Christabel Gero
January 14, 2020

How Can We Make Student Loans Fairer?

Student loans have helped many disadvantaged individuals to finance their tertiary education across the world. The loans reduce the financial burden on students, their parents, and guardians; and offer an alternative to those without one.

So great is the demand for student loans that financers can barely satisfy it. The rapid growth in student enrolment remains a challenge to sustainable financing of higher education in many parts of Africa. However, the administration of these loans has often meant that prospective applicants are not guaranteed financing, their neediness notwithstanding.

In many cases, it is a game of chance on the disbursement side, that later turns into a sure bet on the repayment side. Take Kenya’s Higher Education Loans Board (HELB), the government agency responsible for the administration of student loans, for instance. Over the last 24 years, it has disbursed over Ksh92 billion and empowered dreams of more than 837,965 Kenyan students, official statistics indicate.

Student loans, according to research by Forbes in 2018, have the highest repayment delinquency rates in America. They are the largest source of household debt after mortgages. Americans owe more than $1.53 trillion in student loan debt, with one in four American adults having student loan debt. Defaulting on student loans comes with consequences. It negatively affects credit scores, complicating future access to credit. Statistics indicate that about 85,000 Kenyans cannot repay Ksh. 50 billion due to HELB, mainly because most are jobless. Thus, the board has recently resorted to a 30-day ultimatum to defaulters to commit to repayment or risk punishment.

It is unimaginable how an unemployed graduate could put their house in order and commit to loan repayment in just 30 days when they clearly, have no income. Of course, some deliberately refuse to pay and still go scot-free. This begs the question: why should unemployed graduates be pressured to pay back student loans yet well connected senior government officials steal public funds and are not held accountable?

Many graduates cannot service student loans, ever since getting jobs became a struggle. The government has failed in its role of creating an enabling environment for the generation of employment opportunities, as so many university graduates are still unemployed, years after graduation. Let the government provide jobs to all graduates then we can discuss loan defaulting. Otherwise, let it forever hold its peace.

The struggling economy and doubling interest rates on student loans do not make the situation any better. How would an unemployed graduate fully settle a loan if it continues to accrue interest and penalties by the month? Eventually, many graduates who do not service their loans struggle accessing loans from other financial institutions, having been listed on credit reference bureaus, making it difficult to start and run businesses.

The desperate moves to torment jobless graduates with threats to name and shame defaulters’ in dailies are shameful. This is a case of washing dirty linen in public and hanging it out for all to see. It is also an expensive undertaking, considering the advertising space needed to accommodate 85000 names of defaulters. Besides, it is expensively embarrassing for one’s name to appear in such lists of shame. Naming and shaming loan defaulters is not within the law, but if at all it has to be done, then could the government start by giving decent jobs and salaries to loan defaulters?

In South Africa, many students rarely seek student loans because of the fear that it saddles them with debt. Even the government seems to have lost confidence in its loan scheme.

The Obamas are known to have settled their student debt in 2005 when the former president was running for office. Similarly, presidential aspirant Ted Cruz paid up his student loan sometime before the 2016 election. Kerry Washington, a renowned actor, paid back her student debt only after she was financially stable. It is thus wise to let everyone pay back their student loans whenever they can, not necessarily when they are supposed to.

Education is an investment whose benefits are enjoyed by society at large. It should not just be up to only the student to pay fees but rather a joint effort from the government and other stakeholders in ensuring access to university education for the country’s future development.

Perhaps it’s time to consider a review of laws on student loans, so that graduates, who are still jobless after a year of completing campus, get amnesty. There should also be a reduction in interest rates, more flexible payment plans and increased regulation of the cost of university education. Pending loans that are not paid back should also be written off in the same fashion loans for coffee farmers and other firms in distress have been written off by the government in the past. This is to allow young people to start life without “baggage”.

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2 comments on “How Can We Make Student Loans Fairer?”

  1. Thanks for adding your voice to this important conversation Christabel. It is ridiculous that governments spend so much on higher education but burden the products of their investments with so much debt that they cannot take off, and benefit society. And come to think of it, our governments train military for free!

