Expensive HELB Interest, Fines Outlawed – Court Ruling Explained

The Higher Educatíon Loans Board (Helb) has been stopped by the High Court from charging fines, penalties and interest that exceed the principal amount. Justice Alfred Mabeya ruled that the charges were unconstitutional in a verdict rendered on Monday, August 22.

Helb beneficiaries Ann Mugure, Davis Nguthu and Wangui Wachira had filed the case challenging the legality of the fees. The petitioners argued that the charges were exorbitant and a violation of their socioeconomic rights.

The petitioners told the court that the exorbitant fees had affected their ability to repay their student loans. HELB disburses over Ksh15 billion to over 200,000 beneficiaries annually.

Failure to remit Helb loan payments, or delayed remittance, attracts a five per cent penalty of the total amount due. Helb loan deductions are required to be remitted by the 15th day of every month.

Many find themselves struggling under the weight of piling interest and penalties, which often go on to exceed the principal amount.

Helb data released in July revealed that defaulting accounts dropped 14 percent following a four-month penalty waiver that ended June 30. Helb offered a 100 percent penalty waiver from March 1 to encourage repayment in a bid to mitigate the impact of Covid-19 on the repayment ability of beneficiaries.

Loan accounts in default stood at 94,216 down from 109,661 in February as unpaid loans hit Ksh10.2 billion.

Mabeya’s decision means that Helb will no longer be allowed to charge beneficiaries interest amounts, penalties or fines that exceed the principal amount.

“A declaration hereby issues against the respondent (Helb) that by imposing interest amounts and penalties or fines that exceed the principal amount, the respondent is in contravention of Article 43 (1) (e) and (f) and Article 27 of the Constitution of Kenya,” the judgement read in part.

Most students who apply for Helb loans require financial support to pay for their upkeep and tuition. The maximum Undergraduate loan is Ksh60,000 per year.

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