Tertiary education in Kenya is funded in three ways: Household or personal contribution, government loans and scholarships by government. Students who qualify for tertiary education can opt to self-fund or accept government funding through an application as illustrated in Chart 1 below.
As shown in Chart 1, according to the New Funding Model (NFM), students are classified into five bands according to the socioeconomic characteristics of the household in which they live. The factors of placement are based on the Means Testing Instrument (MTI) developed by Higher Education Loans Board (HELB). MTI entails many factors meant to rank students’ ability to pay their tuition and sustenance throughout their academic journey.
The 5 bands are ranked based on household income with band 1 and 2 entailing students from low income households, 3 from middle income households and 4 and 5 from high income households. As shown in Table 1, each band has a preset share of grants and loans. Students from low income receives more grants and less loans with the other bands receiving less grants and more loans. The justification of grants and loans share is based on present ability to pay.
As shown in Table 1, scholarships are granted to all qualified students across all bands with each preceding band receiving 10% less. The 10% difference between consecutive bands does not imply people in the preceding bands receive more grants per individual as the grants are dependent on course fees. According to data from the Higher Education Loans Board (HELB), during the 2023/24 academic year, 48.25% of government funding for tertiary education was issued as grants. This implies that, on average, nearly half of a student’s education cost was covered through non-repayable financial aid. The other portion of tuition fee is catered for by a government loan and family or another sources contribution. Each student is also accorded a fixed upkeep loan dependent on their band with each band receiving Ksh 5,000 less than the preceding band.
Despite the progressive education funding model represented by the MTI, higher education is not entirely accessible to students due to cost constraints and other underlying obstacles. MTI considers a student household of origin as a benchmark of their ability to pay for tuition fee and sustenance. The household income level does not necessarily translate to a student ability to pay or sustain their tertiary education. It is a requirement of law that one must be of legal age to enter into a debt contract, therefore, students applying to tertiary institutions are mostly 18 years or older. A student household of origin is not legally bounded to aid on tuition fees and sustenance of a student past the attainment of adulthood. The household of origin benchmark in MTI can misplace a student due to that leading assumption on income position.
Secondly, irrespective of whether a student is correctly placed in the right band, she may find it difficult to meet the tuition fees especially low-income household students. For illustration purposes, Table 2 shows two students placed in the University of Nairobi based on the 2023/24 fee structure to take different courses.
Table 2 shows that students in the same band are exposed to different costs with the student admitted to take a course in medicine required to pay three times more than their colleague taking a bachelor’s course in education. These statistics illustrate the reality of diverting students from high cost courses which would probably place them in better opportunities in society.
The rising application to Technical and Vocational Education and Training, TVETS by university or college qualified students may be an early signal of this reality. These happenings may encourage a continued inequality in the present is witnessed in the future across households based on their family of origin initial income band.
The fourth band appropriates a majority of the scholarship due to the fact that most of the students who join tertiary schools are from band 4 which is composed of students from high income households shown in chart 2. The inequitable distribution of students across the bands could be explained by looking into the accessibility of secondary school. Low income household students are most likely to join local public secondary schools due to cost constraints. Most public primary secondary schools have limited resources and quality of education barring students from qualifying for university studies and other tertiary institutions in extension.
The scholarship component of university education is funded from the exchequer. The issuing body, University Fund, must consider the impact of redistribution of income from the rest of the population 47 million in comparison to the 1.9 million who have a university education as of 2019 census report.
While university education is a private good, the rationale for public subvention is because it results in positive externalities that Kenyan society may wish to promote. For this reason, the more efficient and ethically responsible trade-off is between scholarships to loans. The trade-off represented by the present policy could reduce the probability that students from low-income families from pursuing courses that would impose an immediate economic burden on their guardians. Therefore, the reform by raising the loan quotient for every learner would equalize opportunity and in the long run it would ensure the financial sustainability of university fund as a revolving fund.
The share of the education grant accorded to students should be substituted for a loan with the possibility of a fixed rate of grants such as 10% or 20% and using the available resources to supply full loans to fund their studies with a commitment to repay it upon completion. The reform towards substitution of the subsidy with a loan for the full amount of tuition fee ensures universal access to qualifying students irrespective of their household or personal income status and further that they can acquire higher education of their choice.
This reform will not only reduce financial access constraint but will also allow freedom of choice making students and their guardians to evaluate their career choice carefully given they will need to use that to build a livelihood and repay their loan liability. The partial substitution of the scholarship with increased loans will require a harmonization of operations for increased efficiency. This will require the government of Kenya to amalgamate the University Fund and HELB. The existence of HELB and the University Fund is a disconnect from efficiency, duplication of roles and increased disconnect of analysing single government expenditure as two separate entities.
In conclusion higher education as shown by the poverty data on Table 5.1 of the The Kenya Poverty Report 2022 is a gateway to a higher income and better life irrespective of the existing unemployment rate. The minority of Kenyans who have tertiary education also bear a lower probability of being in poverty and through their skills receive the highest wages in society. To provide them with a grant for that education has distributional consequences because it is equivalent to government action deliberately redistributing wealth from the poor to the rich in future which will grow inequality. Tertiary education in Kenya is dominated by the students from the higher income households calling into question the success of access policy on secondary schools. Students from lower income households are most likely to attend the public day secondary schools. The government should improve accountability of these schools to raise the chances that learners from lower income households can compete for subvention to university as well.