Three years ago, President William Ruto unveiled the Student-Centred Funding Model as the solution to the financial crisis facing public universities.
The model, rolled out in September 2023, promised to end years of underfunding by directing government support to students according to their level of need rather than applying a uniform funding formula.
Today, however, the government is preparing yet another overhaul of university financing after the model ran into the same financial pressures that had crippled its predecessor.
This has left, public universities remain burdened by debts, delayed funding and growing financial obligations.
Fresh disclosures before Parliament show that the Student-Centred Funding Model is now facing the same challenge that undermined the system it replaced.
Documents tabled by the Ministry of Education indicate that billions of shillings required to finance scholarships, student loans and university capitation have not been provided, leaving universities with widening funding deficits.
The disclosures also show that despite successive governments introducing different university funding formulas, none has been financed at the levels required.
The latest admissions by the government shift attention from a model problem to persistent and chronic underfunding of university education.
The Standard retraces the roots of the current crisis, which stretch back a little over a decade.
In 2016, then Education Cabinet Secretary Fred Matiang’i made a policy decision that fundamentally changed the financing of public universities.
Before then, government sponsorship was reserved for only a section of students who qualified for admission to public universities.
For male students, it was mainly those who scored B+(Plus) and above, while for female students the entry grade was lowered to a B(plain) of sometimes 64 points and above.
This effectively locked out thousands of students who had qualified for university from the government-sponsored scholarships.
The remaining students were given the option to enroll under the self-sponsored programme, where they paid the full cost of their education without government support.
For years, the programme became the financial backbone of public universities.
The additional income generated through self-sponsored students enabled universities to cushion themselves against delayed or inadequate government funding.
The University of Nairobi, for instance, had accumulated close to Sh4 billion in reserves by the time the late Prof George Magoha left the institution as Vice Chancellor in 2015.
The self-sponsorship funds had even enabled the late Professor to build the iconic UoN towers.
Although public universities had for years complained of inadequate government funding, income from privately sponsored students enabled many institutions to remain financially stable.
The situation changed following reforms in the Kenya Certificate of Secondary Education examinations in 2016.
The reforms led to a sharp drop in the number of students attaining the minimum university entry grade.
To ensure those who qualified secured university places, the government progressively admitted virtually all eligible students under the government-sponsored programme.
The decision significantly expanded access to university education but gradually wiped out the self-sponsored programme.
With almost every eligible student admitted under government sponsorship, universities lost one of their largest sources of internally generated revenue.
The institutions increasingly depended on exchequer allocations to finance their operations.
The loss of income from self-sponsored students also exposed a problem that had existed for years.
Government allocations had consistently fallen below the actual cost of training university students, but the revenue generated by self-sponsored programmes had enabled universities to bridge part of the gap.
Without that buffer, financial pressures intensified across the sector.
By the time President Ruto assumed office in 2022, public universities were already struggling with Sh60 billion in growing debts and persistent cash flow problems.
The government blamed the crisis on the Differentiated Unit Cost (DUC) funding model introduced in 2017.
Under the DUC model, universities were to receive funding based on the cost of programmes offered, with government expected to finance about 80 per cent of the cost of every student.
However, the allocations made through the national budget consistently fell below the required amounts.
By the time the model was abandoned in 2023, government funding had dropped to about 47 per cent of the actual cost of training students.
This means for every Sh100 a student was meant to get, the government only provided Sh47.
Universities increasingly relied on borrowing, delayed payments and pending bills to sustain operations.
It is against this background that President Ruto unveiled the Student-Centred Funding Model in September 2023.
The new system shifted government funding from institutions to individual students.
Unlike the previous model, funding would be determined by a student’s household income and level of financial need.
The government initially proposed placing students into four categories before settling on a five-band structure shortly before implementation.
Under the revised framework, students are classified according to household income, with government scholarships, HELB loans and family contributions varying from one band to another.
Students in Band One, whose households earn up to Sh5,995 per month, qualify for a 70 per cent scholarship, a 25 per cent loan and contribute five per cent of tuition fees.
Those in Band Two receive a 60 per cent scholarship, a 30 per cent loan and contribute 10 per cent.
Band Three students receive a 50 per cent scholarship, a 30 per cent loan and contribute 20 per cent.
Band Four students qualify for a 40 per cent scholarship, a 30 per cent loan and contribute 30 per cent.
Students in Band Five receive a 30 per cent scholarship, a 30 per cent loan and are expected to meet 40 per cent of their fees through household contributions.
Government also adjusted student upkeep support, reducing the maximum annual upkeep allocation from Sh60,000 proposed under the earlier framework to Sh40,000 depending on the student’s band.
The model was presented as a more equitable way of financing higher education by directing more government support to students from poor households while requiring wealthier families to contribute more.
