August 8, 2025 – Introduction: A Turning Point in Kenyan Higher Education
In May 2025, Kenya marked two years since it began implementing the most far-reaching higher education financing reforms in its history. Five months earlier, Geoffrey Monari stepped into the role of Chief Executive Officer at the Higher Education Loans Board (HELB), inheriting both the challenges and hopes tied to the nation’s quest for fair, sustainable, and modern university funding.
From his vantage point on linkedin, Monari has seen it all: fear, misinformation, public pushback, and cautious optimism. But in his own words, one thing became clear — perhaps the reformers could have done more to explain to Kenyans why this change was urgently needed, the dire state of universities, and the future they hoped to secure.
“We didn’t paint a clear picture of the storm we were trying to steer out of,” Monari reflected.
This is that picture — a detailed journey through the history, the crisis, and the rebirth of Kenya’s higher education financing model.
From Colonial Roots to Full State Sponsorship
Kenya’s higher education financing story began in 1952, under British colonial rule, with the creation of the Higher Education Loans Fund (HELF). Its mission was straightforward: support bright Kenyan students studying abroad in countries such as the United Kingdom, the United States, India, the USSR, and South Africa.
Following independence, the new Kenyan government abolished HELF and chose to fully fund higher education at home. This meant the state covered tuition, accommodation, and even personal upkeep allowances. This decision followed the Kenya Education Commission’s recommendation to rapidly train African professionals capable of managing the young nation’s administrative and economic needs.
At the time, higher education was more than a personal right — it was a national development strategy. Graduates were bound to serve in the public sector for at least three years after graduation, ensuring that the nation benefited from its investment in their training.
This ambitious approach worked — until global and domestic economic realities caught up.
The 1970s Economic Strain: Beginning of Cost-Sharing
In 1973, a combination of global oil shocks, rising inflation, and rapid population growth began to strain government finances. To keep universities running, the state reduced recurrent expenditure on higher education.
By 1974, Kenya introduced user charges for university students. To cushion learners from these new costs, the University Students Loan Scheme (USLS) was established. This was managed by the Loan Disbursement and Recovery Unit (LDRU) within the Ministry of Education.
The process was simple: universities submitted student lists to the Ministry, which then budgeted for and disbursed personal allowances — popularly known as “Boom” — through the National Bank of Kenya. Tuition, accommodation, and catering fees went directly to the universities.
1986: Structural Adjustment and Direct Fees
The real turning point came in 1986, when the government adopted Sessional Paper No. 1, a blueprint for reducing public expenditure as part of structural adjustment programmes encouraged by the World Bank and IMF.
By 1991, direct university fees were introduced at KSh 16,000 per year. Students paid KSh 8,000 out-of-pocket, while the other KSh 8,000 came as a tuition loan, alongside an upkeep loan of KSh 5,640. The once-universal free meals in university cafeterias were replaced with a “pay-as-you-eat” system — sparking protests from students.
To protect poor students, a bursary scheme was added, but the golden age of fully state-funded higher education was over. In 1994, the education budget fell from 37% to 30% of the national budget, and it became clear that public funding alone could no longer sustain higher education.
1995: HELB Is Born
The need for a structured, reliable funding agency led to the establishment of HELB in July 1995 through an Act of Parliament. HELB’s mission was to manage student loans efficiently while ensuring higher education remained accessible under the new cost-sharing reality.
From 1995 to 2016, public university students received funding at a flat rate of KSh 120,000, with KSh 70,000 from the government and KSh 50,000 from HELB and households.
Module II Programs and Their Rise — and Fall
In the late 1990s and 2000s, universities introduced Module II (parallel degree) programs, where self-sponsored students paid the full cost of education. This became a crucial revenue stream for institutions.
By 2008, self-sponsored students outnumbered government-sponsored ones, boosting university income but raising concerns about access and equity.
However, inflation and surging student enrolment outpaced available funding. By 2014, the Economic Survey revealed that enrolment was growing seven times faster than public funding. Universities were stretched to breaking point, with no clear resource mobilisation framework and no transparent formula for allocating government subsidies.
