Universities mess: Questions mount over new university funding model

Education Cabinet Secretary Julius Ogamba and Higher Education Principal Secretary Beatrice Inyangala. [Jonah Onyango, Standard]

Concerns have emerged over the proposed overhaul of university funding, with questions being raised over who initiated the new model, how quickly it is being pushed through and what it could mean for students and universities.

Sources familiar with the proposals said the Ministry of Education was pushing to have the new system implemented as early as January.

The rush has raised concern among stakeholders who want Parliament to first scrutinise the proposed financing structure and put in place safeguards before it takes effect.

 

Unlike the current student-centred funding model, which followed recommendations by the Presidential Working Party on Education Reform, the latest proposal is understood not to have originated from Cabinet.

This has raised questions over who initiated the new financing framework and how it found its way to Parliament.

The questions are significant because the proposal would change how billions of shillings are raised and distributed to students and universities.

It would also create a new authority to take over the functions of the Higher Education Loans Board, Universities Fund and the TVET Funding Board.

Another major concern is the interest rate on student loans.

The proposal leaves the determination of the interest rate to the Cabinet Secretary, raising questions over how much students will eventually pay.

Sources said this was particularly important because the Government plans to raise part of the money from private investors through education bonds.

They said investors would expect a return on their money, meaning the cost of raising the funds could eventually be reflected in the cost of student loans.

The sources said Parliament should put clear safeguards on the cost of borrowing before the system is implemented instead of leaving the issue to regulations or a later decision by the Cabinet Secretary

There are also questions over the Government’s ability to raise the targeted Sh100 billion every year, especially as public universities continue to face financial pressure.

Questions have also been raised over whether the proposed Tertiary Education Funding Authority will have the capacity to take over the functions of the three existing institutions without disrupting funding to students and universities.

The transition could also create uncertainty for students already in university, particularly if different groups continue to operate under different funding arrangements.

The National Assembly has completed public participation on the Tertiary Education Placement and Funding Bill, 2026.

Among those raising concerns is the Supreme Council of Kenya Muslims, which wants interest removed from student loans.

SUPKEM says the removal of interest should not be limited to Muslim students but should apply to all students receiving loans.

The council argues that students should not bear the cost of interest on loans meant to support access to education.

Its position comes as the Government proposes to raise part of the money for higher education from private investors through education bonds.

The proposed arrangement would require investors to earn returns on their money, raising questions over whether those costs would eventually be passed on to students.

The Universities Academic Staff Union has also raised concerns over the proposed financing model.

In its memorandum to Parliament, UASU said the Bill had significant implications for the financing of public universities, the sustainability of academic programmes, the employment and remuneration of academic staff, and the quality, accessibility and long-term development of university education.

The union said it was particularly concerned about the proposed financing architecture.

“The extent to which funding for the salaries and remuneration of university academic staff may be channelled through the proposed tertiary education financing framework.” The memorandum reads.

UASU said the law must “clearly protect predictable and adequate financing for the human-resource component of university education.”

The union said public universities could not be financed through student fees alone because they undertake functions such as research, innovation, postgraduate education, community outreach and the running of specialised laboratories.

It also cited infrastructure development and the training of students in low-enrolment but nationally important courses.

UASU has proposed a dedicated Government grant to public universities, separate from money meant to finance students.

The union said such grants should take into account student numbers, the mix of programmes offered, the cost of running those programmes, research needs, infrastructure, postgraduate enrolment, national priorities and geographical factors.

UASU also warned against a system that relies mainly on student numbers to determine university funding.

It said such a model could leave universities exposed when enrolment falls, students defer their studies, loans are not approved or disbursements are delayed.

The union also cited programmes that are expensive to run and changes in the country’s demographics.

UASU has proposed a financing structure based on separate pillars for student financing, institutional financing and capital development, among other sources.

Under its proposal, student financing would include scholarships, loans, bursaries and targeted financial assistance through the proposed TEFA.

Institutional financing, it said, should come through the National Exchequer and parliamentary appropriations and cover recurrent grants, staff costs, institutional operations and statutory obligations.

Capital development would be separately funded by the Government and development partners.

This would cover laboratories, lecture facilities, libraries, ICT infrastructure, research facilities, student accommodation and other specialised facilities.

The union has made a strong case for the salaries of academic staff to remain a direct Government responsibility.

The union has asked Parliament to ensure that no provision in the Bill is interpreted as allowing academic staff salaries to be paid from student fees, student loan recoveries or market-based funding.

UASU said the safeguard was necessary for the continuity of teaching and research, collective bargaining, protection of academic staff and institutional stability.

It said the success of the new system would depend on whether it adequately finances “both the student and the institution.

The concerns come as the Government seeks to replace the existing funding arrangements with a system that would bring student financing and new sources of capital under a new authority.

Under the proposal, the Government plans to mobilise Sh100 billion annually from the State, investors, parents, graduates and development partners.

A major part of the new financing would come from the capital markets through education bonds.

The proposed financing authority would issue the bonds, with investors providing money  upfront and receiving interest before recovering their principal when the bonds mature.

The Government wants the annual Sh100 billion allocation ring-fenced as a first charge to support repayment of the bonds.

The arrangement would be supported by investment banking and treasury functions and regulated by the Capital Markets Authority.

The proposal would also introduce an education savings scheme through which parents could save for their children’s tertiary education.

The funds would be invested by professional fund managers and later used to meet education costs.

The Government also plans to strengthen recovery of HELB loans, with graduates repaying according to their incomes.

Development partners would provide another source of funds through concessional loans.

HELB chief executive Geoffrey Monari told MPs that the proposed system draws heavily from Malaysia’s higher education financing model.

The proposal would also dissolve HELB, the Universities Fund and the TVET Funding Board and replace them with the Tertiary Education Funding Authority.

The new authority would handle financing across the tertiary education sector.

The proposals come against a widening funding gap in universities.

Monari told MPs that the University Fund’s structural deficit had increased from Sh9.6 billion in 2024/25 to Sh11.3 billion in 2025/26 and was projected to reach Sh16.5 billion in 2026/27.

The combined financing gap for universities and student support is projected to reach Sh351.2 billion by 2030/31.

Monari attributed the pressure to rising student numbers and Government funding that has not increased at the same pace.

He also cited challenges in verifying student information used to determine eligibility for scholarships and loans.

The Means Testing Instrument, used to assess household income, also faces difficulties, particularly when dealing with families in the informal economy.

Monari also acknowledged that many parents and students do not fully understand the current funding arrangements.

The Government has also faced legal challenges over higher education financing, with the proposed law intended to provide a clearer legal framework.

Education Cabinet Secretary Julius Ogamba has said the transition will begin once Parliament passes the Bill.

 He said the new system would cover students across universities, TVET institutions, Kenya Medical Training Colleges and teacher training colleges.

Existing students would be transitioned once the new law comes into force, while the current arrangements would continue until the legislation is enacted.