The first year of implementation appeared to validate the reforms.
Government fully financed the first cohort admitted under the new model, raising expectations that the financing challenges facing universities had finally been addressed.
But as student numbers grew, funding failed to keep pace.
The number of students funded under the model increased from 122,634 admitted in 2023 to 134,889 admitted in 2024 and 180,125 admitted in 2025.
The three cohorts now account for 437,648 students under the funding system.
This year presents the biggest test yet.
A total of 202,000 candidates who attained the minimum university entry mark placed to join various degree programs in public and private universities.
This means that the universities will host some 639,000 students in the four years since adoption.
However, funding of students has not paced with the growth in student population.
Documents tabled before the National Assembly Education Committee show that the Ministry of Education required Sh29.55 billion to fully support students under the model during the 2025/26 financial year.
However, only Sh18.42 billion was allocated, leaving a funding gap of Sh11.13 billion.
This means the allocation would finance only about 62 per cent of the amount required.
Appearing before the National Assembly Education Committee in July, Higher Education Principal Secretary Beatrice Inyangala admitted that the financing mechanism has failed to match the requirements of the Student-Centred Funding Model.
Documents presented by the State Department show that scholarships, university capitation and student loans required Sh70.39 billion during the 2025/26 financial year.
Only Sh41.423 billion was approved, leaving a funding deficit of Sh28.97 billion.
The Principal Secretary said the shortfall had significantly reduced the Universities Fund’s ability to finance institutions at the levels required under the model.
“The shortfall limits the Fund’s ability to fund universities at full levels, constrains university cash flows and increases the risk of pending obligations that may affect teaching, learning, research and institutional operations,” Inyangala told MPs.
She maintained that the challenge lies not in the funding model itself but in the financing mechanism supporting it.
“The mechanism of funding has not aligned with the model. Even if this model was changed to another one, if the budgeting allocations are not aligned to the requirements, we will still have problems,” she said.
According to Inyangala, the Ministry of Education submits funding requirements based on the actual cost of scholarships and student loans, but the amounts appropriated through the budget process fall below those requirements.
“We have come very respectfully to this committee and presented our requirements, but what has been appropriated has not been equivalent to the requirements for loans and scholarships,” she said.
Members of Parliament questioned whether the model can survive under the current financing arrangements.
Lugari MP Nabii Nabwera told the committee that vice chancellors had complained universities were receiving student upkeep funds ahead of tuition payments, leaving institutions without adequate operational resources.
He questioned whether the arrangement was sustainable, warning that universities were being pushed back into the same financial crisis the Student-Centred Funding Model was intended to solve.
Similarly, a similar crisis faces the Higher Education Loans Board(HELB).
HELB Chief Executive Geoffrey Monari while appearing before the National Assembly committee on education, said the admission of the students in September will see a projected 1,199,423 students requiring government financial support in the 2026/2027 financial year.
HELB estimates it will require Sh114.36 billion to finance the eligible students, against an approved budget of just Sh56.71 billion, leaving a funding gap of Sh57.65 billion that threatens the sustainability of the government’s funding model.
"The introduction of the Student-Centred Funding Model (SCFM) in FY2023/2024 significantly expanded access to Government student financing. Consequently, the number of students supported under the programme increased from 567,338 in FY2023/2024 to 823,691 in FY2025/2026. This expansion has resulted in a corresponding increase in the annual student loan financing requirements," Monari told the committee.
The strain is already visible across public universities.
Government documents show that public universities had accumulated pending bills amounting to Sh100.3 billion as at January 31 this year.
The largest liabilities comprise Sh33.21 billion in statutory deductions, Sh26.34 billion in unpaid salaries and wages, Sh18.63 billion in unremitted SACCO deductions, Sh4.69 billion owed to part-time lecturers, Sh4.17 billion owed to suppliers and Sh3.03 billion tied to capital projects.
Universities have also failed to remit deductions to agencies including NSSF, NHIF, HELB, NITA, banks and the Housing Levy.
The State Department further acknowledged that the pending bills have not been provided for in the approved 2026/27 Budget, placing additional pressure on institutions already struggling with cash flow constraints.
Parliament has since directed universities to prioritise settlement of pending bills before committing resources to new projects.
The committee also instructed institutions to suspend commencement of new development projects where existing projects remain incomplete.
The report shows that 80 capital projects remain under implementation across public universities.
In the report 24 are more than 80 per cent complete, seven are between 60 and 79 per cent complete, while 49 projects remain below 60 per cent completion due to financial constraints.
Government estimates that an additional Sh42.1 billion will be required to complete the projects.
The financial burden facing universities also continues to grow.
Among the institutions carrying the largest debts are Egerton University, University of Nairobi, Technical University of Kenya, Kenyatta University and Moi University.