Christabel Gero
January 14, 2020

How Can We Make Student Loans Fairer?

Student loans have helped many disadvantaged individuals to finance their tertiary education across the world. The loans reduce the financial burden on students, their parents, and guardians; and offer an alternative to those without one.

So great is the demand for student loans that financers can barely satisfy it. The rapid growth in student enrolment remains a challenge to sustainable financing of higher education in many parts of Africa. However, the administration of these loans has often meant that prospective applicants are not guaranteed financing, their neediness notwithstanding.

In many cases, it is a game of chance on the disbursement side, that later turns into a sure bet on the repayment side. Take Kenya’s Higher Education Loans Board (HELB), the government agency responsible for the administration of student loans, for instance. Over the last 24 years, it has disbursed over Ksh92 billion and empowered dreams of more than 837,965 Kenyan students, official statistics indicate.

Student loans, according to research by Forbes in 2018, have the highest repayment delinquency rates in America. They are the largest source of household debt after mortgages. Americans owe more than $1.53 trillion in student loan debt, with one in four American adults having student loan debt. Defaulting on student loans comes with consequences. It negatively affects credit scores, complicating future access to credit. Statistics indicate that about 85,000 Kenyans cannot repay Ksh. 50 billion due to HELB, mainly because most are jobless. Thus, the board has recently resorted to a 30-day ultimatum to defaulters to commit to repayment or risk punishment.

It is unimaginable how an unemployed graduate could put their house in order and commit to loan repayment in just 30 days when they clearly, have no income. Of course, some deliberately refuse to pay and still go scot-free. This begs the question: why should unemployed graduates be pressured to pay back student loans yet well connected senior government officials steal public funds and are not held accountable?

Many graduates cannot service student loans, ever since getting jobs became a struggle. The government has failed in its role of creating an enabling environment for the generation of employment opportunities, as so many university graduates are still unemployed, years after graduation. Let the government provide jobs to all graduates then we can discuss loan defaulting. Otherwise, let it forever hold its peace.

The struggling economy and doubling interest rates on student loans do not make the situation any better. How would an unemployed graduate fully settle a loan if it continues to accrue interest and penalties by the month? Eventually, many graduates who do not service their loans struggle accessing loans from other financial institutions, having been listed on credit reference bureaus, making it difficult to start and run businesses.

The desperate moves to torment jobless graduates with threats to name and shame defaulters’ in dailies are shameful. This is a case of washing dirty linen in public and hanging it out for all to see. It is also an expensive undertaking, considering the advertising space needed to accommodate 85000 names of defaulters. Besides, it is expensively embarrassing for one’s name to appear in such lists of shame. Naming and shaming loan defaulters is not within the law, but if at all it has to be done, then could the government start by giving decent jobs and salaries to loan defaulters?

In South Africa, many students rarely seek student loans because of the fear that it saddles them with debt. Even the government seems to have lost confidence in its loan scheme.

The Obamas are known to have settled their student debt in 2005 when the former president was running for office. Similarly, presidential aspirant Ted Cruz paid up his student loan sometime before the 2016 election. Kerry Washington, a renowned actor, paid back her student debt only after she was financially stable. It is thus wise to let everyone pay back their student loans whenever they can, not necessarily when they are supposed to.

Education is an investment whose benefits are enjoyed by society at large. It should not just be up to only the student to pay fees but rather a joint effort from the government and other stakeholders in ensuring access to university education for the country’s future development.

Perhaps it’s time to consider a review of laws on student loans, so that graduates, who are still jobless after a year of completing campus, get amnesty. There should also be a reduction in interest rates, more flexible payment plans and increased regulation of the cost of university education. Pending loans that are not paid back should also be written off in the same fashion loans for coffee farmers and other firms in distress have been written off by the government in the past. This is to allow young people to start life without “baggage”.

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2 comments on “How Can We Make Student Loans Fairer?”

  1. Thanks for adding your voice to this important conversation Christabel. It is ridiculous that governments spend so much on higher education but burden the products of their investments with so much debt that they cannot take off, and benefit society. And come to think of it, our governments train military for free!

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