Determinants Of Undergraduate Helb Loan Default: A Case Of Higher Education Loans Board

Abstract

There are many factors that influence undergraduate HELB loan default. In spite of the government’s and other stakeholders’ endeavor to improve and make university education accessible, undergraduate HELB loan default still remains a major challenge with significant proportion of undergraduate beneficiaries defaulting on their loans. The focus of this study is to investigate the determinants of undergraduate HELB loan default in Kenya and draw policy recommendation based on the study findings. The study utilized the probit model to analyze the determinants of undergraduate HELB loan default in Kenya using cross sectional data from HELB database as at December 2017. The dataset consisted of 152,482 undergraduate HELB beneficiaries across the country from both public and private universities. Number of years since completion of undergraduate study and gender though statistically significant, are negatively related to undergraduate HELB loan default. Outstanding loan, total penalty charged on principal loan, principle loan awarded to beneficiary for the period of undergraduate study, employment status and age of beneficiary significantly affect undergraduate HELB loan default as per the findings. Majority of undergraduate HELB loan defaulters are males at 60 percent with average age of the undergraduate HELB loan beneficiaries at 39 years. The average principal loan HELB award undergraduate beneficiary is Kshs 142,490. Based on the findings, it is therefore recommended that the government through HELB should review the policy on penalties levied on defaulters to control how and when penalties are charged to curb ever rising loan default. The study also recommends that going forward HELB should match the loan amounts with age so that the loan advanced to older beneficiaries be reduced compared to the loan advanced to the younger beneficiaries. Similarly, the study also recommends that HELB should introduce a reward scheme for those who finish paying their loan on record time, this will instil a positive approach towards repayment of HELB loan in Kenya.