The government of Tanzania has a way to get college students to pay back their student loans, but the strategy doesn’t go over well in the U.S. The idea is garnishing a percentage of a student borrower’s wages.
According to a report in allAfrica, the Higher Education Students’ Loan Board in Tanzania will begin deducting 15% of student loan borrowers’ income to go toward paying back their loans, up from 8%. The amendment was added by the Higher Education Students Loan Board Act in November with the new payroll deduction rate kicking in as of Jan. 1.
To ensure employers are complying with the increase, the loan board has been sending letters to urge them to make the changes. One letter to Pivotech Company Limited, the telecom and IT contracting company, said that the board should receive the payroll deductions by the 15th of the following month.
Employers who don’t garnish the increased amount of wages could be hit with a 100% late penalty, noted the report, citing Abdul-Razaq Badru, executive director of HESLB. Employers who hire new workers have 28 days to provide HESLB with the names of the employee or employees. If they don’t do so they are breaking a law and thus considered a criminal offense.
HESLB also has the power to send agents to look at the records of employees to ensure they are confiscating wages of borrowers who owe student loans. “Where an employer fails to notify the board without reasonable excuse that he has, in his employment a beneficiary within a specified period, that employer commits an offense and shall, on conviction be liable to a fine of not less than one million shillings,” the amendment stated according to the report.
With Tanzania staring at its fair share of student loan defaults, the government said the hike in how much borrowers have to pay back through their wages is designed to increase loan recovery and to enhance the operations of the loan board. Beneficiaries of the student loans get a year grace period before they have to start paying it back while the self-employed have to contribute 10% of their already taxable monthly income.
Last year, President John Magufuli’s government overhauled the Higher Education Loan Board to boost the number of debts it collects and to clamp down on fraud within the government agency. The student loans that have gone unpaid date back to the 1994-1995 school year and 2005, the year the Ministry of Higher Education in Tanzania started issuing student loans. While the U.S. is facing high default rates among borrowers, it hasn’t taken the federal step towards garnishing wages.
Since taking office a year ago, shook up the HELB administration to bring about effectiveness in collecting debts from beneficiaries and control fraudulent expenditures.
The list of beneficiaries, who have not repaid their loans, include those who took loans between 1994/95 and 2005, when the then Ministry of Higher Education was charged with the role of issuing loans to students. When HESLB started operating in 2005, it took over the responsibility of pursuing payment of loans amounting to 51.1bn/- issued by the ministry to 48,378 students.
Author: Andrew Rombach
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