The Pros and Cons of the Upwards Adjustment of University Tuition Fees
Category: EducationUniversity education
By: Maureen Barasa,
The Presidential Working Party on Education Reforms is proposing a significant increase of 225% in fees paid by government-sponsored students in public universities. Currently, these students pay Ksh. 16,000 for tuition fees, and the proposed increase would raise this amount to Ksh. 52,000 per annum for each student.
This increase is being proposed to address the financial constraints faced by universities, make adjustments for inflation and to improve the quality of education offered. The idea is that the increase in fees will provide universities with the funds they need to improve facilities and resources available to students, as well as to respond to the cumulative effects of inflation.
The Ksh 16,000 per semester average tuition fees were introduced in Kenya’s higher education system in 1991 after an education scheme that received substantial support but had minimal recovery. In 1995, the Higher Education Loans Board (HELB) was established to provide loans for students who couldn’t afford tuition fees. Since 1991, the tuition fees have been kept at the nominal amount of Ksh 16,000 per semester. The recent proposal to increase the tuition fees to Ksh 52,000 per semester marks the first significant increase since 1991. The higher education system in Kenya faces various challenges, such as limited funding, insufficient resources and facilities.
The cost of pursuing higher education can be viewed as the opportunity cost which is the value of the best foregone alternative. This includes the potential earnings from investing the money elsewhere or engaging in other productive activities. It also includes the time and effort invested in pursuing education instead of engaging in leisure or other activities. Therefore, the decision to pursue higher education with the increased tuition fees comes with a trade-off, and the demand side being students must consider the opportunity cost when making this decision
On the supply side, public universities have been facing financial constraints, making it difficult for them to meet the demand for education. In the Financial Year starting in July 2019, the Office of the Auditor General reported that public universities had tax arrears totaling Ksh. 21.845 billion owed to the Kenya Revenue Authority, in addition to outstanding statutory obligations to pension schemes, workers’ savings and cooperative societies.
Since 1991, the buying power of the subsidy has been eroded by inflation, making it necessary for these recent adjustments to counter inflation and allow for cost recovery. If universities do not raise tuition fees, they would be unable to maintain their solvency and cover the increasing costs of providing education over time. Thus, adjusting fees to account for inflation is a necessary step for universities to ensure their financial stability and sustainability.
Cost recovery refers to the process of recouping the expenses incurred in producing a good or service. Universities use tuition fees to recover the costs of providing education, such as salaries, maintenance, and research. Inflation has caused the costs of producing education services to rise, making it necessary to increase tuition fees. The concept of adjusting for buying power recognizes the need to account for changes in the value of money over time. Therefore, periodic tuition fee adjustments are necessary to account for inflation and enable universities to cover their costs.
For example, in the UK, universities increased tuition fees up to £9,000 per year in 2012. This increase was aimed at addressing the funding gap that existed in universities and improving the quality of education. Similarly, in Australia, universities increased tuition fees in 2017 by 7.5% to address funding shortages. However, this reduced enrolment rates by 15%. Clearly, an increase in prices can create a barrier for students who may not consider higher education to be a worthwhile investment compared to other opportunities. Policies that increase fees, without matching subsidies or mechanisms for financing that education through loans and grants often lead to tough trade-offs for students.
The Higher Education Loans Board (HELB) offers funding for tertiary and university education in Kenya, but the current level of funding is insufficient to cover the rising tuition fees. An examination of the market for higher education loans through the lens of demand and supply reveals that despite attempts by the HELB to meet demand, it has not succeeded in doing so. This is illustrated by the data presented in Tables 1 and 2.
Chart 1 demonstrates that from the Financial Year starting in July 2014 to comparable year starting in July 2020, HELB offered loans to 137,800 students compared to the 208,280 applicants for the FY starting in July 2014. There is a significant rise in the number of students who have been applying for HELB Loans, this shows there is demand for HELB loans. The difference between the number of students who applied vis a vis that the number of students who have been awarded over the years has been reducing. All through, the number of students who have been awarded is lower than the number of students who initially applied for HELB loans.
Source: HELB External Resource Mobilization: 2014 – 2021
Chart 2 below shows disparity in the amounts of loans applied for against the amounts awarded between FY starting in July 2014 and 2020 respectively. The share of disparity between the HELB Loan amounts applied and the amounts awarded has been decreasing. Clearly, the amounts awarded has been lower than the amounts applied for throughout the years with a huge disparity in the FY starting in July 2016 which was at 75%. This shows that there is unmet demand for these loans by students compared to what HELB can supply.
Source: HELB External Resource Mobilization: 2014 – 2021
In conclusion, the finding that the demand for higher education is growing at a faster rate than the supply is significant, as it indicates that the financing of higher education will continue to place pressure on public finances and the HELB as the administrator of the loans and recovery. To address this issue, it is crucial for universities to operate efficiently, and for the Government of Kenya to place them under competition to use resources effectively. Moreover, several measures can be adopted, such as providing increased funding for higher education to cater for increased demand, offering targeted subsidies and financial aid based on financial need, and encouraging universities to reduce costs by sharing resources. By implementing these measures, education will remain affordable and more accessible while also addressing the issue of increasing tuition fees for universities to counter inflation as well as recoup costs.
