Kenya is preparing to make a major change to how university education is financed, with the government planning to move university funding away from the annual national budget and towards a market-based financing model.
The change is expected to begin in October 2026 and comes as the government prepares to introduce a new system that promises full funding for students admitted to universities.
But what exactly is changing, and how will the new system work?
Why is the government changing university funding?
Under the current arrangement, university education is partly financed through allocations from the national government budget.
The government introduced a differentiated funding model in 2023, combining scholarships, student loans and contributions from households. The amount of support a student received depended on their assessed financial need.
However, the model faced criticism from students and universities, while the government later acknowledged that it had not provided institutions with the level of funding they needed.
President William Ruto has said the government initially promised to finance up to 80 per cent of university costs under the model but eventually provided about 40 per cent.
The government is therefore seeking a different approach that it says will provide a more sustainable way of financing higher education.
What is the new market-based model?
According to President Ruto’s Chief Economic Adviser David Ndii, university funding will be removed from the normal annual government budget from October.
Instead, the government plans to establish and capitalise a fund over a longer period.
The fund would then be able to raise additional money from financial markets.
In simple terms, the government would provide the initial financial backing, while the fund would use the financial markets to mobilise additional resources for university education.
This means university financing would no longer depend entirely on how much money is allocated to higher education every year through the national budget.
Will students still receive government funding?
Yes, according to the government’s proposed new system.
President Ruto has announced that students admitted to universities from September 2026 will receive full funding for their studies.
The proposed arrangement would cover tuition and upkeep during the period of study.
However, the support is not necessarily a permanent grant. Students would be expected to repay the funding once they secure employment.
This means the government is moving towards a system where financial support is provided when students need it, with repayment linked to their ability to earn after graduation.
What happens to HELB?
The proposed changes also affect the institutions currently responsible for financing tertiary education.
The Tertiary Education, Placement and Funding Bill, 2026 proposes merging the Higher Education Loans Board (HELB), Universities Fund and TVET Fund into one institution.
The new institution would be called the Tertiary Education Funding Authority (TEFA).
TEFA would become responsible for financing students across public universities, colleges and TVET institutions.
The idea is to create a single institution responsible for managing tertiary education financing rather than having several agencies performing different functions.
Why is the government creating one funding agency?
The government argues that bringing the different funding institutions together could make the system easier to manage and create a more sustainable way of financing students.
Currently, different institutions have different responsibilities for university and TVET financing.
Under TEFA, these functions would be brought together under one framework.
For students, this could mean having a more centralised system for accessing financial support.
Does this mean universities will get more money?
That is one of the major questions surrounding the proposed changes.
The government says the new system is intended to provide a more sustainable financing framework for universities.
Moving university funding into a market-based fund could give the government another way of mobilising money beyond annual budget allocations.
However, the exact financial structure and how much money the new fund will raise will depend on the final legislation and implementation framework.
What does it mean for students?
For students, the most immediate change could be the promise of full government funding for those admitted under the new system.
Instead of combining scholarships, loans and household contributions based on a differentiated funding model, the government says students will receive funding covering tuition and upkeep.
The repayment obligation would then arise after employment.
This could potentially reduce the immediate financial burden on families supporting students through university.
However, students and their families will also need to understand the repayment terms and conditions attached to the funding.
What does it mean for taxpayers?
The proposed system could also change how taxpayers indirectly finance university education.
Rather than relying entirely on yearly allocations from tax revenues, the government intends to capitalise the fund and allow it to mobilise financing from the market.
The success of such a system will depend on how the fund is managed, how much it can raise and the cost of accessing financing from financial markets.
It also raises questions about governance, transparency and long-term financial sustainability.
What happens next?
The changes are not yet entirely final.
The Tertiary Education, Placement and Funding Bill, 2026 is before Parliament, meaning lawmakers still have to consider and approve the proposed legal framework.
The government wants the legislation passed ahead of the planned rollout of the new funding system.
If implemented as proposed, the changes would mark one of the biggest shifts in Kenya’s higher education financing system in recent years.
The central idea is simple: the government wants to move from funding universities primarily through annual budget allocations to a system where government-backed financing can also mobilise money from the market.
For students, the key issue will be whether the new model delivers on its promise of more predictable and comprehensive support while remaining financially sustainable in the long term.
