Varsity dream comes with bigger debt under Ruto's new proposals

President William Ruto.

Fresh revelations have emerged on President William Ruto's plan to change how universities are funded, with the government proposing a new model that will rely mainly on student loans to finance higher education.

Under the proposals before Parliament, the government plans to raise billions of shillings from investors, parents, graduates and development partners instead of the current arrangement that depends on taxpayers' money.

Under the proposal, majority of government-sponsored students will receive loans, while scholarships would only go to top-performing students and those from poor and vulnerable families.

The proposals also seek to do away with the current funding model, meaning the amount of support a student receives would no longer be based mainly on their financial need but on the course, they choose and its demand in the job market.

The proposals, presented by Higher Education Loans Board (Helb) Chief Executive Officer Geoffrey Monari before the National Assembly Education Committee, now form the backbone of the Higher Education Funding Bill.

This is set to turn HELB to a development bank that the government backs on funding university and colleges across the country.

Under the Bill, the Higher Education Loans Board (HELB), the Universities Fund (UF) and the Technical and Vocational Education and Training Funding Board (TVETFB) will be dissolved and replaced by a single institution to be known as the Tertiary Education Funding Authority (TEFA).

In the funding model the Ministry of Education seeks to secure Sh100 billion annually from government, investors, parents, graduates and development partners.

The funds will be used to issue education bonds, backed by a ring-fenced Sh100 billion annual allocation, with a sinking fund to service interest and principal repayments.

The programme would be managed through investment banking and treasury functions, supervised by a governing board and regulated by the Capital Markets Authority.

Parents would also save through an investment-based education scheme listed on the NSE that will earn interests.

Other funding sources include strengthened HELB recoveries, income-contingent graduate repayments and low-interest, long-term concessional financing from development partners.

HELB Chief Executive Geoffrey Monari said the model heavily borrows from the Malaysian higher financing model that they term successful.

In July, President William Ruto announced that the legislative amendments needed to implement a new universal university funding model had been submitted to Parliament for consideration.

The reforms seek to replace the 2023 student-centred funding model with a universal financing framework under which all eligible students admitted to public universities, constituent colleges and TVET institutions will qualify for full government support beginning with the September 2026 intake.

Students currently in the system will continue under the existing funding arrangements.

Ruto stated that in the new arrangement, every eligible student will receive 100 per cent government financial support, with parents only expected to make voluntary contributions should they wish to do so.

On Wednesday, Education Cabinet Secretary Julius Ogamba urged Parliament to fast-track the proposed law so the new model can take effect before the September 2026 admissions.

At the centre of the proposals is a plan to consolidate the existing government funding streams while introducing new sources of capital. The government hopes to mobilise Sh100 billion annually for higher education.

The biggest proposal is to raise money from the capital markets through education bonds.

Under the arrangement, the financing agency would issue bonds to investors, who would provide money upfront to finance students.

In return, investors would receive periodic interest payments before recovering their principal when the bonds mature.

The model mirrors how governments raise money to finance infrastructure projects such as roads and ports.

To boost investor confidence, the government wants Parliament to ring-fence an annual contribution of Sh100 billion.

Monari said the allocation would become a first charge under the proposed law, meaning it would be protected from budget cuts and prioritised for higher education financing.

The entire arrangement would be regulated by the Capital Markets Authority (CMA).

The second financing source is a voluntary education savings scheme that would allow parents to save for their children’s university education from the early years of schooling.

Unlike ordinary savings accounts, the money would be invested by professional fund managers to earn returns before being used to pay tuition once students join university or TVET institutions.

The savings product would also be regulated by the CMA and listed on the Nairobi Securities Exchange to enhance transparency.

The third proposal seeks to strengthen Helb loan recoveries.

Monari said the Bill would improve repayment mechanisms so that more money repaid by graduates can be recycled to support future students.

It also introduces income-contingent repayments, allowing graduates to repay according to their earnings instead of following a fixed repayment schedule.

The government will also be seeking funding from development partners.

These loans carry lower interest rates and longer repayment periods than commercial borrowing.

However, legislators in the committee led by Tinderet MP Julius Melly questioned whether the new framework can succeed where previous university funding models have struggled, particularly amid persistent budget shortfalls, growing public university debt and concerns over its long-term sustainability.

The proposals come against the backdrop of a worsening funding crisis.

Monari told MPs that the current system is struggling to keep pace with rising demand for university education, with funding needs increasing much faster than available resources.

He said the structural deficit under the University Fund has widened steadily, rising from Sh9.6 billion in the 2024/25 financial year to Sh11.3 billion in 2025/26, and is projected to reach Sh16.5 billion in 2026/27.

Without reforms, the combined funding gap for universities and student support is projected to hit Sh351.2 billion by the 2030/31 financial year.

Monari said annual Treasury allocations are no longer sufficient because student enrolment continues to grow faster than government funding, creating an ever-expanding financing gap.

He also pointed to weaknesses in the current student-centred funding model, beginning with challenges in verifying student data used to determine scholarships and loans.

Another concern is the Means Testing Instrument used to assess students’ financial need. Monari said accurately determining household income remains difficult, particularly for families working in Kenya’s large informal sector, making it harder to identify those most in need.

He acknowledged that many parents and students still do not fully understand how the funding model works, limiting public confidence despite government efforts to explain it.

The reforms have also faced legal challenges that have slowed implementation. Monari said the new Bill seeks to provide a clear legal framework to anchor higher education financing and minimise future disputes.

According to Monari, the proposed law is designed to expand access to student funding, ensure adequate financing, improve long-term sustainability and create a predictable legal and institutional framework for higher education financing.