Employers who deduct student loan repayments from employees’ salaries but fail to remit the money on time could face a penalty equivalent to five percent of the outstanding amount for every month, or part of a month, under a proposed law.
Under the proposed Tertiary Education, Placement and Funding Bill, 2026, an employer who employs a beneficiary of a student loan would be required to notify the Authority of the employment of the employee.
The employer shall deduct such monthly loan repayment from the emoluments of the employee as determined by the Authority and shall remit the same from the employer within a period of nine days after the end of each month.
Where an employer makes the deduction but fails to remit it within the prescribed period, the Authority would charge the employer five percent of the repayment amount for every month or part of a month that the money remains unpaid.
The penalty would therefore apply where money has already been deducted from a loanee’s salary but has not been forwarded to the Authority within the required period.
The bill further provides that deductions would continue until the loan is fully repaid or the loanee exits the employment, whichever occurs earlier.
Amounts owed to the Authority would also be recoverable as debts due to the Authority and could be recovered summarily as civil debts.
The proposed penalty mirrors an existing HELB requirement, under which employers who fail to remit deductions made from an employee’s salary are charged a five percent penalty for every month that the deduction remains unpaid.
The proposed provisions would retain the employer’s role in student loan recovery as Kenya moves towards a new institutional framework for financing tertiary education.
The bill also proposes replacing the Higher Education Loans Board (HELB), Universities Fund Board and TVET Funding Board with a new Tertiary Education Funding Authority.
The proposed authority would mobilise funds for lending to students and trainees, administer scholarships, maintain tertiary education funding data and recover loans from beneficiaries.
The reforms come amid increasing demand for student financing. In March, Parliament heard that nearly 1.1 million students needed financing in the 2025/26 financial year, but only about 650,000 had received it.
The bill also proposes that a loanee begin repaying the loan, together with any accrued interest and other charges, within one year of completing their studies.
For loanees in formal employment, repayment would be through deductions from their earnings, while those in informal employment would be required to enter into a payment plan with the Authority.
The proposed law would cap loan repayment deductions at 25 percent of a loanee’s emoluments.
The Bill is currently at the parliamentary consideration stage and its provisions could change during debate and the legislative process.