Photo credit: Freepik
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The Pros and Cons of the Upwards Adjustment of University Tuition Fees
| Post date: Tue, Apr 4, 2023 |
| Category: EducationUniversity education |
| By: Maureen Barasa, |
The Presidential Working Party on Education Reforms is proposing a significant increase of 225% in fees paid by government-sponsored students in public universities. Currently, these students pay Ksh. 16,000 for tuition fees, and the proposed increase would raise this amount to Ksh. 52,000 per annum for each student.
This increase is being proposed to address the financial constraints faced by universities, make adjustments for inflation and to improve the quality of education offered. The idea is that the increase in fees will provide universities with the funds they need to improve facilities and resources available to students, as well as to respond to the cumulative effects of inflation.
The Ksh 16,000 per semester average tuition fees were introduced in Kenya’s higher education system in 1991 after an education scheme that received substantial support but had minimal recovery. In 1995, the Higher Education Loans Board (HELB) was established to provide loans for students who couldn’t afford tuition fees. Since 1991, the tuition fees have been kept at the nominal amount of Ksh 16,000 per semester. The recent proposal to increase the tuition fees to Ksh 52,000 per semester marks the first significant increase since 1991. The higher education system in Kenya faces various challenges, such as limited funding, insufficient resources and facilities.
The cost of pursuing higher education can be viewed as the opportunity cost which is the value of the best foregone alternative. This includes the potential earnings from investing the money elsewhere or engaging in other productive activities. It also includes the time and effort invested in pursuing education instead of engaging in leisure or other activities. Therefore, the decision to pursue higher education with the increased tuition fees comes with a trade-off, and the demand side being students must consider the opportunity cost when making this decision
On the supply side, public universities have been facing financial constraints, making it difficult for them to meet the demand for education. In the Financial Year starting in July 2019, the Office of the Auditor General reported that public universities had tax arrears totaling Ksh. 21.845 billion owed to the Kenya Revenue Authority, in addition to outstanding statutory obligations to pension schemes, workers’ savings and cooperative societies.
Since 1991, the buying power of the subsidy has been eroded by inflation, making it necessary for these recent adjustments to counter inflation and allow for cost recovery. If universities do not raise tuition fees, they would be unable to maintain their solvency and cover the increasing costs of providing education over time. Thus, adjusting fees to account for inflation is a necessary step for universities to ensure their financial stability and sustainability.
Cost recovery refers to the process of recouping the expenses incurred in producing a good or service. Universities use tuition fees to recover the costs of providing education, such as salaries, maintenance, and research. Inflation has caused the costs of producing education services to rise, making it necessary to increase tuition fees. The concept of adjusting for buying power recognizes the need to account for changes in the value of money over time. Therefore, periodic tuition fee adjustments are necessary to account for inflation and enable universities to cover their costs.
For example, in the UK, universities increased tuition fees up to £9,000 per year in 2012. This increase was aimed at addressing the funding gap that existed in universities and improving the quality of education. Similarly, in Australia, universities increased tuition fees in 2017 by 7.5% to address funding shortages. However, this reduced enrolment rates by 15%. Clearly, an increase in prices can create a barrier for students who may not consider higher education to be a worthwhile investment compared to other opportunities. Policies that increase fees, without matching subsidies or mechanisms for financing that education through loans and grants often lead to tough trade-offs for students.
The Higher Education Loans Board (HELB) offers funding for tertiary and university education in Kenya, but the current level of funding is insufficient to cover the rising tuition fees. An examination of the market for higher education loans through the lens of demand and supply reveals that despite attempts by the HELB to meet demand, it has not succeeded in doing so. This is illustrated by the data presented in Tables 1 and 2.
Chart 1 demonstrates that from the Financial Year starting in July 2014 to comparable year starting in July 2020, HELB offered loans to 137,800 students compared to the 208,280 applicants for the FY starting in July 2014. There is a significant rise in the number of students who have been applying for HELB Loans, this shows there is demand for HELB loans. The difference between the number of students who applied vis a vis that the number of students who have been awarded over the years has been reducing. All through, the number of students who have been awarded is lower than the number of students who initially applied for HELB loans.
Source: HELB External Resource Mobilization: 2014 – 2021
Chart 2 below shows disparity in the amounts of loans applied for against the amounts awarded between FY starting in July 2014 and 2020 respectively. The share of disparity between the HELB Loan amounts applied and the amounts awarded has been decreasing. Clearly, the amounts awarded has been lower than the amounts applied for throughout the years with a huge disparity in the FY starting in July 2016 which was at 75%. This shows that there is unmet demand for these loans by students compared to what HELB can supply.
Source: HELB External Resource Mobilization: 2014 – 2021
In conclusion, the finding that the demand for higher education is growing at a faster rate than the supply is significant, as it indicates that the financing of higher education will continue to place pressure on public finances and the HELB as the administrator of the loans and recovery. To address this issue, it is crucial for universities to operate efficiently, and for the Government of Kenya to place them under competition to use resources effectively. Moreover, several measures can be adopted, such as providing increased funding for higher education to cater for increased demand, offering targeted subsidies and financial aid based on financial need, and encouraging universities to reduce costs by sharing resources. By implementing these measures, education will remain affordable and more accessible while also addressing the issue of increasing tuition fees for universities to counter inflation as well as recoup costs.
Photo credit: Freepik
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In my new paper, “On Efficiency, Equity, and Optimal Taxation: Reforming Kenya’s Tax System,” I examine Kenya’s tax system through the lenses of efficiency, equity, and optimality and recommend policy recommendations. I try to look at how efficiently the system generates revenue without distorting economic activity (efficiency), how fairly the tax burden is distributed across […]
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