The Higher Education Loans Board (HELB) has warned Parliament that Kenya’s student financing programme is facing a widening funding crisis, with a projected Sh57.65 billion deficit in the 2026/27 financial year despite improved loan recoveries and prudent budget management.
Appearing before the National Assembly Departmental Committee on Education during deliberations on the FY2025/26 Budget Implementation Status, HELB said the demand for student loans continues to outstrip available resources under the Student-Centred Funding Model, threatening equitable access to higher education.
According to documents submitted to the committee, HELB estimates that 1,199,423 students will require financial support in FY2026/27, translating into a projected loan requirement of Sh114.36 billion against an approved budget of Sh56.71 billion.
The Board projects the shortfall at Sh57.65 billion, nearly double the funding gap experienced in the current financial year.
“The projected financing position for FY2026/2027 indicates continued growth in demand, with an estimated 1,199,423 students requiring support with a projected loan requirement of Shs.114.36 billion against an approved budget of Shs.56.71 billion, resulting in a projected funding gap of Shs.57.65 billion,” Monari said.
Monari added that, “HELB continues to work closely with the Ministry of Education and the National Treasury to mobilise additional resources to sustain equitable access to higher education financing.”
The financing challenge has steadily worsened since the introduction of the Student-Centred Funding Model (SCFM), which significantly expanded the number of students eligible for government support.
HELB told lawmakers that student numbers requiring financial support increased from 567,338 in FY2023/24 to 823,691 in FY2025/26, creating sustained pressure on available resources.
The Board says funding gaps have widened over the three financial years, rising from Sh29.27 billion in FY2024/25 to Sh18.58 billion in FY2025/26, before climbing sharply to the projected Sh57.65 billion next year.
Despite the financial strain, HELB reported strong budget implementation during FY2025/26.
The Board said it absorbed 102 percent of its revised operational budget after increasing internally generated revenue through enhanced loan recovery efforts, partnership funding and higher miscellaneous income.
The report indicates that Parliament had approved a budget of Sh45.665 billion, comprising Sh40.939 billion in Exchequer funding and Sh4.726 billion in Appropriations-in-Aid (A-I-A).
Following improved loan recoveries, HELB revised its operational budget to Sh49.137 billion in April 2026.
Actual expenditure reached Sh50.043 billion, representing 102 percent budget absorption and resulting in a modest operational surplus of Sh543,372.
The Board attributed the improved performance to stronger internally generated revenues.
Loan recoveries reached Sh7.625 billion, exceeding the target of Sh6.963 billion by 110 per cent.
Interest income also surpassed projections after generating Sh196.685 million against a target of Sh110 million, while miscellaneous income stood at Sh417.869 million, representing 131 per cent of the target.
“The performance partially cushioned the effects of constrained Exchequer funding and enabled HELB to continue financing eligible students. Nevertheless, the revenues generated remained insufficient to fully bridge the growing student financing gap.” Monari affirmed.
The Board also highlighted the impact of the Student-Centred Funding Model on higher education financing.
During the financial year under review, HELB supported 823,691 students through loans and bursaries across universities and Technical and Vocational Education and Training (TVET) institutions.
Out of these, 233,333 students received loans, while 364,279 TVET students benefited from bursaries, reinforcing the government’s Bottom-Up Economic Transformation Agenda and Vision 2030 objectives.
However, Monari acknowledged that capital expenditure lagged behind because resources were channelled towards financing students.
“There were no capital projects in FY2025/2026. The entire budget allocated by the National Treasury was for recurrent expenditure.”
The Board further disclosed that it had identified three major risks facing its operations during FY2025/26.
These include a financial risk arising from budget deficits caused by high demand for loans against inadequate allocations, a liquidity risk stemming from insufficient funds to meet obligations, and operational risks linked to ongoing land litigation.
To mitigate the risks, Monari said it will maintain continuous engagement with the National Treasury for additional Exchequer funding, intensify loan recovery and resource mobilisation efforts, and continue pursuing legal appeals while strengthening governance and periodic risk assessments.
Monari cautioned that while it has fully utilised available resources to sustain higher education financing and implemented robust resource mobilisation strategies, long-term sustainability will require increased government funding.
“HELB fully utilised the available resources to support higher education financing and enhanced resource mobilisation through robust loan recovery mechanisms. However, increasing demand under the Student-Centred Funding Model continues to outpace available funding, underscoring the need for additional fiscal support and long-term financing solutions to sustain equitable access to higher education.”
