25% imposed on ’varsity loan defaulters
Higher Education Students Loans and Grants Board (HESLB) has imposed a 25 percent penalty on university loan defaulters at the expiry of the one-year grace period to repay by March 31, it has been disclosed.
University students, mainly from University of Malawi, owe the board about K3.8 billion and so far the board has collected K68 million only.
Loans Board Act Section 27 (3) (a & b) empowers the loans board to calculate a reasonable interest on all former students’ loans as per the original agreement forms signed between a student and all preceding student loans scheme administrations.
HESLB chief executive officer Chris Chisoni said although there is a high traffic in the repayment of the loans, the law requires that at the expiry of the grace period, the loans be paid back at an interest and the 25 percent will date back to the year of graduation and will be calculated using a compound interest method.
“The board, therefore, resolved that 25 percent of the base lending interest rate in the year of graduation and compound interest method would be the most applicable method of calculating the loan balance to be paid by the loan beneficiaries,” he said.
Chisoni also said the grace period started in April 2016 and expires on March 31 2017 and after that the Loans Board will refer some of the defaulters to credit data bureaus.
He said the 12-month grace period was deliberately put in place so that the Loans Board would raise awareness of its existence, the beginning of the recoveries campaign, the legal provisions regulating its operations were put in place.
In 2015, the board granted a one-year grace period, starting April 1 2016 ending on March 31 2017 to former beneficiaries of student loans to repay the original loans. n
