The Higher Education Students Loans Board (HESLB) was supposed to be a lifeline for tertiary students, providing loans to those needing higher education funding.
But nearly two decades since its inception, the system has become a financial burden, with loan defaults skyrocketing and very few students able to repay their debts.
The CAG’s 2024 audit paints a grim picture, highlighting over 85% default rates and a rapidly growing debt portfolio. This article delves into why HESLB is failing and makes the case for its immediate dissolution, advocating for a more sustainable, debt-free education funding model.
As far as I know, it wasn’t our idea but was imposed upon us by the Bretton Woods Institutions.
It greedily consumes public funds while failing to achieve its corporate objectives.
The harsh reality is now gently settling in on us all. HESLB is not delivering! It has become a financial burden, but policymakers are cautious about pulling the plug.
How HELB Started
If you peruse the HESLB website, you will see a tripod mission statement: lending college loans to needy and eligible tertiary students, collecting their loans, and establishing a sustainable revolving fund with partnerships with similar fraternities.
HESLB is a creature of the statute crafted in Act No.9 of 2004 (CAP 178) (as amended in 2007, 2014, and 2016), and it began operating in July 2005.
This law had one major fault underlying assumption: there was a job market to accommodate recipients of government education assistance that they may be able to repay.
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Regrettably, that has not been the case. Default is running at a staggering rate of over 85%. From my own rough estimates, only two of every 10 recipients of government scholarships are in a position to repay the money according to the schedule without defaulting!
A more glaring indictment is what HESLB consumes to dish out our taxes with unacceptably minimal marginal returns!
CAG Report of 2024
The report noted that there were major concerns about the collection of mature and outstanding loans.
It went further to depict a grim picture. The outstanding loans increased from TZS 552.97 Billion (2015/16) to TZS 3.02 trillion (2022/23).
Also, in the financial year 2022/23, HESLB recorded a portfolio at a Risk rate of 85%, contrary to the best practice rate in microfinance, which is 10%.
The audit also noted the increase in overdue loans with ten years or more, rising from 0.42% in 2014/15 to 2.52% in 2022/23.
It points to a risk in the loan portfolio, indicating potential challenges in liquidating these long-overdue loans.
The analysis also highlighted the inadequate collection from self-beneficiaries, ranging from 2.8% to 8.1%, showcasing a focus on employed beneficiaries and ineffective tracing strategies.
Analysis of loan disbursed data and loan repayment status noted that outstanding loans increased yearly.
The outstanding loans increased from TZS 1.25 trillion in the financial year 2015/16 to TZS 4.84 trillion in the financial year 2022/23, with an average growth rate of 23%.
The number of loaners grew, but the remittances subsided.
HESLB, to cut corners, began channelling the loans to risk-averse sectors, such as the formal sectors, and evaded the risk-prone sectors, like the informal sector, where repayment rates are minimal.
Doing so widened the income divide it was supposed to bridge in the first place!
When a public entity defeats her reason, it is created. That alone gifts us with a reason to dissolve it.
The number of cumulative matured loan beneficiaries was 227 063 in 2014/15, and it rose to 486 549 in 2022/23.
As of 2022/23, the number of matured loans exceeding or equal to ten years was 140,343. While the grace period for beginning to pay up student loans is one year, most loanees did not pay for a decade or more after completing their studies.
Section 6 (c) of the Higher Education Students Loans Board Act, Cap. 178, 2008, requires HESLB to administer and supervise the entire process of granting, repaying and recovering loans issued to students.
Also, para 2.1 of the HESLB Loan Repayment and Recovery Manual of 2019 mandates that HESLB ensure that loans are repaid through monthly instalments deducted.
This is done at a rate of 15% of the basic monthly salary for employed loan beneficiaries or a minimum of TZS 100,000 or 10% of the taxable income of a self-employed beneficiary, whichever is higher, or in a lump sum.
That requirement presumes a monthly salary of Tshs 1,500 000/=. How many graduates choose that generous pay?
The audit noted the unsatisfactory collection of due and overdue loans from loan beneficiaries by HESLB.
