Between a Loan and a Hard Place: Kenya’s Higher Education Funding Crisis Unpacked
Universities have found themselves in a catch-22 situation, grappling to finance their operations amid mounting pressures. The quagmire is multi-dimensional. The main stakeholders are stretched thin; students are complaining of high fees, university staff are complaining of delayed salaries, and the government is currently questioning its capacity to fund education at the levels it has promised. Because of this funding gap universities are facing a financing crisis with 23 universities currently facing the risk of insolvency as of March 2025. The question of the day remains: how can this gap be filled while keeping tertiary education accessible and affordable for students? This is a battle between competing financial priorities and limited fiscal capacity.
Historically, there has been a reliance on the government as a major source of funding for higher education institutions through subsidies offered to students. However, higher education institutions have faced an increase in the number of enrolments due to the increased access to schooling through the provision of free primary education and the 100% transition to high school policy. As a result, the government is facing significant challenges in funding tertiary education.
Recently Proposed Models
In light of this, different governments have tried to come up with alternative funding models to solve the problem. In 2017, the Kenyan government introduced the Differentiated Unit Cost (DUC) model, which allocated resources according to each discipline’s needs. The main aim was to make sure the high-cost disciplines received the resources they needed, as opposed to the previous model, which allocated a flat rate of $1,200 per student. However, this model proved ineffective, creating a burden on the low-income students and reducing government capitation, particularly to large universities. Moreover, the rich and poor students received the same amount of support, which was not optimal. The model faced protests from stakeholders, and its implementation was abandoned.
In 2023, the government attempted to address the situation once again by introducing the Variable Scholarships and Loans Fund (VSLF) model that aimed to have students pay according to their capacity and need. A metric called Means Testing Instrument (MTI) was adopted to place students into different financial bands according to their financial capacity, from vulnerable, extremely needy, less needy, and needy. This metric, however, proved to be inefficient, placing many needy students in higher capacity bands. The government received over 10,000 appeals from students complaining they cannot afford to pay the fees that were required of them. The model placed a huge financial burden on students, making higher education inaccessible, particularly for lower-income students. The Kenyan Human Rights Commission took to court seeking to stop the implementation of the model. The High Court halted the rollout of the VSLF model on the grounds that it was unconstitutional due to lack of public participation prior to its enactment. This decision created further problems, stalling the remittances of funds from the government to universities for over 6 months, hence creating operational crises for the institutions.
Governmental constraints
The national debt crisis is greatly compounding the challenges of the higher education financing crisis. The government is facing significant pressures from the international financing bodies, such as the International Monetary Fund (IMF) and the World Bank, to pay off their debts. With the current national debt levels, the Kenyan government has been forced to implement austerity measures that include reducing spending on education, complicating the situation even further. As of 2024, the current national debt was at US$82.5 billion. Therefore, the government finds itself in a position where there are two important competing priorities: repayment of debt or provision of public services such as education, thus limiting the amount of money that can be directed to the sector.
On one hand, the Ministry of Education is pleading for a higher budget allocation, while on the other hand, the Treasury is acknowledging that although valid, there is limited fiscal capacity to meet these demands. The situation is strained to the extent that foundational programs within the education sector are at risk of being halted. For example, there are current talks to shift the cost burden of primary and secondary education to the students and their families due to the inadequacy of funds. This would endanger the Free Primary Education policy introduced by former President Mwai Kibaki – a policy that has long stood as a pillar of educational access and equity in Kenya. If basic education, which is universally recognised as a fundamental human right for children, is now at risk, then the prospects of tertiary education remain bleak.
Institutional and student loans
In a bid to fill the funding gap, the universities opted to seek loans and have now accrued a lot of institutional debt from creditors. As of 2024, universities had collectively accumulated US$465 million in institutional debt. This debt reflects years of reliance on government capitation and financial mismanagement, coupled with delayed disbursements of funds from the government. The universities are struggling to finance their day-to-day operations while simultaneously servicing these massive debts. The great academic giant, the University of Nairobi, has accumulated the highest debt. As of February 2025, the university’s debt stood at Ksh20 billion.
To help substitute government capitation, students have access to loans through the Higher Education Loans Board. However, there is a growing concern about the growing debt in student loans, with students collectively holding debt worth US$208.92 million. With the increased unemployment rates and a tough job market, very few students get employed after graduation, and fewer have jobs that pay enough for them to pay off their debt sustainably. Hence, concerns are mounting over the recoverability of these loans. Without stable employment, students are unable to pay their loans. Additionally, those who get jobs start off their careers with a high debt burden.
Delayed salaries to staff
University lecturers and other staff have repeatedly complained of delayed salaries and benefits, with lecturers’ strikes becoming a norm in the calendar year. Shortly after the students had finished striking over the VSLF model in September 2024, the lecturers took to the streets in November demanding the release of their delayed salaries, which totalled to Ksh 2.7 billion. These strikes were called off after the government agreed to disburse their salaries. However, the commitment was not honoured, and in January 2025, the lecturers of the Technical University of Kenya took to the streets once again demanding their pay. These on-and-off strikes disrupted the academic schedule with many missed classes, which resulted in a ‘lost semester’ between September and December 2024.
Current budgetary commitment to education
In the recent budget for the financial year 2025/2026, the government allocated the biggest share of the budget to education. Allocating approximately 16.6% to the sector signals the government's commitment to it. While this is a welcome move, it is still not enough to fill the existing gap. There is a willingness to commit, but not enough resources. We can only hope that the allocated resources will be disbursed in reality to the respective places where they are needed. As we have seen in the past, the government makes budgetary commitments but sometimes fails to release the funds. Hence, these institutions are left with little choice but to borrow, which plunges them into debt, perpetuating the fiscal problem.
Looking forward
Rather than attempting to reinvent the wheel, the government can build on the recent VSLF model and explore alternative methods to improve on how students are grouped into financial bands, ensuring the process is accurate, transparent, and does not unduly burden students. This would allow students to contribute to their education in a manner that reflects their financial abilities. Although this will not entirely fill the gap, it is a step towards a more equitable and sustainable framework than the current one.
Public-Private Partnerships are also another avenue that can be explored to fill the gap. Companies can fund infrastructure projects in tertiary institutions, like building innovation hubs, laboratories, and digital libraries. This gives them a chance to shape future talent while easing the financial burden for universities. Large corporations and high-net-worth individuals can contribute to universities’ endowment funds that can be used to fund programs and scholarships in exchange for recognition and visibility. Such partnerships inject the needed resources while fostering strong relationships between industry and academia – an essential link for translating academic research into material industry gains. This enables the university to direct the funds to other core academic functions.
Conclusively, it is becoming increasingly clear that the long-standing practice of government-funded higher education is unable to withstand the current economic times and political climate. Partly by choice, through financial mismanagement, and partly by circumstances arising from austerity pressures. The government is already falling short, and the situation will not get any better soon due to the debt commitments. The bearers of the brunt are the universities and Technical and Vocational Education and Training (TVET) institutions who have to figure out alternative means to finance their operations which effectively balance immediate financial needs and long-term sustainability.
