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Students Loans Board hikes interest rate to 15%

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Benedicto Kondowe

The Higher Education Students’ Loans and Grants Board (HESLGB) has hiked the interest rate on outstanding mature students loans by five percentage points from 10 to 15 percent.

In a statement released Monday, HESLGB Chairperson Sam Kakhobwe said the board noted that the 10 percent interest was not closer to maintaining the value of the loans.

Kakhobwe said general inflation and currency devaluations erode the value of loans.

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“… to the extent that recoveries at 10 percent interest rate can hardly support adequate numbers of new applicants and sustain a revolving loan fund,” the statement reads.

The adjustment is effective January 1 2023.

The board is mandated to recover loans from all beneficiaries, some of whom started accessing loans in the 1985-86 academic year, and a loan matures for repayment two years after a student beneficiary completes successfully or unsuccessfully his or her studies.

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In December last year, the board indicated that students who benefitted from grants  and loans but are yet to repay the same would now be subjected to 15 percent per annum interest repayment rate.

HESLGB Director of Recovery Paul Padambo justified the move at the time, saying the current economic situation had necessitated such a move.

He also bemoaned that former students who are holding on to money are denying deserving students an opportunity to benefit from loans.

The director of recovery, therefore, asked those that owe the board money to repay before January 1 2023 for them to be charged at the prevailing rate of 10 percent.

“We still have a lot of outstanding loans that need to be recovered. We are currently at between K12 billion and K15 billion, in terms of money that is due for recovery. As such, you can see that the amount is substantial,” Padambo said at the time.

Meanwhile, Civil Society Education Coalition Executive Director Benedicto Kondowe has welcomed the development considering that most of the former students are yet to pay back.

Kondowe, however, said HESLGB should put much effort in recovering the loans so as to easily transform the loans into a revolving fund.

“It is evident that the loans board is collecting less money. As such, even if the interest [rate] is adjusted, there is very little that can be obtained from beneficiaries of the loans,” he said.

In a related development, HESLGB Acting Executive Director Prince Phwetekere has indicated that the institution recovered K163 million from January to November 2022.

This is a 209 percent increase in the recovery rate from the K53 million targeted in the same period last year.

Phwetekere further said that, in the 2021-22 loan cycle, HESLGB disbursed a total of K9.4 billion out of the K12 billion budget for both tuition fees and upkeep allowances.

Meanwhile, The Daily Times has learned that ex-students who are clinging to HESLGB money are doing so when some students have been dropping out of school, most of whom due to lack of fees.

For instance, as the country is struggling to increase the number of students accessing tertiary education services, 2,154 students dropped out of school in the 2021-22 academic year.

This is according to the 2022 Malawi Education Statistics Report released by the Ministry of Education.

The report indicates that, out of the 2,154 students, 1,264 dropped out of school due to lack of school fees, representing 59 percent of the dropout rate.

The report, which Secretary for Education Chikondano Mussa and Minister of Education Agnes NyaLonje signed, further indicates that universities enrolled 56, 624 students in the year in question.

“As regards to proprietorship, about 66 percent of those who drop out of school in public institutions are male students, and they do so because of lack of school fees, while in private institutions, more than half [of] female students drop out of school because of school fees,” the report reads.

The ministry says it also intends to double enrolment figures over the next five to 10 years, citing the provision of loans through HESLGB as one of the mechanisms for achieving that goal.

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