Kenya's Tertiary Education Funding Authority: Employers Must Deduct Loan Repayments

• A proposed Kenyan law requires employees with outstanding student loans to disclose their status to employers upon taking up a new job.
• Employers would be responsible for deducting monthly loan repayments from employee salaries and remitting them to the Tertiary Education Funding Authority.
• The authority would manage loan repayment, including capping monthly repayments at 25 percent of a loanee's emoluments.
• Employers who fail to comply with these requirements could face penalties equivalent to five percent of the unpaid repayment.

The proposed law is part of a broader effort to restructure tertiary education financing in Kenya, which would see the Higher Education Loans Board (HELB), Universities Fund Board, and TVET Funding Board replaced by the Tertiary Education Funding Authority.

A proposed law in Kenya could significantly impact human resources practices for employers, particularly when it comes to managing employee finances. The Tertiary Education Placement and Funding Bill, 2026, aims to introduce a new framework for student loan repayment, which would require employees with outstanding loans to disclose their status to their employer upon taking up a new job. This disclosure would trigger the employer's responsibility to deduct monthly loan repayments from the employee's salary and remit them to the proposed Tertiary Education Funding Authority. The authority would then be responsible for managing the loan repayment process, including capping monthly repayments at 25 percent of a loanee's emoluments. Employers who fail to comply with these requirements could face penalties equivalent to five percent of the unpaid repayment for every month or part of a month that it remains unpaid.

The proposed law is part of a broader effort to restructure tertiary education financing in Kenya. The Higher Education Loans Board (HELB), Universities Fund Board, and TVET Funding Board would be replaced by the Tertiary Education Funding Authority, which would be responsible for mobilizing funds for student and trainee loans, administering scholarships, maintaining funding data, and recovering loans. This new framework is intended to address ongoing challenges in university financing, including a recent shortfall of Sh28.9 billion in public universities' scholarship and grant allocations. The proposed loan recovery system aims to ensure that money advanced to students and trainees is recovered and made available to support future beneficiaries.

The proposed law has significant implications for employers, employees, and the education sector as a whole. For employers, it means adapting HR practices to accommodate loan repayment deductions from employee salaries. For employees, it means being aware of their responsibilities in disclosing outstanding loans and managing their finances accordingly. The education sector will also benefit from a more efficient loan recovery system, which can help address ongoing funding challenges and ensure that resources are allocated effectively. As the proposed law moves forward, stakeholders will need to carefully consider its implications and work towards implementing a smooth transition to the new framework.

Employers in Kenya may need to deduct student loan repayments from employees' salaries under a proposed law, which could impact HR practices and compliance obligations.

Source: Original reporting via Capital FM