How Govt is planning to Get Public Universities out of Debts
The first step in the government’s strategy to pay off more than Sh60 billion in debt to public universities is the gradual phase-out of the current financing mechanism, which has been in place for more than three decades.
As a result of its concern over the increasing debt, the government has put forth policies that will not only help universities pay off their debts but also stabilise their finances.
As of June of this year, Sh60,2 billion in debt was owed; it is growing by about Sh500 million every month.
Authorities have proposed a wide range of measures to save the institutions, such as altering the funding formula, switching to renewable energy to cut down on electricity costs, which make up the majority of expenditures, reserving 30% of government consulting services for universities, commercialising university research, and creating public-private partnerships to improve infrastructure.
The majority of public institutions’ enduring financial issues are touted as being resolved by changes in funding. Government representatives painted a grim picture of how the current financial structure forces universities into debt on Friday.
For students accepted under government sponsorship, the government would cover 80% of their tuition costs; the remaining 20% would be covered by student loans from the Higher Loans Board (Helb) and direct payments from parents or guardians.
called the Differentiated Unit Cost (DUC) model informally. It is now clear that neither the government nor the students have contributed the required sum.
Geoffrey Monari, chief executive of the University Fund, notes that despite an increase in student enrollment, the government does not allot enough money to support government-sponsored students.
Therefore, the original strategy for the government to pay 80% of the tuition costs for students accepted into a government-sponsored programme has been jeopardised.
The government has failed to fulfil its duties in recent years. For instance, the government paid 61% during the 2019–2020 fiscal year (FY), and 54% during the 2020–2021 FY for students who were supported by the government.
The situation worsened with time, with the proportion dropping to 50% in the fiscal years 2021–2022 and 2022–2023 and to 48% in the latter.
The government is obligated to pay Sh576,000 for each student enrolled in the programme under the DUC, assuming that each student pursuing medicine is expected to spend Sh720,000.
However, as of the previous year, institutions only received Sh345,000, or 48% of the sum the government was required to provide, for each student pursuing medicine.
The remaining Sh144,000 was supposed to be raised by parents and Helb, but they only donated Sh16,000 instead. “You can actually see how insufficient money contributed to the situation our country is in today. According to Monari, neither the government nor the general public were making their expected contributions at the expected rate.
Poor instruction
Helb CEO Charles Ringera claims that the decrease in government financing has resulted in a drop in educational quality, which has led to graduates receiving inadequate training and being unprepared to enter the industry.
“If you only contribute 48% of the total amount anticipated, what kind of graduate do you expect the universities to produce? “Half-baked graduates first appeared in this context, according to Ringera, who spoke on Friday in Naivasha.
He talked about the new funding mechanism at a workshop on media sensitization. Beginning in September, the new funding mechanism will progressively replace the old one.
How Govt is planning to Get Public Universities out of Debts
This means that the old model will continue to be utilised to fund students who are in their second year or later and who were admitted in September. Monari claims that Sh34,1 billion has been set aside by the government for continuing DUC students.
As a result, continuing students and institutions will continue to face funding challenges. Surprisingly, this sum will only give 40% of the entire amount that the government is planned to provide under this approach. “We would have funded them at an average rate of 35% this year if we had continued to fund all students under the model,” said Monari.
Further modelling shows that by 2028, the government may have supported students at a rate of 20%, requiring a revision to the funding paradigm.
According to Monari, the cascading effects left colleges in debt since they were unable to cover employee salaries and required deductions. Additionally, they failed to pay employee pensions. Because of this, he said, “universities found it difficult to offer a quality education, and as a result, students were not adequately prepared for the job market.”
According to the chairman of the University Fund, the new finance model will support new entrants at the market rate that universities charge. This is made possible by the Sh19.6 billion that the exchequer set aside in June.
This indicates that for the first time, universities will be paid the whole cost of a programme. According to the new methodology, the government would finance students through loans and scholarships.
The degree of need among students has been broken down into four categories: vulnerable, which represents the students with the lowest incomes, and seriously needy, which comes in second.
Both Loans and Fellowships
The government will provide full funding for these two categories, with scholarships making up the majority of the funds and a minor loan that must be repaid after graduation.
The less needy and the impoverished make up the remaining two groups. 93% of their financial support will come from the government in the form of loans and scholarships. 7% of their tuition will be covered by their parents.
To assist student loans, the government increased HELB financing from Sh15.8 billion to Sh30.3 billion in June. The concept, according to Monari, is more sustainable and will guarantee that institutions receive enough financing to deliver high-quality instruction and pay other overhead costs.
The new model, which promotes equity, offers more help to the most disadvantaged students than the previous one did, which supported all students equally.
The present strategy, Monari explained, “promotes equity because we support the neediest students who, otherwise, would not be able to attend college. Previously, every student received the same funding regardless of their desire for it.”
However, the head of the University Fund asserts that this won’t be enough to pay off the current debt. “We are looking at diversifying the revenue streams in universities, away from a single revenue stream from grants to government-sponsored students,” he stated. Vice-chancellors were continually pushing for more cash, making this very challenging.
Added Reforms
The University Fund suggests mandating public-private partnerships between higher education institutions and businesses to improve infrastructure. Monari claims that universities would have to apply this strategy when building dorms for their students.
This project has been presented using the construct-manage-Transfer paradigm, in which the university gives land for a private investor to build a dormitory facility, the investor is allowed to manage it for the predetermined number of years, and then the investor transfers it to the university.
Another suggestion is that universities build up their capacity to produce their own electricity in order to lessen their reliance on Kenya Power.
Monari claims that the cost of electricity has been one of the major causes of student debt in colleges, so he advises the academic institutions to invest in clean energy sources like solar energy.
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According to Monari, cutting back on this expense could generate income for universities in addition to saving them millions of dollars.
As an example, Monari cited Strathmore University as being on the list of independent power suppliers to the KPLC in addition to producing their own electricity.
Additionally, it has been promoted for colleges to profit from consultancy services. According to Monari, academic staff from various colleges will handle this because they are equipped to offer the specialised information needed by different industries.
According to Monari, they are urging government organisations to limit consulting work to just public universities. In this way, institutions will be required to provide consultancy services to State entities.
We are advocating for legislation that would let colleges to give advisory services for up to 30% of government services, the official said. Universities will also need to commercialise their research projects in order to get financing.
How Govt is planning to Get Public Universities out of Debts