The presence of insufficient collections of matured loans evidenced this.
This was attributed to a decreasing trend in matured loans and loan repayments, a low number of beneficiaries paying their loans, an increase in long-term overdue loans and insignificant loan repayment from self-beneficiaries.
It also includes untimely collection of matured loans and insufficient collection of loan repayment, which was attributed to insufficient monthly loan repayment and a decreasing trend of loan repayment collection rates.
My take
The CAG auditing report on HESLB was comprehensive and focused on the effects facing the beleaguered corporation. Still, it was thin on the causes and what is needed to arrest the deteriorating situation there.
HESLB is a political solution to an essentially economic problem. Politicians would love to indent an impression that higher education is oiled with sufficient funds but pay little attention to the quaking underlying assumption.
We have no labour market that will absorb the student loan beneficiaries. We know this; to state otherwise would be lying to ourselves, as we have been doing in this area for almost two decades.
The report did not compare the HESLB’s spending to the cost of failing to collect the outstanding loans.
One way or the other, we deserve to know the cost-benefit ratio, which will help determine the issue of sustainability the CAG indicated was its prime target in its findings. The report miserably failed to achieve its intended objective without knowing the cost-benefit ratio.
At the end of the CAG report, there were lame recommendations that would not address the symptoms the report identified correctly.
In short, the CAG report alerted us on the policy failures governing the formation of the HESLB but was disappointing for not making tangible recommendations.
If you read between the lines of the report, you can understand the CAG believes HESLB, though it is languishing in the ICU, can be resuscitated! It is an autopsy without a coroner.
One problem I have encountered when reading the CAG reports is their failure to carry out a productive sustainability test of the public institutions they mention.
HESLB is no longer a patient on the recovery path but is the one in life support assistance.
The Parliament should do its part: terminate this parasitic relationship between the Treasury and the HESLB.
We can save more money by resorting to old relationships in meeting our goals of providing access to higher education to all, irrespective of income status, without being overcharged by the HESLB.
In order to achieve that, the Ministry of Education must acknowledge that HESLB is a deadweight that we shouldn’t carry anymore.
All education grant beneficiaries must be relieved of their debts.
Debt forgiveness is the most logical alternative to apprehending defaulters through HESLB.
Given the lopsided labour market, the Ministry of Education should stop pretending that HESLB can carry out its statutory mandate.
The majority of HESLB recipients cannot and will not repay the loans because they are job hunting on the streets.
Those who say they can employ themselves hardly appreciate and understand the challenges facing graduates in the labour markets.
The capital, skills, connections and experience needed for self-employment exceed almost 90% of the graduates.
So, we should stop preaching lies. While the report did not state how much money the HESLB has spent on a yearly basis since its inception, compared with uncollected loans, I can easily see that HESLB is unbearable: it is bleeding the Exchequer without tangible returns!
The Ministry of Education should accept that public universities should take over the functions that were under the HESLB.
Higher education should be free upon meritocratic criteria. Unpaid education loans are worse than free bursaries. HESLB should be disbanded, and its staff should be paid lawful terminal dues. HESLB buildings can be offered for rent to whoever needs them.
HESLB, despite its nobler intentions, has been sidelined by the vagaries of the labour markets.
Accepting the inevitable is the right thing to do. We can do better than spoon-feeding a failed corporate mission statement.
HESLB’s current intent is to arrest and jail those who cannot pay for one reason or the other. Most of her victims are willing to pay but are devoid of the means to do just that!
Sending to jail victims of circumstances defeats the very reason HESLB was created in the first place. We truly deserve better. Jailing non-payers will not make them pay. That rankling tactic will stiffen their spinal cord to dishonour their vows.
Enforcement of apprehensions can only compound the running costs of the HESLB without improving her revenue collections.
The HESLB is not telling us that she has outlived her statutory purpose because their jobs will be on the chopping block.
HESLB would like to keep their straws at the Treasury without hurting their paychecks. We should reject this parasitic relationship and vermicide it.
