President William Ruto’s administration is preparing to pull university financing out of the national budget from October, marking a major overhaul of how Kenya funds higher education.
President’s Council of Economic Advisors Chairperson David Ndii said the government plans to move university financing into a market-based model where the state capitalises a dedicated fund while the fund raises additional money from financial markets.
The proposed shift could fundamentally change the relationship between government spending, university financing and student loans.
Government Plans to Exit Direct University Funding
Ndii said the government intends to remove university funding completely from the ordinary national budget beginning October.
Under the proposed arrangement, the state would initially capitalise a dedicated fund over an extended period.
The fund would then raise additional resources from investors and financial markets rather than depending entirely on annual allocations from the Treasury.
The move represents a significant departure from the traditional model, where university funding has been directly provided through government budgets and various public financing agencies.
It also raises questions about how the new financing mechanism will remain sustainable while protecting students from rising education costs.
Ruto Promises Full University Funding
The announcement comes shortly after President Ruto promised full government funding for students admitted to universities from September 2026.
Under the proposed system, students would receive funding covering tuition and upkeep during their studies.
The government would then recover the financing after graduates secure employment.
The arrangement is intended to reduce the financial burden on families and prevent students from abandoning university education because of inability to meet tuition and other costs.
However, moving the financing mechanism away from the national budget introduces a new layer of financial-market dependence.
TEFA Set to Replace HELB and Other Funds
The proposed funding reforms are contained in the Tertiary Education, Placement and Funding Bill, 2026, which is currently before Parliament.
The legislation seeks to establish the Tertiary Education Funding Authority (TEFA) as the central institution responsible for financing students across tertiary education.
TEFA would absorb functions currently handled by the Higher Education Loans Board, Universities Fund and TVET Fund.
The government argues that consolidating the agencies would create a more unified and sustainable financing system.
It would also bring scholarships, loans and other forms of tertiary education support under one institutional framework.
Market Financing Could Change the Funding Equation
Moving university funding into a market-based structure could reduce the government's dependence on annual budget allocations.
Instead, the proposed fund would have greater flexibility to raise money from financial markets.
That could potentially provide a larger and more predictable pool of resources for student financing.
But market-based funding also introduces new risks.
The cost of borrowing, investor appetite and broader economic conditions could influence how much money the fund can raise.
The government will therefore face the challenge of ensuring that the new model does not expose university financing to excessive financial-market volatility.
Current Funding Model Faces Government Criticism
The proposed reforms follow criticism of the student-centred funding model introduced in 2023.
The current system combines government scholarships, student loans and household contributions, with support determined through a means-testing framework.
Ruto has previously criticised the model, arguing that it failed to provide sufficient support to universities and students.
The President said the government had initially promised up to 80 percent funding but eventually provided significantly less.
According to Ruto, the resulting funding gaps contributed to serious financial difficulties among universities.
Universities Brace for Another Major Financing Shift
For universities, the proposed transition could be one of the most consequential changes to higher education financing in years.
Institutions have struggled with funding shortages, accumulated debts and delayed government disbursements.
A dedicated financing fund capable of raising money independently could potentially provide universities and students with greater financial stability.
But the success of the model will depend heavily on how the fund is capitalised, governed and managed.
Parliament will also have to scrutinise the proposed structure before the government can fully implement the changes.
Parliament Holds the Key to September Rollout
The Tertiary Education, Placement and Funding Bill remains before Parliament as the government pushes for approval ahead of the planned September 2026 rollout.
If enacted, the legislation would fundamentally restructure Kenya's tertiary education financing architecture.
The proposed system promises full student funding while simultaneously shifting the financial burden of raising those resources away from the annual national budget.
That creates a bold but complicated experiment.
The immediate question is whether the new market-based model can raise enough money consistently to finance Kenya's growing university population without creating a new financial burden for the state, students or future graduates.
