University students applying to get loans under the higher education students’ loan scheme will pay an interest of seven per cent at the time of repaying loans, a top ministry official has said.
This means for Shs4m each student will get every year, it will attract an interest of Shs280,000.
Mr Michael Wanyama, the coordinator of the higher education loan scheme, said they opted for a lower interest rate to minimise cases of loan defaulting as is the case in other countries where the scheme is already operational. “...repaying of loans is a big challenge and by setting a modest interest rate we hope the beneficiaries will pay back in time to enable others benefit from the same scheme ,” he said.
Mr Wanyama said they had reached an agreement with Centenary Bank to give out loans as well as collecting filled out application forms from applicants across the country.
“We want to experiment and see how effective they can do the work, but with time we shall bring other banks on board,” he said. He added that students will also be required to pay a loan processing fee of Shs20,000.
Applying for loans began yesterday. Government has put aside Shs5b to kick-start the scheme which is intended to enable students from poor background to access higher education.
However, when launching the scheme a couple of months ago, President Museveni warned that government would prosecute students who default in paying back the loans. The beneficiaries will be expected to repay the loans on completion of education or risk a fine not exceeding 50 currency points (Shs1m) or imprisonment of six months, according to the law.
Mr Wanyama said the Education ministry would track the applicant’s status right from primary school to establish if indeed their families are struggling financially. Also, the local councils and the Internal Security Organisation will have to vouch for them. At least 1,000 students who intend to study science-based courses will benefit in the first lot.