Employers Face Five Percent Penalty on Unremitted Student Loans

Employers who fail to deduct and remit loans by employees who benefit from the new university and college funding model face penalties of up to five percent of the total amount of the repayment for each month.

The Tertiary Education Placement and Funding Bill, 2026 requires an employer to deduct not more than 25 percent of a loanee’s emoluments while making deductions for loan repayments to the government.

The proposed law establishes the Tertiary Education Funding Authority whose function is to grant loans to eligible students and trainees pursuing tertiary education.

Tertiary education is defined as formal post-secondary education offered in a university, college, and technical and vocational training institution recognised by the relevant educational bodies.

“A loanee in formal employment shall disclose his or her loan status to the employer at the commencement of the employment,” the Bill states. It was read for the first time in the National Assembly on Tuesday, 11 August 2026.

A loanee in informal employment shall enter into a payment plan with the Authority on the mode and frequency of payment.

In making deductions, the Authority shall deduct not more than 25 percent of the loanee’s emoluments.

Every employer of a loanee shall, upon employment of the loanee, inform the authority in writing or in such other manner as the authority may specify.

Employers will be required to deduct from the emoluments of the loanee such monthly deductions as may be determined by the authority until payment in full or exit from employment, whichever is earlier.

Employers must remit such deductions within nine days after the end of the month.

The authority shall charge an employer who fails to remit the deduction within the prescribed period a sum equal to five percent of the total amount of repayment for each month or part of the month that the repayment remains unpaid.

All sums due to the authority shall be recoverable as debts and may be recovered summarily as civil debt.

The Bill imposes a Sh1 million fine or imprisonment for a term not exceeding two years for individuals who breach the law.

Every student or trainee admitted into a public or private tertiary institution would be eligible for an education loan.

On admission, a student or trainee wishing to be funded shall apply for the grant of an educational loan.

Those who secure the loans will be required to commence repayment of the loan together with any accrued interest or other charges within one year of completion of studies.

The Tertiary Education Funding Authority’s mandate includes mobilising funds for lending, granting loans, administering scholarships and maintaining a data management system relating to funding of tertiary education.