2016: The Equity Gamble That Backfired
In 2016, the government made a bold move: all students with a C+ and above would join the Government Sponsored Student Programme (GSSP). While this expanded access and promoted fairness, it eliminated Module II programs — cutting off universities’ financial lifeline.
To compensate, the Differentiated Unit Cost (DUC) model was introduced, promising to fund 80% of the actual cost per student. But the reality fell short:
- 2017/18: 66% coverage (best year)
- 2022/23: 48% coverage
- 2024/25: 23% coverage
By 2021, it cost an average of KSh 200,000 to educate one student annually, meaning each student was underfunded by more than KSh 80,000.
The Breaking Point: 2022 University Debt Crisis
By late 2022, public universities carried a staggering KSh 72 billion in debt. Salaries went unpaid, Moi and Egerton universities temporarily shut down, and strikes disrupted learning.
The problem wasn’t just underfunding — it was systemic unfairness. All students received the same level of support, regardless of financial need. Wealthy and poor students got identical allocations. Universities of different sizes and needs were funded equally. The system unintentionally subsidised the rich and ignored the vulnerable.
2023: The New Funding Model
Faced with collapse, the government launched a new funding model in 2023, marking a clean break from the past. At its heart was a revamped Means Testing Instrument (MTI) — the first major update since 1997.
The new MTI uses 12 socio-economic indicators, including:
- Household income
- Parental occupation
- Number of dependents
- Type of school attended
- Orphan status
- County/location
- Marginalisation
- Physical disability or chronic illness
… among others.
Students are placed into five financial bands:
- Band 1 (Most Needy): 95% of costs covered (70% scholarship, 25% loan) + KSh 60,000 upkeep loan
- Band 5 (Least Needy): 60% of costs covered (30% scholarship, 30% loan) + KSh 40,000 upkeep loan
Support now follows actual need, replacing the old one-size-fits-all approach.
Impact of the New Model
In the 2024/25 financial year:
- KSh 36.5 billion in student loans disbursed
- KSh 16.9 billion in scholarships awarded
- 702,000 learners supported nationwide
Since 1974, Kenya has invested KSh 179 billion in higher education loans for over 1.7 million beneficiaries. As of June 2025, 67.5% of the HELB loan book was performing, though 32.5% remained in default — equivalent to KSh 32 billion owed by 256,000 Kenyans.
Addressing Loan Defaults
HELB has introduced measures to recover unpaid loans, including:
- Employer engagement for salary deductions
- Outreach to past beneficiaries
- 80% penalty waiver for lump-sum repayments
By partnering with 43 counties, corporates, and development partners, HELB has mobilised KSh 3.3 billion. The agency is also exploring social bonds and crowdfunding to boost resources.
Why Reform Was Non-Negotiable
For Monari, the stakes were clear:
- Equity: Protect the poor and match support to actual need
- Efficiency: Incentivise universities to manage resources better
- Trust: Restore confidence in higher education financing
- Sustainability: Prevent future debt crises
As he put it, “We are no longer funding in the dark… we are no longer imagining that universities can survive on broken promises.”
The Road Ahead
Monari acknowledges that the journey is far from over. Funding gaps remain, some students still feel misclassified in the MTI bands, and universities must adapt to the new reality.
But he remains optimistic that Kenya can build a system that is fair, sustainable, and future-proof — if stakeholders stay the course.
Key Takeaways from the New Funding Model
- Data-Driven Decision-Making: Funding allocations now rely on up-to-date socio-economic data.
- Need-Based Support: The poorest students get the most help.
- Shared Responsibility: Government, students, families, and development partners all contribute.
- Accountability Measures: Loan repayment incentives aim to keep the system solvent.
Final Word:
Kenya’s higher education sector has gone from full state sponsorship, through cost-sharing and financial crises, to a modernised funding model grounded in fairness and sustainability. The reforms may be tough, but they are designed to prevent collapse and safeguard opportunities for generations to come.
