LILONGWE-(MaraviPost)-The country’s Higher Education Students Loans and Grants Boards (HESLB), has imposed a 25 percent penalty on university loan defaulters starting from April 1, 2017.
The penalty imposition comes at the expiry of a year-long grace period to repay the loan by March 31, 2017 from April 2016.
Currently, former University of Malawi students owe the board about MK3.8 billion that only MK68 million has been collected since the time the exercise started.
HESLB Chief Executive Officer Chris Chisoni, told reporters in Lilongwe that the grace period the board put was coming to an end and hence the decision to penalize loan defaulters.
Chisoni said although there is high loan repayment, nonetheless, the law requires that at the expiry of the grace period, the loans be paid back with an interest.
He added that the 25% will date back to the year of graduation, and was to be calculated using a compound interest method.
“The board, therefore, resolved that 25% of the base lending interest rate in the year of the graduation and compound interest method would be the most applicable method of calculating the loan balance to be paid by the loan beneficiaries.
“The 12-month grace period was deliberately put in place so that the board would raise awareness of its existence, the beginning of the recoveries campaign, the legal provisions regulating its operations were put in place. Therefore after the expiry of the grace period, the board will refer some of the defaulters to credit data bureaus,” Chisoni said.
The Loan Board Act Section 27 (3) (a & b) empowers HESLB to calculate a reasonable interest on all former students’ loans as per original agreement forms signed between a student and all preceding student loans scheme administrations.