Kenya's higher education financing system is on the brink of its biggest restructuring in decades after the government proposed merging the Higher Education Loans Board (HELB), the Universities Fund and the TVET Fund into a single authority.
The proposed reforms, contained in the Tertiary Placement and Funding Bill, 2026, seek to establish the Tertiary Education Funding Authority (TEFA) as the country's sole agency responsible for financing students in public universities, colleges and Technical and Vocational Education and Training (TVET) institutions.
If Parliament approves the Bill, TEFA will assume powers currently exercised by three separate institutions, fundamentally changing how higher education is funded, administered and financed in Kenya.
One Agency to Control Higher Education Funding
The proposed legislation seeks to eliminate the fragmented funding model that has seen HELB issue student loans while the Universities Fund and TVET Fund separately finance institutions.
Instead, TEFA will become the central authority responsible for student financing, institutional funding and loan recovery under one integrated framework.
The government argues that consolidating the three agencies will eliminate duplication, improve efficiency and create a more sustainable financing system capable of supporting growing enrolment in tertiary institutions.
Under the proposed framework, TEFA will inherit HELB's core functions, including issuing student loans and recovering repayments from graduates.
It will also take over the institutional financing roles currently performed by the Universities Fund and the TVET Fund Board.
The merger represents one of the most significant structural reforms in Kenya's higher education sector since HELB was established nearly three decades ago.
Ruto Abandons Differentiated Funding Model
The proposal comes barely a day after President William Ruto announced that all students admitted to universities and colleges would receive full government funding beginning September 2026, subject to Parliament passing the new legislation.
The Bill proposes replacing the controversial income-based differentiated funding model introduced in 2023 with a universal funding system covering all eligible students admitted to public tertiary institutions.
Under the new arrangement, government support would extend beyond tuition fees to include accommodation and living expenses, with beneficiaries expected to repay the financing after securing employment.
President Ruto defended the shift, arguing that the differentiated funding model had failed both students and universities.
"We tried the differentiated model. I think the Vice-Chancellors here know it didn't work because it made most of our universities almost close down. After all, while we promised 80 per cent funding, we went down to 40 per cent," the President said.
The admission amounts to one of the government's clearest acknowledgements that the previous funding framework failed to deliver the financial stability expected by universities.
Parliament Faces Crucial Decision
The Tertiary Placement and Funding Bill now heads to Parliament, where lawmakers will determine the future of Kenya's higher education financing system.
If enacted, the reforms are expected to reduce the financial burden on families, improve predictability in university financing and ensure qualified students are not locked out of higher education because of financial constraints.
However, the changes will also create a single institution responsible for managing billions of shillings in student financing, institutional allocations and loan recoveries, placing enormous responsibility on TEFA's governance and accountability structures.
The authority will also be expected to strengthen loan recovery mechanisms to ensure graduates honour repayment obligations, providing a sustainable funding cycle capable of supporting future generations of university and TVET students.
The proposed merger signals the government's most ambitious attempt yet to overhaul tertiary education financing, with its success likely to depend on adequate Treasury funding, efficient administration and robust loan recovery in the years ahead.
