Interest on HELB loans, fines exceeding principal amount unconstitutional, High Court rules

  • High Court Judge Alfred Mabeya said monthly fines imposed by the Higher Education Loans Board (HELB) were unlawful
  • The decision followed a petition filed by beneficiaries Anne Mugure, Davis Nguthu and Wangui Wachira
  • The court said it was wrong to impose monthly fines because most graduates remain unemployed after completing their studies.

A Nairobi High Court has ruled that the monthly fines imposed on the Higher Education Loans Board (HELB) were unacceptable.

Students wait to be served in the lobby of HELB headquarters in Nairobi’s Anniversary Towers. Photo: HELB.
Source: Twitter

Judge Alfred Mabeya, in a judgment dated August 19, said HELB is not entitled to recover more than twice the amount it advances to a borrower.

He made this statement following a petition filed by Anne Mugure, Davis Nguthu and Wangui Wachira, beneficiaries of HELB.

The judge in the ruling said HELB recipients are helpless students who acquire the loans in question to fund their education. In most cases, the judge said after graduation, the majority of graduates find themselves unemployed and the loan expires before they find employment and interest and penalties kick in.

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He said it was unfair that the loan continued to accrue interest and penalties.

“With the economy shrinking and job opportunities scarce, these loans are a nightmare. Also, the monthly fines would eventually make the amount irrecoverable. This is unacceptable,” Mabeya said.

The judge declared that section 15(2) of the HELB Act is unconstitutional because the interest rates and fines exceed the principal amount advanced.

The judge ruled HELB Section 15(2) unconstitutional, resulting in interest rates and fines exceeding the principal amount advanced to a borrower.

He said that HELB is not entitled to recover from its lenders an amount greater than twice the amount advanced, which violates the double rule.

Mugure Nguthu and Wachira sued HELB in 2021, claiming it charged exorbitant interest and penalties, which often exceeded double the principal amounts owed, making repayment difficult.

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Nguthu borrowed KShs. 146,090 in July 2016; in March 2021 the amount was KShs 335,207, Mugure borrowed KShs 82,980 in July 2004 and by July 2016 it had accrued to KShs 540,464.

Wangui borrowed Sh135,000 in July 2016; in February 2021, she owed HELB Sh336,573.

They said the interest rates and penalties were excessive and undermined the socio-economic status of beneficiaries and made it difficult to repay them. They added that due to non-performing loans, they were denied the necessary clearance for job applications.

HELB imposes a fine of at least KSh 5,000 for each loan deduction that remains unpaid.

Additional reporting by Ben Kerich.

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