Why you pay more than your principal loan to HESLB

Friday March 13 2020
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Dar es Salaam. In order to have a sustainable fund that will enable lending to other students, facilitate its operational activities and to hold the debtors accountable, the Higher Education Students’ Loans Board (HESLB) introduced more charges to loan beneficiaries, The Citizen reports.

This revelation has come at a time when many loan beneficiaries have been complaining of increased interest on their debts, which, according to the HESLB, is due to their (debtors) ignorance or failure to find out the various deductions, including penalties for late repayment.

For instance, Mr George (sought his second name to be withheld), a higher education loan beneficiary told The Citizen that four years after his graduation he realised that his debt was increasing without knowing the reason behind.

“You know the time you’re applying for a loan, you don’t bother finding out the laws about this loan. However, even after graduating, most of us don’t try to find out the requirements,” he said, adding: “It is at a later day that I came to realize that I owed HESLB twice of my principal loan.” Due to the fact that it is not only Mr George who goes through such a situation, but also many other graduates, The Citizen approached HESLB to find out a clarification on the charges.

In an interview, three charges that result in the increase of the interest rate were revealed.

The first is the six per cent Value Retention Fee (VRF) charged yearly on outstanding loan balance and not the principal loan. It was introduced in 2012/13 and aimed at increasing the value of the 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 lending to others without compromising the value of the loan money that the beneficiary owes,” said Mr Phidelis Msafiri, the assistant director of loan repayment.

He also noted that the Board was imposing a 10 per cent penalty on the debt owed by a beneficiary who has not come forward to begin repaying the loan after graduation as prescribed by law.

On this, he said, for pre-2016 graduates, the repayment begins 12 months after graduation and for graduates from 2017 (when the law was amended) will be charged within 24 months.

“This charge also applies to an employer who deducts a 15 per cent from his employees who are beneficiaries as required by law, but does not submit those deductions to the board within stipulated time,” he said.

According to Mr Msafiri, there is also loan administration fee amounting to one per cent per annum.

“This percent (1 percent) is charged once a year on the principal loan of the beneficiary to facilitate operational activities of the board including improving technological systems, finding beneficiaries, sending invoices among other activities,” he said.