HELB may soon lock defaulters' bank accounts to recover loans

The government is seeking Parliament's approval to recover Sh35 billion from 316,000 university graduates who have defaulted on their Higher Education Loans Board (HELB) loans.

If approved, HELB could gain the authority to access and freeze the bank accounts of these defaulters to recover the outstanding funds.

The 316,000 former students include individuals employed in both formal and informal sectors, as well as those who have left the country for opportunities abroad. While some defaulters are unemployed, others who are working have not begun repaying their loans.

Appearing before the National Assembly’s Public Investment Committee on Governance and Education, HELB Chief Executive Officer Geoffrey Monari raised concerns over the rising number of loan defaults, which he said threatens the sustainability of the revolving fund model. For 27 years, this model has supported students whose families could not afford higher education.

Monari revealed that HELB is struggling to recover the Sh35 billion, with only Sh66 million currently being repaid by 464,000 former students. The larger portion of the debt remains unpaid, directly affecting the availability of loans for current students. He noted that HELB is operating on a limited budget of Sh4 billion, which is insufficient to meet demand.

“Only Sh66 million is being repaid by 464,000 students, typically over a 10-year period. Meanwhile, the 316,000 defaulters have not started repayments. If we can get them to start repaying, it would significantly improve cash flow to support current students,” Monari explained.

To address this, HELB urged the parliamentary committee to approve a proposed law that would empower the board to freeze defaulters’ bank accounts as a deterrent and a means to recover funds.

“My request is for legislation that allows us to freeze accounts of former students who are doing business but not repaying their loans, similar to how the Kenya Revenue Authority (KRA) freezes business accounts. This would encourage defaulters with steady incomes to comply,” Monari submitted.

“We can provide a detailed proposal outlining the laws we need to recover these funds.”
However, the committee challenged HELB on what they described as chronic underfunding and over-reliance on Treasury allocations. They questioned the board’s efforts to recover the billions.

“Do you have a system to track these funds? Are you saying all 316,000 defaulters are unemployed and unable to repay?” asked Embakasi West MP Mark Mwenje.

Committee Chair Francis Sigei (Sotik MP) added, “Are you aware of employed graduates who are reluctant to pay? What about those who have ventured into successful businesses? Do you have mechanisms to follow up on these loans?”

Monari explained that HELB has an inspectorate team to ensure compliance. Employers who fail to deduct and remit loan repayments face a penalty of Sh3,000 per student per month for the duration of non-compliance.

When asked about graduates employed abroad, Monari admitted, “We face challenges with the diaspora. We are working with our embassies and running online campaigns to encourage repayment. We are also exploring partnerships with the State Department of Immigration to track Kenyans leaving the country using their ID numbers linked to passports. This would help us locate defaulters more precisely.”

To ensure compliance from self-employed graduates, Monari noted that defaulters are blacklisted with the Credit Reference Bureau, limiting their access to bank credit.

However, he highlighted challenges with graduates in the gig economy and online businesses, where HELB lacks oversight, and income is not formally declared.

“We appeal to these graduates to repay their loans, as it is the right thing to do and ensures future students can benefit,” Monari said.

The MPs urged HELB to explore alternative funding sources to reduce dependence on the Treasury.

“As time goes on, you must realize the Treasury is not a reliable source of funds. You need to work harder to recover your loans to avoid relying on the exchequer,” the committee advised.
The committee has summoned Education Cabinet Secretary Migos Ogamba and Principal Secretary for Higher Learning Beatrice Inyangala to appear on June 18 to address HELB’s financial crisis and respond to members’ queries.