Half of the 67,124 students who are expected to join public universities from next month will not receive any loans from the Higher Education Loans Board (HELB).
HELB says it is short of Sh 2 billion meant to give the students as loans.
In the fiscal year that started in July HELB was allocated Sh7.5 billion by Treasury.
The agency later made a request for an additional Sh2 billion but was denied.
This comes even as it was revealed that the board is yet to recover Sh21.9 billion from past beneficiaries.
This in turn has thrown the agency into a funding crisis, putting it in a tough position in trying to support fresh students joining the universities from September.
Auditor General Edward Ouko has now raised concerns over the debt owed to the loans board.
In his report for the fiscal year ended June, Ouko said that despite the growth in the recovery of loans, the amount so far recovered is still inadequate, Business Daily reports.
Despite this, HELB remains optimistic, instead downplaying Ouko's concerns.
Helb’s Chief Executive Charles Ringera on Friday said the board had surpassed its 2014/15 target by collecting Sh3.36 billion instead of the expected Sh3.1 billion.
He added that the agency was tightening recovery measures to reduce the rate of default.
See HELB Hires Agents Abroad To Collect Loans
Allocation of loans by the agency has always been a point of contention with students.
Several universities have in the past taken to the streets to protest the agency's failure to disburse the loans with some complaining that the board sometimes took too long to get the loans to the students.
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