Student lending in Kenya has climbed to an all-time high of KSh 62 billion in the 2025/26 academic year, even as government support weakens and repayments decline, signalling mounting pressure on the country’s higher education financing system.
According to the Kenya National Bureau of Statistics (KNBS) 2026 Economic Survey, disbursements by the Higher Education Loans Board rose 32.1% from KSh 46.9 billion the previous year. The increase has largely been driven by the rollout of the government’s Student-Centred Funding Model, which has expanded access but significantly increased financial exposure.
However, state backing has not kept pace. Treasury capitation to HELB fell 12.4% to KSh 27.3 billion from KSh 31.2 billion in 2024/25, highlighting a growing mismatch between demand for student financing and available public resources.
Repayments also weakened, dropping 21% to KSh 4.1 billion despite the surge in lending activity. Combined inflows from government support and repayments declined to KSh 31.6 billion, down from KSh 36.6 billion a year earlier, tightening liquidity further within the fund.
HELB CEO Geoffrey Monari noted in June 2025 that 32.5% of the loan portfolio was already in default, more than double the non-performing loan ratio in Kenya’s commercial banking sector. Outstanding bad loans have risen to KSh 90 billion, with over 280,000 former students accounting for a significant portion of arrears.
The board has warned that a combined funding shortfall of KSh 49.8 billion across the 2024/25 and 2025/26 financial years could destabilise the entire higher education system, potentially triggering student dropouts and financial distress in public universities and technical institutions.
Public Universities Take the Largest Share
Most of the increased lending has gone to public universities, which remain the core focus of the Student-Centred Funding Model. Applications rose slightly to 677,128 students, while beneficiaries jumped 35.4% to 509,336.
Disbursements to public universities surged to KSh 52.6 billion from KSh 33.0 billion the previous year, an increase of nearly 60%. Male beneficiaries rose to 293,905, while female recipients climbed to 215,431.
At the same time, university placements expanded. The Kenya Universities and Colleges Central Placement Service (KUCCPS) placed 182,391 students in 2025/26, up from 157,762 the previous year. Public university admissions alone rose 18.2% to 164,518.
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Yet funding gaps persisted. In 2024/25, more than 163,000 eligible students across universities and TVET institutions remained unfunded due to a KSh 13.7 billion shortfall.
TVET Sector Expands but Funding Collapses
The most striking imbalance is visible in the Technical and Vocational Education and Training (TVET) sector. Enrolment rose 17.3% to 825,484 learners, reflecting ongoing government efforts to promote skills-based training for industrial growth.
Despite this expansion, HELB support to TVET students fell sharply. Beneficiaries dropped 46% to 157,376, while total disbursements nearly halved to KSh 5.8 billion from KSh 10.7 billion. The agency attributed the decline to delays in processing first-time applicants.
This contrasts sharply with government targets, which had aimed to support more than 237,000 TVET trainees under the funding model. Meanwhile, enrolment patterns within TVET institutions also weakened across diploma, certificate, and artisan levels.
Grants Decline as Loan Dependency Rises
The shift towards loans has come at the expense of grants and bursaries. The number of bursary recipients fell 37% to 24,075 students, while total bursary allocations dropped to KSh 148.5 million from KSh 237 million the previous year.
For 2026/27, the approved scholarship allocation stands at KSh 17.92 billion, significantly below the estimated KSh 47.36 billion requirement, underscoring a widening financing gap.
Public university bursary support also declined, both in value and beneficiaries, while TVET bursary allocations were cut by nearly 60%, affecting thousands of students.
A Strained Revolving Fund Model
The HELB system was originally designed as a revolving fund, where graduates repay loans to finance future cohorts. That model is now under severe strain due to persistently high youth unemployment, estimated at 67%, and a labour market dominated by informal work.
With more than one million young people entering the job market annually, repayment capacity remains weak. HELB is increasingly considering stricter recovery measures, including credit bureau listings, employer enforcement mechanisms, and penalty waiver programmes, as it struggles to sustain the funding cycle underpinning higher education access.
