- Graduates could have student-loan deductions capped at 25 per cent of their earnings under proposed reforms.
- The Tertiary Education, Placement and Funding Bill, 2026 also proposes repayment within one year after studies.
- Employers would assume greater responsibility for deducting and remitting loan repayments to the proposed funding authority.
Kenya is moving towards a major overhaul of how university and college education is financed, with a proposed law seeking to protect graduates from excessive student-loan deductions while giving the government a stronger mechanism for recovering billions invested in higher education.
The proposed Tertiary Education, Placement and Funding Bill, 2026 introduces a ceiling on monthly student-loan repayments, providing that deductions from a graduate’s earnings should not exceed 25 per cent.
The provision is contained in Clause 49(4) of the Bill and would apply to education loans administered by the proposed Tertiary Education Funding Authority (TEFA), which is expected to replace the Higher Education Loans Board (HELB).
The Bill states that when recovering an education loan, the Authority shall deduct no more than 25 per cent of a loanee’s emoluments.
The proposal comes at a critical moment as the government prepares to roll out a new tertiary education financing framework from September 2026.
Under the planned model, eligible students joining universities and colleges would receive government support to meet the cost of their education. The framework is intended to reduce the financial barriers that prevent qualified students from accessing tertiary education, particularly those from households unable to raise tuition and accommodation costs upfront.
However, while the new system promises improved access at the point of admission, it also introduces a long-term financial obligation for students who benefit from the loans.
The Bill proposes that beneficiaries begin repaying their education loans within one year after completing their studies. Repayment would include the principal amount, accrued interest and any other applicable charges.
This means that the cost of accessing higher education could follow graduates into the workplace, making the proposed 25 per cent ceiling particularly significant for young Kenyans entering employment.
The 25 percent ceiling
The proposed cap is designed to establish a clear limit on the portion of a graduate’s earnings that can be recovered through salary deductions.
Instead of allowing loan repayments to consume an unrestricted share of a borrower’s income, TEFA would be legally restricted from deducting more than one-quarter of the loanee’s emoluments.
For graduates earning modest salaries, the provision could offer an important measure of financial protection.
It would ensure that borrowers retain at least 75 per cent of their earnings before other statutory and contractual deductions, although the actual take-home pay would depend on the full range of deductions applicable to an individual employee.
The provision also introduces predictability into the repayment system.
A graduate entering employment would know that, regardless of the outstanding loan balance, the statutory student-loan deduction could not exceed the prescribed 25 per cent ceiling.
However, the cap does not reduce a graduate’s loan liability by 25 per cent. It only limits the amount that can be deducted from earnings through the prescribed recovery mechanism.
The duration required to fully repay the loan would therefore depend on factors such as the amount borrowed, income levels, interest and applicable charges.
The proposed law would also place significant responsibilities on employers.
Once a person with an outstanding education loan secures employment, the employer would be required to notify the Authority and make the prescribed monthly deductions from the employee’s earnings.
The deductions would then have to be remitted to TEFA within nine days after the end of every month.
This would effectively make employers a critical link between graduates and the institution responsible for recovering education loans.
The Bill further proposes financial penalties for employers who deduct money from an employee but fail to remit it to the Authority within the prescribed period.
An employer could face a charge equivalent to five per cent of the repayment amount for every month, or part of a month, that the money remains unpaid.
The provision is intended to ensure that funds already deducted from a worker are not retained by employers beyond the statutory deadline.
It also establishes a clear accountability framework for employers participating in the loan-recovery system.
Repayment to begin one year after studies
One of the most consequential provisions for students is the proposed commencement of repayment.
The Bill provides that a loanee should begin repaying the education loan within one year of completing studies.
This establishes a defined transition period between graduation and the onset of repayment obligations.
However, the provision also raises important questions regarding graduates who take longer to secure employment.
Kenya continues to face challenges in the transition from education to work, particularly for young people entering highly competitive labour markets.
For such graduates, the practical impact of the new repayment framework will depend heavily on how TEFA interprets and administers repayment obligations for borrowers who have completed their studies but have not yet secured stable employment.
This issue is expected to attract significant scrutiny as Parliament considers the Bill.
The proposed financing model represents a significant shift in the relationship between students and the government.
The policy direction is to ensure that a qualified student is not excluded from university or college education solely due to an inability to meet the required fees.
Government financing would therefore follow the student into tertiary education, potentially easing the immediate financial burden on households.
However, the model also requires students to clearly understand what portion of their financing constitutes a loan and what portion is non-repayable support.
This distinction will be critical.
Expanded access to higher education is only meaningful if students and families fully understand the financial obligations associated with the assistance they receive.
The transition from a fee-payment model to a more comprehensive financing arrangement should therefore be accompanied by clear communication on loan amounts, interest rates, repayment timelines, employment-based deductions and borrower rights.
TEFA could mark a new era in student financing
The proposed creation of TEFA would also signal a broader restructuring of tertiary education financing in Kenya.
Rather than HELB operating within the existing framework, the new Authority would assume responsibility for administering education financing under an expanded legal and institutional mandate.
Its role would extend beyond the disbursement of student loans.
The Authority would become central to the administration, recovery and overall management of education financing under the proposed system.
The effectiveness of the new model will therefore depend not only on the level of government funding but also on how efficiently the institution administers resources, communicates with students and manages loan recovery.
Transparency will be particularly critical.
Students need clear information on how much they owe, how interest is calculated, when repayment begins and how deductions are determined.
Graduates should also have access to accurate and timely updates on their loan accounts throughout their working lives.
Balancing access and debt
The proposed 25 per cent ceiling captures the central challenge facing Kenya’s new higher education financing model.
The government seeks to expand access to university and college education while ensuring that public funds invested in students are eventually recovered.
At the same time, students require a financing system that does not impose excessive financial strain as they begin their careers.
A 25 per cent ceiling could help strike a balance between these competing priorities.
It protects graduates from unlimited salary deductions while preserving the government’s ability to recover funds advanced through the education-loan system.
However, the effectiveness of the framework will ultimately depend on implementation.
A well-structured financing system can expand access, improve equity and enable more young Kenyans to acquire higher-level skills.
Conversely, weak implementation could leave graduates uncertain about their obligations and place undue administrative burdens on employers.
As Parliament considers the Tertiary Education, Placement and Funding Bill, 2026, the debate should therefore extend beyond the headline figure of 25 per cent.
The fundamental question is whether Kenya can establish a tertiary education financing system that broadens opportunity without imposing an unsustainable debt burden on the very graduates it seeks to empower.
For thousands of students preparing to join universities and colleges from September, the outcome could shape not only their access to higher education but also their early career trajectories.
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The proposed 25 per cent salary ceiling is therefore more than a technical provision in a Bill. It is a significant safeguard at the intersection of education, employment, public finance and the economic future of Kenya’s young graduates.
By Hillary Muhalya
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