HELB Offers 80% Penalty Waiver as Kenya Debates New Student Funding System

The Higher Education Loans Board (HELB) has announced an 80 per cent waiver on outstanding loan penalties for beneficiaries who clear their loan balances in full.

The offer was announced on Thursday, August 13, as HELB steps up efforts to recover unpaid student loans. The Board said borrowers who settle their outstanding balances during the offer period will receive a waiver of up to 80 per cent on accrued penalties.

The waiver applies to the penalties rather than the underlying loan balance. Borrowers must therefore clear their outstanding loan balance in full to qualify for the relief.

HELB has not specified a deadline for the current offer in its notice. Borrowers can make payments through the HELB portal, mobile application or USSD service *642#.

The announcement comes at an interesting time for Kenya's higher education financing system, which is itself facing a possible overhaul.

Parliament is currently considering the Tertiary Education Placement and Funding Bill, 2026, a proposed law that would fundamentally change how students in universities, colleges and Technical and Vocational Education and Training (TVET) institutions receive government support.

The Bill proposes replacing HELB, the Universities Fund Board and the TVET Funding Board with a single Tertiary Education Funding Authority (TEFA). The proposed authority would handle student loans, scholarships, funding data and loan recovery.

The proposed changes follow President William Ruto's announcement that students admitted to universities and colleges from September 2026 would receive full government funding for their higher education.

However, the proposed system would not necessarily mean that all education costs become non-repayable. The Bill provides for education loans and mechanisms for recovering money from beneficiaries after they complete their studies and enter employment.

Under the proposed framework, loan deductions from a beneficiary's salary would be capped at 25 per cent of monthly earnings. Employers would also have responsibilities in notifying the authority and remitting loan repayments.

The Bill would give TEFA broader funding responsibilities than HELB currently has. The proposed authority would be able to mobilise money through government allocations, investment proceeds, loan repayments and other financing sources.

It also proposes a tertiary education savings scheme through which parents, guardians or other individuals could save money towards a child's future education.

The proposed funding structure is still being considered by Parliament and should not be confused with the system currently administered by HELB. The existing Student-Centred Funding Model provides a combination of scholarships, loans and household contributions based on a student's assessed financial need and programme cost.

The government is seeking to replace that arrangement with a different framework, while Parliament examines the legislation required to establish the new system.

For current HELB borrowers, however, the repayment obligation remains in place. The latest penalty waiver therefore provides an immediate incentive for existing defaulters to settle their debts even as policymakers debate what the country's student financing system will look like in the future.

HELB's latest figures show the scale of the repayment challenge. More than 380,000 former beneficiaries have outstanding student loans worth close to Sh42 billion, according to figures reported alongside the Board's latest recovery drive.

The Board has also traced more than 17,000 defaulters, while over 120,000 borrowers have been listed with Credit Reference Bureaus.

The 80 per cent waiver consequently comes against a much larger effort to recover money that has already been advanced to students, while the proposed TEFA framework would create a new institutional structure for financing and recovering future tertiary education loans.