Finances: Should I Clear My HELB Loan First Or Should I Save?


Paying off student loan debt or saving is more than a ‘yes’ or ‘no’ response because money issues are never simplistic. Situations are diverse prompting various decisions and it is for that reason that I will not provide a blanket answer.

Assumption: You are recently employed or have a steady source of income

Fact: HELB loan repayment start a year after one has completed their studies regardless of whether one has an income. Additionally, late payments attract penalties that are added to your loan. Borrowing In Joy But Payback In Sorrow – Why You Need To Work On Clearing Your Debts

Arguments on why you should save first

We all require an emergency fund so it is paramount to have one before settling your H.E.L.B debt. This is because we cannot entirely control outcomes and situations and therefore if say for example one is terminated, they will have to borrow more to sustain themselves until they secure another source of income. Additional debt because of an absent emergency fund kitty will keep you in the debt cycle.

Secondly, it makes sense to save first if your employer offers an excellent retirement savings plan. Striving to get the maximum amount matched by your employer should be a goal for everyone. As soon as you graduate, the last thing on your mind is retirement but it is going to happen either way so starting to save up early enough ensures maximum accumulation of funds.

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Arguments on why you should pay off debt first

As we age, more responsibilities directly tied to money come up, for example, acquiring a house. With an existing non-serviced debt, getting financing is difficult as your credit score is not favourable. In circumstances where you are able to acquire more debt anyway, you end up having more debts to service and high chances are your HELB loan has some penalty.

When the interest rate associated with your debt is higher than what you would get if you saved first. This means if what I am earning from my savings is less than the interest accrued plus penalties on my HELB loan, the smart financial decision is to first work on reducing your debt.

Alternative Solutions

Assuming you land a job as soon as you graduate, save for your emergency kitty first because your HELB is due a year after you cleared school. This means that during your first year of employment your sole focus is on saving and investing and as soon as your HELB is due, you will switch from savings to debt clearance.

Additionally, another approach is to do both at the same time. Here a portion of your income goes into your savings and another goes into lowering your student loan.

The truth is, there is no a one size fits all in this and therefore it is important to fully analyze your situation objectively first. Getting intimate with your circumstances ensures that you come up with the most appropriate plan for you or also asking for a financial consultancy that provides a tailor-made solution for you.  Contrary to popular belief, debt is not always bad, however; it still has to be serviced. It is important that we scale plans on how to service our HELB debts so that others can enjoy government-funded tuition for the duration of their study.

University Loans: How HELB Is Locking Young People Into A Cycle Of Poverty

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Caroline Mumbe is passionate about anything money related. She is an entrepreneur and writer who enjoys simplifying financial concepts and making sure people lead their best financial lives. She reads a lot and knows the best coffee joints in Nairobi.