University Student Loan Burdens: What New Funding Formula Means to University Graduates
Students admitted to universities in September will graduate with a substantial debt load. New university entrants will be burdened with substantial student loans upon graduation.
95,000 students who took the 2022 Kenya Certificate of Secondary Education will rely heavily on student loans to finance their university educations under the new funding formula.
A comparison of loan burdens, for instance, that two JKUAT students pursuing a medical degree will have distinct debt loads upon graduation.
The disparity in loans is a staggering Sh1.3 million; however, it will depend on how the government categorizes students in determining their need for financial aid. In essence, university students will complete the same course but graduate with varying levels of debt.
The formula classifies students into four categories that influence the amount of money they receive in government scholarships, loans, and out-of-pocket expenses.
Vulnerable, extremely needy, needy, and less needy are the four groups.
Learners categorized as vulnerable and exceedingly needy will receive free tuition under the new formula, making them the greatest beneficiaries. Instead, a portion of their tuition will be covered by student loans and government grants.
Loan breakdown
82 percent of vulnerable students’ tuition will be covered by the government, money they will not be required to repay.
The remaining 18% will be covered by student loans, which will require repayment upon graduation.
Thus, a student admitted to pursue medicine at JKUAT or Kenyatta University with fees of Sh612,000 will pay his/her fees as follows: the government will pay fees through a scholarship of Sh501,840 and the student will receive a loan of Sh110,160.
In the six years required to earn a medical degree, the student will accrue Sh660,960 in debt.
Extremely poor/needy
For students with extreme financial need, the government will provide 70 percent of tuition through scholarships that are also not repaid at the conclusion of their education.
However, the remaining 30% of expenses will be covered by loans that must be repaid upon graduation.
A student pursuing the same course in this category will receive a Sh428,400 scholarship and a Sh183,600 loan.
In six years, the total amount of the loan will amount to Sh1,101,600.
Nonetheless, the burden of student debt will fall on the last two categories;
The Higher Education Loans Board (HELB) indicates in its explanation that these categories will require little to no financial assistance to complete their university education.
Needy students
Students from low-income households who enroll in universities will receive government grants of 53% and loans of up to 40%. Their Households will only be responsible for 7%.
A student admitted to pursue medicine at JKUAT or Kenyatta University with fees of Sh612,000 will receive Sh324,360 in government scholarships, Sh244,800 in loans, and will pay Sh42,840 in direct fees. Due to the six-year duration of the medicine degree program, the student will incur Sh1,946,160 in loans.
Less needy students
On the other hand, university-bound pupils with less financial need will receive a government scholarship covering up to 38% of the cost of the program and 55% in the form of loans. Their parents will pay 7% of the tuition costs.
In practice, this means that a student who pays Sh612,000 in tuition fees will receive Sh232,560 in government scholarships, Sh336,600 in loans, and Sh42,840 in direct fees.
This student will owe the Higher Education Loans Board Sh2,019,600 of the student loan upon graduation.
According to an analysis by The Standard, these students pursuing a degree in medicine at JKUAT or Kenyatta University and enrolled in the same class will have loans ranging between Sh660,960 and Sh2,020,960.
In spite of pursuing the same degree program, there will be a disparity of Sh1,358,640 between the loan burdens of graduating students, highlighting the disparity in loan burdens students will face.
Criticism
According to critics, the disparity could create a financing issue as thousands of graduates are unable to repay their debts.
In addition, the rising cost of living has been cited as a potential caveat in the new student loan regime, with critics claiming that it will strain graduates.
Student loans, according to proponents of the new funding formula, provide economic opportunity to individuals who otherwise would not have been able to attend college.
With HELB designed as a revolving fund, there are concerns regarding the students’ ability to reimburse the loan in order for funds to be available for new students in subsequent years.
According to critics, the funding formula could lead to problems that persist for decades.
HELB has previously indicated that pupils will receive a one-year grace period before beginning loan repayment.
This means that a student pursuing a four-year degree will begin paying back the loan six years after enrolling in college.
In the first five years of the new financing formula, no payment will be required on outstanding student loans, either because the student is still in school or because the grace period is still in effect.
Charles Ringera, the chief executive officer of HELB, announced on Monday that universities have offered a 15% discount on all courses.
He spoke at the announcement of the allocation of 2022 KCSE exam candidates into colleges and universities.
In practice, students will incur substantial debts that they will be required to begin servicing/paying back one year after graduation.
Currently, a student debt crisis is looming due to the high graduate unemployment rate and the rising expense of living.
This could be especially problematic for recent graduates with lengthy employment gaps.
University Student Loan Burdens: What New Funding Formula Means to University Graduates
