Kenya’s universities are transforming into debt mills

Kenya’s universities are transforming rapidly into debt mills, with recent data revealing a staggering US$208.92 million in student loans compared to a mere US$11.54 million in scholarships. This imbalance raises deep concerns about the growing debt burden on students, especially as living costs continue to soar.

According to President William Ruto’s midterm scorecard, the government has disbursed about US$248 million in student loans and scholarships, highlighting its commitment to supporting higher education.

However, the allocation reveals a significant tilt toward loans: 112,741 students received loans totalling US$97.15 million, and another 151,083 students secured loans worth US$119.46 million.

In stark contrast, only 5,242 students benefited from scholarships amounting to U$11.54 million. This disparity suggests that Kenya’s education financing strategy heavily favours loans over grants.

Life begins with debt

For many Kenyan students, particularly those from low-income households, this scenario means starting their careers with a heavy debt load.

The National Students’ Caucus warned that, while the injection of loan funds is commendable, the over-reliance on loans risks trapping students in a cycle of debt that could deter them from completing their studies.

This debtcentric model risks widening Kenya’s education gap. When financial support is primarily offered as loans, students must consider, not just immediate tuition needs, but also the burden of long-term repayments.

As tuition fees rise alongside Kenya’s overall cost of living, these loans often fall short of covering all necessary expenses, forcing students to seek additional income or even drop out.

Representatives from the Kenya Human Rights Commission have repeatedly highlighted that any funding model which shifts the cost of education from the state to individual households deepens socio-economic divides. This concern is central to the ongoing controversy surrounding Kenya’s higher education financing approach.

New model blocked

In May 2023, Ruto introduced the Variable Scholarships and Loan Funding model, designed to replace block funding with direct student support based on financial need.

Under this model, students were categorised into bands – vulnerable, extremely needy, needy, and less needy – with the most disadvantaged eligible for scholarships covering up to 70%-82% of their costs, while those from more privileged backgrounds received less support.

Although the model promised greater transparency and equity on paper, its rapid implementation, without proper public consultation, sparked immediate controversy.

Civil society groups, student organisations and human rights advocates mounted legal challenges soon after the model’s launch.

Their argument centred on the claim that the model unfairly shifted the financial burden from the state onto students and their families, effectively penalising low-income households.

This led to a landmark ruling on 20 December 2024 when the High Court declared the new funding model unconstitutional.

Justice Chacha Mwita stated that the government has a constitutional responsibility to fund public universities and that transferring this burden to parents is a violation of the constitution. The ruling halted further disbursements under the new scheme, creating significant operational uncertainty for both students and institutions.

The petitioners, including the Kenya Human Rights Commission and the National Students’ Caucus, argued that the model was implemented hastily without the necessary enabling legislation, thus inappropriately shifting financial responsibility to families.

Justice Mwita’s decision noted that the abrupt policy shift violated students’ legitimate expectations, underscoring long-standing critiques of major policy changes made without proper stakeholder engagement.

While the government has appealed the decision and attempted to refine the model, legal uncertainty remains.

Reports indicate that over 250,000 students are now at risk, as universities have not received funding since October 2024.

This funding gap has placed immense strain on public institutions struggling to maintain operations. Geoffrey Monari, CEO of the University Fund Board, advised affected students to remain patient as the government works to implement measures to secure continuous study. However, such assurances provide little relief for those caught in financial limbo.

General funding shortfall

The financing crisis goes beyond the loans versus scholarships imbalance. In March 2023, Higher Education Loans Board, or HELB, CEO Charles Ringera disclosed to the National Assembly Public Investments Committee on Education and Governance that about 140,000 students from public universities and TVET institutions had missed out on government loans due to a funding shortfall.

“Currently we have 140,000 students in TVETs (technical and vocational education and training institutions) and universities that we have not been able to fund to the tune of US$43.85 million because we have run out of the budget we presented to the treasury,” Ringera explained, highlighting the severity of the issue.

This shortfall forces many students to suspend their studies, compromise their academic performance by taking additional work, or drop out altogether. The heavy reliance on loans not only creates immediate challenges but also leaves graduates with long-term financial burdens that can strain household finances for years or decades.

Recent studies suggest that high levels of student debt can trap graduates in a cycle of financial vulnerability, perpetuating socio-economic disparities and undermining the broader benefits of increased educational access.

As of 30 June 2021, matured loans yet to be repaid had risen to US$318.46 million, an increase of US$53.85 million from the previous year. Auditor General Nancy Gathungu has expressed serious concerns about the recoverability of these loans, particularly those outstanding for more than 10 years.

Crisis impacts on the future

The implications of this crisis extend beyond individual students. A generation burdened with significant debt may be less likely to take entrepreneurial risks, invest in housing, or contribute to overall economic growth – effects that could hinder Kenya’s long-term development goals.

Even with government loans covering tuition fees, many students face additional expenses such as accommodation, transport and food, which often exceed tuition costs.

As Kenya’s cost of living continues to rise with inflation, these extra costs further strain students and their families. Local university administrators have noted that, while tuition may be funded through loans, many students still struggle to meet basic living needs, adversely affecting their academic performance and completion rates.

Public universities are also feeling the financial pressure. Institutional debts have doubled over two years to reach approximately US$576.92 million as of 2023.

This mounting debt includes unpaid statutory deductions, such as PAYE taxes and pension contributions, as well as pending bills to suppliers, all of which jeopardise the quality of education as institutions are forced to cut corners.

Education Cabinet Secretary Julius Migos Ogamba recently emphasised the need for collaborative solutions to ensure that students are admitted, funded and supported across Kenya’s universities.

The challenge now lies in reworking the funding model to balance immediate educational needs with long-term financial sustainability for both students and institutions.