“The purpose of this charge is to enable the government, through HESLB, to have a sustainable fund that will enable it to lend to others without compromising the value of the money  issues as loans to beneficiaries.”

 Mr Ngole also noted that the board was imposing a ten percent penalty on the debts owed by beneficiaries who had not started repaying them two years after graduating.

Pre-2016 graduates were sup- posed to start repaying their loans 12 months after graduating, but those who  graduated from 2017 when the law was amended  have a two- year grace period.

“This charge also applies to employers who deduct 15 per cent of their employees’ pay, but don’t submit the deductions to the board within the stipulated time,” Mr Ngole said.

 He added that there is also a loan administration fee of one per cent per annum. “This percentage is charged once a year on the principal sum to facilitate the board’s operations, including improving its systems, tracing beneficiaries and sending invoices, among other activities.”

Mr Ngole said employers are sup- posed to deduct 15 percent of beneficiaries’ monthly pay, and submit the same to HESLB before the 15th of the following month. Self-employed beneficiaries can pay a minimum of Sh100,000 or ten percent of their taxable income each month.

The aim is to give beneficiaries an opportunity to use the skills they acquired in college to clear their loans. “We urge all beneficiaries to be patriotic and repay their loans on time to avoid unnecessary penal- ties,” Mr Ngole said, adding that beneficiaries should refrain from seeking unconfirmed information on social media and instead contact the board for clarification.

He said HESLB is currently in the process of putting in place an electronic system (HESLB loan repayment portal) that will enable beneficiaries to see their outstanding loans on computers and mobile devices from February 2021.

The system will also be integrated with employers’ pay systems to enable them submit deductions easily. “The law does not allow beneficiaries’ pension savings to be deducted to clear loans, and that is why lending criteria have set applicants’ age limit at 35 years to ensure that they can clear their loans after completing their studies.

 Meanwhile, beneficiaries of higher education loans have increased from 93,800 to 145,000 in the last five years. Repayment collections increased from Sh28.2 billion in 2015/16 to Sh183 billion in 2019/20.