More than half a million former university students have defaulted on Sh90 billion college loans, a new report shows.
The report by Auditor General Nancy Gathungu shows 563,949 students with loan accounts valued at Sh89.9 billion had not made any repayment during the year ended June 30, 2025.
The revelations raise fresh concerns about the sustainability of the Higher Education Loans Board (Helb) fund that supports hundreds of thousands of learners each year.
The audit further raises questions about Helb’s ability to recover funds from beneficiaries and sustain the revolving loan scheme that finances university education for needy students.
According to the report, 731,789 Helb loan accounts had matured by June 2025, with a combined running balance of Sh115.37 billion.
However, a large portion of the loans have not been serviced, significantly increasing the risk of loss to the public fund. “Analysis of the loan book as at June 30, 2025, revealed that 731,789 loan accounts had matured with a running balance of Sh115.37 billion,” Gathungu says in the report.
“Included in the matured loans are 563,949 loan accounts with a running balance of Sh89.87 billion with no repayment of principal, interest, ledger fee or insurance fee during the year.”
The audit indicates a significant number of borrowers have failed to start repaying their loans years after leaving university. The largest share of the defaulted accounts is among relatively recent borrowers.
Loans issued in the last five years account for 281,459 defaulted accounts, representing about 50 per cent of all defaulters and carrying a cumulative balance of Sh39.6 billion.
Another 191,766 loan accounts issued between five and 10 years ago are also in default, with an outstanding balance of Sh33.4 billion.
Together, the two categories account for more than 80 per cent of the defaulted loans, suggesting that most graduates fail to start repayment soon after completing their studies.
The report also reveals that thousands of borrowers have remained in default for decades.
Loans that are between 10 and 15 years old account for 32,608 accounts worth about Sh8 billion, while those aged 15 to 20 years total 11,337 accounts, with an outstanding balance of about Sh2.9 billion.
Older loans continue to appear in the books as well, the accounts running into hundreds of millions of shillings.
The audit shows 8,118 accounts aged between 20 and 25 years, 11,408 accounts aged 25 to 30 years, and 13,372 accounts between 30 and 35 years.
Another 13,881 accounts are more than 35 years old, raising concerns about the effectiveness of the board’s recovery mechanisms.
Gathungu warned the high default rate could undermine the long-term viability of the loan programme.
“In the circumstances, the high default rate may affect the sustainability of the students’ loans fund, which may in turn limit loans availability to students in future,” she said.
Helb is broke, with managers sounding the alarm it may not be able to fund 100,000 of the about 270,000 students expected to join the university this year.
The surging numbers portend a strain on the varsity funding system, with the fund reporting a Sh33 billion shortfall in the current year’s budget.
To mitigate the crisis, Helb is seeking to access the Kenya Revenue Authority (KRA) and the National Transport and Safety Authority (NTSA) data to track defaulters, as well as have MPs impose a three per cent education levy on Value Added Tax.
Following the cash-flow strains, Helb has been prioritising upkeep money, leaving universities starved of tuition cash amid the financial mess at the universities.
Helb CEO Evans Monari earlier told MPs the universities and TVET colleges are the most affected. Universities owed suppliers about Sh84 billion as of September 2025.
For the Helb management, the third-party data will enhance targeting of financial and enforce tracing of defaulters.
In what’s worse, a new model fronted by President William Ruto’s administration, which proposed to address the funding gaps, is yet to improve the situation.
For yet another year, Gathungu has flagged challenges with the new system, citing inaccurate data submission by applicants.
Interviews with managers of the fund revealed the loan repayment burden was due to high unemployment and underemployment rates.
“This makes it challenging for graduates to repay their loans, increasing default rates and threatening the sustainability of the revolving fund,” the report reads.
The Auditor General has also flagged weaknesses in the board’s debt recovery strategy.
According to the report, the board has only made provisions for bad and doubtful debts amounting to Sh185.8 million.
Although Helb management has taken measures to collect the debts, including issuing written notices and engaging lawyers, the audit indicates the strategy has not produced significant results. “In the circumstances, the effectiveness of debt recovery strategies employed by the board could not be confirmed ,” the report states.
Experts say the high default rate exposes the government to financial risk and threatens the sustainability of Helb’s lending programme, which relies on repayments from past beneficiaries to support new students.
“We must rethink making a savings fund to support the education sector,” Education committee chairman and Tinderet MP Julius Melly is on record as saying.
The board operates largely as a revolving fund, meaning money repaid by graduates is used to finance loans for students currently in universities and colleges. Persistent non-payment therefore reduces the pool of funds available to support learners.
The issue has been a long-standing challenge for Helb, which has in recent years stepped up recovery efforts through partnerships with employers, credit reference bureaus and government agencies.
Borrowers who fail to service their loans risk being listed with credit reference bureaus, which can limit their ability to access credit from financial institutions.
Despite these measures, the latest audit suggests that recovery remains a major hurdle, with billions of shillings in student loans remaining unpaid years after they became due.
