New University Funding Model Has Worked in South Africa, Australia and UK

Change is always resisted. It is met with skepticism because human beings always prefer the status quo.  People will naturally fight change because it makes everybody uncomfortable. When M-Pesa services were being launched, Kenyans were very skeptical. It is the same with the new university education funding model. 

Kenya’s education landscape has undergone a significant transformation with the introduction of a new university education funding model. This shift is intended to address the growing challenges of access, equity and sustainability in higher education. To fully understand its implications, it is essential to compare the new model with the previous one, examine countries where similar models have been successful and weigh the pros and cons.

The old university education funding model in Kenya was heavily reliant on direct government funding through the Higher Educat¡on Loans Board (HELB). This model provided loans and bursaries to students, which were expected to be repaid after graduation. However, several challenges plagued this system:

1. Inadequate funding

The growing number of students enrolling in universities overwhelmed the capacity of HELB, leading to delays and insufficient disbursements.

2. High default rates

Many graduates struggled to secure employment, resulting in high default rates on HELB loans. This, in turn, strained the revolving fund meant to support future students.

3. Inequitable distribution

The allocation of funds often favoured students from well-off backgrounds who had better access to information and could secure loans more easily. This widened the gap between the rich and the poor in access to higher education.

4. Limited accountability

Universities received block grants from the government, which were not always tied to performance or the specific needs of individual institutions. This often led to inefficient use of resources.

The new university education funding model introduced in 2023 aims to address these challenges by adopting a differentiated unit cost (DUC) approach. Under this model there is:

1. Need-based funding

Students are categorised based on their financial need into three groups: those from low-income households, middle-income households, and high-income households. The funding is then tailored to the needs of these groups, with the most disadvantaged students receiving full scholarships and grants.

2. Performance-linked funding

Universities are now funded based on the performance and outcomes of their programs. This includes factors such as employability of graduates, research output, and the relevance of courses offered.

3. Increased private sector involvement

The new model encourages private sector partnerships, allowing companies to fund students in specific fields in exchange for future employment commitments.

4. Loan repayment reform

The repayment of loans is now linked to income, where graduates pay a percentage of their earnings once they reach a certain income threshold, easing the burden on those who earn less.

Kenya’s new model borrows elements from successful higher education funding systems in countries such as Australia, South Africa and the United Kingdom.

Australia’s HECS-HELP

Australia introduced the Higher Education Contribution Scheme (HECS) in 1989, later rebranded as HECS-HELP. This model allows students to defer tuition payments until they are earning above a certain income threshold. Repayments are income-contingent, ensuring that graduates are not overburdened by debt early in their careers. This approach has proven successful in balancing access and sustainability in higher education funding.

United Kingdom’s student loans system

The UK has a similar income-contingent repayment model. Students do not start repaying their loans until they earn above a certain threshold. The loans also have a time limit, after which any remaining debt is written off. This system has been effective in widening access to higher education, though it has faced criticism for high debt levels among graduates.

South Africa’s NSFAS 

The National Student Financial Aid Scheme (NSFAS) in South Africa provides loans and bursaries to disadvantaged students. Repayments are income-based, and the system has been pivotal in increasing university access among marginalized communities.

Pros and cons of the new funding model

1. Equity in access

The new model prioritizes students from low-income backgrounds, ensuring that financial constraints do not bar talented individuals from accessing higher education.

2. Sustainability

By linking funding to university performance and ensuring loan repayments are income-contingent, the new model aims to create a more sustainable funding system.

3. Encourages accountability

Universities are incentivised to improve their performance, leading to better educational outcomes and more efficient use of resources.

4. Private sector collaboration

Increased private sector involvement could lead to more targeted education programs, directly linked to job market demands, thus reducing graduate unemployment.

Implementation challenges: The success of the new model hinges on accurate data collection and management, which may be difficult to achieve in practice, leading to potential misallocation of resources.

High administrative costs: The complexity of managing a differentiated funding system could lead to higher administrative costs, which might offset some of the benefits.

Risk of exclusion: While the model aims to be inclusive, there is a risk that some students, especially those from middle-income backgrounds, might fall through the cracks if their needs are not adequately assessed.

Dependence on economic conditions: The income-contingent loan repayment system is highly dependent on the economic climate. In periods of economic downturn, there may be lower loan recoveries, putting pressure on the system.

Kenya’s new university education funding model represents a bold step towards a more equitable and sustainable higher education system. While it draws inspiration from successful systems in other countries, its success will depend on effective implementation and ongoing adjustments to address emerging challenges.

If managed well, this model could significantly improve access to higher education for Kenya’s most disadvantaged students, while also ensuring that universities are held accountable for the quality of education they provide. However, careful monitoring and continuous refinement will be necessary to ensure that the model delivers on its promise of broadening access while maintaining financial sustainability.

Kamomonti teaches English and Literature in Gatundu North Sub County.*