Who pays for higher education? Whether talking about the government’s role or the student responsibility, the question is controversial all over the world.
Private Universities in Kenya receive no funding from the government for running expenses. They rely on tuition fees to meet recurrent and developmental costs.
In very rare cases do these universities, now approximately 30 in number, get funding from philanthropic individuals and institutions.
A significant number of students from public Universities benefit from the Higher Education Loans Board (HELB), which advances loans to students seeking university education. HELB runs a revolving fund. It follows up on old debts and liaises with companies to collect repayments from employees who were beneficiaries of the loans.
For any loan system to work efficiently, the intricate balance and need for collaboration with the relevant stakeholders is real. In this case, these include the government that provides the funds, students to provide truthful information when applying for loans, the higher education institution that provides the necessary mechanism so that loans are administered efficiently. This would come to naught without beneficiaries repaying loans to keep the fund revolving.
Private universities are, however, left to their own devices where financing is concerned. At Strathmore University, even with its vibrant alumni body, setting up of an endowment fund to cater for scholarships is still not at the stage of making a significant impact similar to those of established American universities, such as Yale, Harvard, and Princeton.
The cost of studying at Strathmore is approximately Sh1.2 million for a degree course, which, clearly, is out of reach for the majority. There is a small number of students on scholarships sourced by the Strathmore Advancement office. On an average, only 10 per cent of the student body is on any financial aid, be it full or partial scholarship.
HELB now gives loans to privately sponsored students of private universities. A student who applies to HELB and is fortunate is eligible to get a maximum of Sh60,000 per year, hence a total of Sh240,000 for four years. The average amount received by most students is Sh40,000 per year.
The HELB model, though laudable, is not adequate in addressing the financing dilemma for a private university whose degree courses cost much more than the full loan thresholds. Thus, needy and talented students could only access private university education if full financial aid was available.
There are alternative models that local commercial banks have offered in the market. CBA, Chase Bank, and Co-Op Bank all offer various education loans at premium rates. These loans are usually targeted at working class parents and not full-time students.
Two years ago, Strathmore and Kiva discovered a sustainable alternative. Based in San Francisco, California, Kiva is a worldwide micro-lending organisation accessible online. With 900,000 lenders, Kiva so far distributed over $410 million worht of loans to one million people worldwide.
In Kenya, it has offered a total of $20.5 million to 63,000 individuals. Kiva has strengthened this by connecting lenders to borrowers on the web platform and through the field partner. Money gets to the lenders from Kiva.
Strathmore is a field partner of Kiva. The model targets students who do not have a credit history and also takes into consideration the actual and full cost of the degree course.
There are three categories of Kiva loans: Full tuition, partial tuition and laptop loans. The full tuition loan repayment starts one year after graduation, or the beginning of the sixth year to the 10th.
The interest rate is at four per cent flat rate on total amount received. This interest is actually charged for administrative work since Kiva does not collect any interest on the loans it facilitates.
Kiva funds are purely supported by grants, loans and donations from its users. The risk for this model is mitigated through a rigorous selection process that ensures the student is talented, has potential to excel and fully understands that this is a loan not a grant.
The impact that this model has made is monumental. Take the case of Lydia, a student from remote Lorengelup village, Lodwar. Her journey to the university begins with a two-hour trek through dry arid land from her mother’s home to the nearest shopping center. From there, she hops onto a bumpy, two-hour matatu ride to Lodwar town and then to Kitale town. Finally, she takes a second matatu for the last leg of her journey to Nairobi.
Lydia’s primary and secondary school fees were sponsored by local charities and organisations. She was among the top 10 performers in her graduating class, and the only student selected by her school principal to travel to Nairobi to be interviewed for a Kiva loan. Lydia is now excelling in her studies at Strathmore.
She is top of her class.
Financing education using low-cost loans is the norm in the US and Europe. Offering these loans teaches students to manage loan commitments and understand that it is an investment just like taking a mortgage or and business loan from a bank.
With other partnerships such as Kiva, private universities will see more needy students get through their doors to enhance equity in education.
The writer is the advancement manager at Strathmore University