How Govt Plans to Free Public Universities from Debt
The government has devised a plan to settle more than Sh60 billion in debt owed to public universities, with the first step being the phase-out of the current financing model, which has existed for more than three decades.
Concerned about the ever-increasing debt, the government proposes measures that will not only reduce the debt that is strangling universities, but will also make them financially stable.
Sh60,2 billion was owed as of June of this year; the debt is expanding by approximately Sh500 million per month.
To save the institutions, authorities have outlined an array of measures, including a change in the funding formula, the adoption of renewable energy to reduce electricity bills, which account for the largest expenditure, the reservation of 30 percent of government consulting services for universities, the commercialization of university research, and the formation of public-private partnerships to enhance infrastructure.
Changes in funding are promoted as the solution to most public universities’ chronic financial problems. On Friday, government officials painted a bleak picture of how the current financing model pushes universities into debt.
The government would pay 80% of student fees for students admitted under government sponsorship, while students would use a Higher Loans Board (Helb) student loan and direct fees paid by a parent or guardian to cover the remaining 20%.
Commonly referred to as the Differentiated Unit Cost (DUC) model. However, it has become apparent that neither the government nor the students have paid the expected amount.
Geoffrey Monari, chief executive officer of the University Fund, explains that the government allocates insufficient funds to pay for government-sponsored students despite the rising number of students.
Consequently, the initial plan for the government to cover 80 percent of the tuition fees for students admitted to a government-sponsored program has been compromised.
In recent years, the government has neglected to live up to its obligations. During the 2019–2020 fiscal year (FY), for example, the government paid 61%, while in the 2020–2021 FY, government-sponsored students received 54%.
The situation continued to deteriorate, with the percentage falling to 50 percent in the 2021–22 fiscal year and 48 percent in the 2022–23 fiscal year.
Assuming that students pursuing medicine are expected to pay Sh720,000 each, the government is required to pay Sh576,000 for each student enrolled in the program under the DUC.
However, as of last year, institutions only received Sh345,000 for each student pursuing medicine, or 48% of the amount the government was supposed to give.
Parents and Helb were anticipated to raise the remaining Sh144,000, but they only contributed Sh16,000. “You can actually see how we got into the predicament we’re in as a nation due to inadequate funding. Monari stated that neither households nor the government were contributing at the rate they were expected to.
Poor training
Charles Ringera, the chief executive officer of Helb, asserts that the decline in government funding has led to a decline in the quality of education, which has resulted in inadequate training and graduates who are unprepared to enter the workforce.
“What type of graduate do you expect the universities to produce if you only contribute 48% of the total sum expected? “This is the origin of the phrase half-baked graduates,” Ringera said on Friday in Naivasha.
During a media sensitization workshop, he discussed the new funding formula. The new funding formula goes into effect in September and will gradually replace the previous model.
This means that the model will only be used to finance students admitted in September, while students in their second year and beyond will continue to be funded using the old model. According to Monari, the government has allotted Sh34,1 billion for continuing DUC students.
Unbelievably, this amount will provide only forty percent of the total amount that the government is anticipated to provide under this model, which means that continuing students and universities will continue to struggle with funding issues. “If we had continued to fund all students under the model this year, we would have funded them at an average rate of 35%,” said Monari.
Further simulation reveals that by 2028, the government could have funded students at a rate of 20%; therefore, the funding model must be revised.
Monari explained that the cascading effects caused universities to incur debt because they were unable to pay salaries and statutory deductions. They also neglected to pay employees’ pensions. “As a result, universities struggled to provide a quality education, and as a result, students were inadequately prepared for the job market,” he explained.
The new financing model will fund new entrants at the market rate that universities charge, according to the head of the University Fund. The Sh19.6 billion that the exchequer set aside in June will make this possible.
This means that universities will receive funding for the full amount they charge for a program for the first time. The government will fund students through scholarships and loans under the new formula.
The neediness of students has been divided into four categories: vulnerable, representing the poorest students, and severely needy, coming in second.
Loans and scholarships
These two categories will receive full government support, with scholarships accounting for the majority of the funding and a small loan to be repaid after graduation.
The final two categories consist of the destitute and the less needy. They will receive 93% of their government funding in the form of loans and scholarships. Their parents will be responsible for 7% of their tuition costs.
In June, the government increased HELB funding from Sh15.8 billion to Sh30.3 billion to support student loans. Monari contends that the model is more sustainable and will ensure that universities receive adequate funding to provide quality education and cover other overhead expenses.
As opposed to the current model, which supported all students equally, the new model provides greater assistance to the most disadvantaged students, thereby promoting equity.
“Before, every student received the same funding regardless of whether they wanted it, but the current model promotes equity because we support the neediest students who otherwise would not be able to attend college,” explained Monari.
Nevertheless, according to the head of the University Fund, this will not be sufficient to eliminate the existing debt. “We are looking at diversifying the revenue streams in universities, away from a single revenue stream from grants to government-sponsored students,” he said. “This was becoming very difficult because vice-chancellors were constantly lobbying for more funding.”
Extra reforms
The University Fund proposes requiring higher education institutions to engage in public-private partnerships to enhance their infrastructure. For instance, according to Monari, institutions would need to use this model when constructing dormitories for their students.
A popular model, construct-Operate-Transfer, has been proposed for this project, in which the university provides land for a private investor to construct a hostel facility, and the investor will be permitted to operate it for the agreed-upon number of years before transferring it to the university.
Another proposal is for universities to reduce their dependence on Kenya Power and instead develop the capacity to generate their own electricity.
Monari indicates that the cost of electricity has been one of the most significant debt contributors in universities; he therefore suggests that the institutions invest in renewable energy sources such as solar power.
According to Monari, reducing this expenditure will not only save universities millions of dollars, but it could also be converted into a revenue-generating endeavor.
“Strathmore University serves as an illustration. “Not only do they generate their own power, but they are also on the list of independent power suppliers to the KPLC,” Monari explained.
The universities have also been encouraged to capitalize on consulting services. This, according to Monari, will be carried out by the academic staff of various institutions, as they are outfitted to provide the specialized knowledge required by various industries.
Monari stated that they are lobbying government institutions to reserve consulting services exclusively for public universities. In this manner, State agencies will be compelled to obtain consulting services from universities.
“We are lobbying to allow universities to provide consulting services for perhaps 30 percent of government services,” he disclosed. In order to attract funding, universities will also be required to commercialize their research initiatives.
How Govt Plans to Free Public Universities from Debt