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Proposed University Funding Model: How Kenyan Students Will Repay Loans After Graduation
Kenyan university and TVET students could soon be required to repay all government funding they receive for their education under a proposed new financing framework currently before Parliament.
The proposed Tertiary Education Placement and Funding Bill seeks to fundamentally change how higher education in Kenya is financed by replacing the existing Student-Centred Funding Model with a system where eligible students receive full government support through repayable loans.
The proposal comes as the government seeks to establish a more predictable and sustainable way of financing the rapidly growing number of students seeking university and college education.
Under the current Student-Centred Funding Model, students are assessed according to their financial needs before being placed in different funding categories.
Government scholarships currently cover between 30 and 70 per cent of tuition costs, while the Higher Education Loans Board (HELB) provides loans to cover the remaining fees and, in some cases, upkeep expenses.
The proposed system would significantly alter this arrangement. If approved by Parliament, students admitted to public universities and TVET institutions would be eligible for full funding, but the money would be provided in the form of loans that beneficiaries would eventually have to repay.
When Will Students Start Repaying?
One of the key provisions in the proposed legislation concerns when graduates will begin repaying their education loans.
According to the proposal, beneficiaries would begin repaying their loans one year after securing employment. This means students would not immediately be required to make repayments simply because they have completed their studies.
The repayment system would also differ depending on whether a graduate secures formal or informal employment.
Graduates who obtain formal employment would be required to declare their loan status to their employers. Employers would then deduct the required amount from the employee's salary and remit the money towards repayment.
Importantly, the proposed law seeks to protect graduates from excessive deductions. Loan repayments would not be allowed to exceed 25 per cent of a beneficiary's earnings.
How Will Informal Workers Repay?
The proposed framework also recognises that many Kenyan graduates work outside the formal employment system.
Graduates employed in the informal sector would instead enter into repayment agreements with the proposed Higher Education Loans Authority. The agreements would specify the amount to be paid, the method of payment and the frequency of repayments.
The authority would have powers to recover outstanding amounts as civil debts if beneficiaries fail to honour their repayment obligations.
However, the proposed system would offer some protection to graduates who experience periods of unemployment.
A graduate who temporarily loses employment and is unable to make repayments would not automatically face penalties or default charges. Instead, unpaid amounts would be added to the end of the repayment period.
Government Funding to Follow Students
The proposed reforms would also change how government funding is attached to institutions.
Higher Education Principal Secretary Beatrice Inyangala told Parliament's Education Committee that government support would follow students rather than institutions.
This would potentially allow beneficiaries to choose between public and private universities.
The Ministry of Education argues that such an approach would expand access to tertiary education while reducing the financial burden on families.
The proposed fund is expected to draw money from several sources, including government grants, borrowing through capital markets, parents' savings, recovery of student loans and concessional financing from development partners.
The Ministry estimates that higher education financing needs could rise to approximately KSh230 billion.
HELB Interest Rate Remains 4 Per Cent
The proposed changes have also generated questions about whether students will face higher interest rates on their loans.
HELB has clarified that the current interest rate for undergraduate, TVET and Kenya Medical Training College loans remains at 4 per cent per year.
The board has said that no changes have been made to the existing rate and urged students and parents to rely on official communication concerning any future adjustments.
The proposed financing model is therefore likely to remain a major subject of debate as Parliament considers the legislation.
While the government says the reforms could create a more sustainable system and guarantee access to higher education, questions remain over the long-term cost of loan repayment for graduates and whether the proposed financing sources will be sufficient to meet the country's growing demand for university and college education.