Student funding plan: Govt to deduct up to 25% from salaries of beneficiaries

This story has significance for readers across Kenya and beyond.

- The Tertiary Education, Placement and Funding Bill, 2026, proposes a stricter loan repayment system tied directly to graduates' payslips

- Graduates would have just one year after completing studies to begin repaying loans, with employers required to deduct up to 25% of salary

- Employers who fail to remit deductions on time face a 5% monthly penalty, while unpaid loans could be pursued as civil debts in court

Elijah Ntongai is an experienced editor at TUKO.co.ke, with more than four years in financial, business, labour and technology research and reporting. His work provides valuable insights into Kenyan, African, and global trends.

Kenya's proposed Tertiary Education, Placement and Funding Bill, 2026, would lock graduates into an automated, payroll-linked loan repayment system that goes significantly further than the existing Higher Education Loans Board (HELB) framework.

Under Clause 49 of the Bill, sponsored by National Assembly Majority Leader Kimani Ichung'wah, a loanee would have precisely one year from the date of completing their studies to begin repaying the principal loan amount alongside any accrued interest and additional charges.

The window is tighter than current arrangements, raising concern for graduates who take longer than average to secure formal employment after leaving campus.

Disclosure and Deduction Rules

The Bill places immediate obligations on graduates entering the workforce. Any loanee taking up formal employment must disclose their outstanding loan status to their employer from the very first day of work.

Graduates in informal employment may negotiate a repayment plan directly with the Authority, covering the mode and frequency of payments.

The figure most likely to affect borrowers day-to-day appears in Clause 49(4), which authorises the Authority to deduct up to 25% of a loanee's emoluments.

That cap covers salaries, wages, allowances, bonuses, and other benefits, meaning a fresh graduate could lose a quarter of their total monthly package toward loan repayment during what are typically the leanest early years of a career.

Employer Duties and Debt Recovery

Employers are drawn directly into the repayment chain under Clause 50. They would be required to register loanees with the Authority, make the prescribed deductions, and remit the funds within nine days of the end of each month. Any employer that misses the remittance deadline would face a penalty of 5% per month on the outstanding amount.

Should repayment break down at the borrower level, Clause 51 grants the Authority wide recovery powers. All outstanding sums are classified as debts owed to the Authority and may be pursued through summary civil debt proceedings, placing unpaid education loans on the same legal footing as any other enforceable civil obligation.

The provisions in Clauses 49 to 51 together represent a structural departure from HELB's recovery model, which has long drawn criticism for inconsistent enforcement.

What will happen to HELB?

As reported earlier on TUKO.co.ke, the funding proposes merging HELB, the Universities Fund and the TVET Funding Board into a new Tertiary Education Funding Authority (TEFA).

The proposed authority would operate a savings scheme allowing parents and individuals to set aside money for a child's future university, college or TVET education.

Under the new funding model, students could receive up to 100% of their education costs, while loan repayments would begin after studies or employment and be capped at 25% of a beneficiary's monthly salary.

The bill followed President William Ruto's July 21 pledge to fully fund students admitted to public universities and colleges, with TEFA expected to draw funding from government allocations, investments, loan repayments and other financing sources.

Source: TUKO.co.ke

Reporting originally appeared via TUKO. Read the full source for additional context.