To help those who could not afford the cost of higher education, Tanzania introduced students’ loan scheme where students are provided loans through a means test. The main objective of this study was to explore the effects of cost sharing on students’ academic performance, as perceived by teachers and students themselves. Given that there seems to be no clear agreement on the effects of cost-sharing on academic performance, this study used an analytical framework which included six concepts: academic performance, financial factors, learning environment, prior education experiences, motivation and external factors. The study used a qualitative approach and included interviews with six students and two teachers of Mzumbe University. The data was analysed whereby a thematic chart was used in categorising data into themes and typical statements were used for citation. The results showed that the effects of cost sharing on academic performance seem to be complex and they may depend on the particular circumstance an individual is facing. While on one side it was perceived not to affect performance, on the other hand, it resulted in low performance because of psychological stress, study delays and lack of funds to buy learning materials and food. The study also found that limited study time, language incompetence and poor course organisation were also important factors that influenced low performance. However, some students perceived that cost sharing increased their motivation to study which resulted in good performance. Other factors that influenced good performance were support and encouragement received from family and friends. The study concluded that cost sharing is likely to motivate some students to study hard and improve performance by reflecting on the amount of funds they invest in education. However, it can also lead to poor performance due to lack of funds to cover educational expenses and other personal needs. The results implied that students from low-income families were more likely to perform low because of financial hardship and poor schools they attended. Thus, there is a need for the government to ensure that all students receive better education. This is because the result indicated that some of the factors affected academic performance in higher education also resulted from poor education background.