The demand for higher education in Kenya has increased despite inadequate funding from various stakeholders. This has led to the cost-sharing policy where the government and parents or stakeholders/donors (households) share the costs of higher education.

The Higher Education Loans Board (HELB) provides students with loans, and public universities are supported through capitation grants to meet development and recurrent expenditure by the government. The student’s households contribute towards the tuition and upkeep of their scholars.

The majority of the students depend on HELB and support from their parents or stakeholders to finance their higher education. The amount allocated by HELB is inadequate and students have to seek multiple sources of funding to meet the full costs of education. Those from poor backgrounds are adversely affected. Others defer their studies affecting academic progression.

Under the Differentiated Unit Cost (DUC) funding method, all students placed by the Kenya Universities and Colleges Placement Service (KUCCPS) are expected to be sponsored by the government for up to 80 percent of the unit cost. However, due to the limitation of resources, this has gradually declined to 48.11 percent in public universities and 21.94 percent for private universities as of the 2021/2022 academic year.

A recent study by the Kenya Institute for Public Policy Research and Analysis (KIPPRA) indicates that although public universities receive government funding, there is a growing funding gap. 

“The funding gap in public universities has increased by more than double in the last few years. Over the last years, government funds to universities through the DUC model has been declining gradually from 66.4 percent in the financial year 2018/19 to as low as 48.11 percent in 2022. As a result, public universities are confronting a build-up of pending bills amounting to Ksh65 billion as of February 2022 and are thus not able to meet their statutory obligations, including remittances to pension schemes, health insurance, and taxes. Universities have resorted to increasing the cost of tuition and accommodation for the students to bridge the gap,” KIPPRA said.

The current methods of funding higher education are not dependable as they negatively affect students’ access, academic progression, completion rates, and quality of learning outcomes.

New funding model

The new funding model is expected to provoke universities and Technical and Vocational Education and Training (TVET) institutions to raise and generate more funds and enhance the quality of education. 

The model is also changing the funding method by addressing the uniform and inequitable capitation which is witnessed under the current DUC model, where the rich and the poor students receive the same amount.

The model incorporates funding for universities and TVETs through government scholarships, student loans and household contributions. The universities are required to reveal the full costs of their academic programmes to KUCCPS which will publish the information before the placement of students so that students can choose which universities they want to join.

The funding is based on four criteria i.e., choice of the programme, household income band, affirmative performance, and government priority areas. The model will apply a Means Testing Instrument (MTI) to scientifically determine the need levels of students.

Funding will be student centred and will be apportioned according to their levels of need classified into four; vulnerable, extremely needy, needy and less needy.

The government will fully fund the vulnerable students who comprise 29 percent of students joining universities. Students in private universities will qualify for loans but not scholarships.  Needy students will get more scholarships and fewer loans, while able students will get more loans and fewer scholarships.

Students from needy households joining universities will receive government scholarships of up to a maximum of 53 percent and loans from HELB of up to 40 percent. Their households will pay 7 percent of the cost of their university education. Those joining TVETs will receive government scholarships up to a maximum of 50 percent and 30 percent in loans. Their households will pay 20 percent of the costs.

The less needy students joining university will be funded through a government scholarship of up to a maximum of 38 percent of the cost of the programme and 55 percent in the form of loans from HELB. Their households will pay 7 percent. Those joining TVETs, the government will fund 32 percent through scholarship, 48 percent from HELB and households cater for the remaining 20 percent of their cost of education.

The model will offer financial support to students from poor families and enable them to complete their studies on schedule. However, the model might impose a crushing burden on many students. Data from HELB shows that as of March 31, 2023, 713,484 mature loan accounts were holding KSh93.49 billion. Out of these mature loans, 320,898 loanees holding KSh50.11 billion are repaying their loans while a total of 125,609 loanees holding KSh15.22 billion are in default. A total of 266,977 loanees holding KSh28.16 billion have completed repayment of their loans.

The impending student-debt crisis is, however, not an isolated case for the country as several countries run up similar headwinds. For instance, in the US, millions of Americans have student loan debt, amassing more than $1.6 trillion as of September 2022.