Education is neither a commercial venture nor a credit facility but a basic need and a public good

We are living through a profound contradiction in how our state treats its young. In the speeches, they are our “youth dividend,” the hustler generation whose energy will build the nation. In the ledgers, they are collateral. The same state that celebrates their potential has built a public finance system that punishes them for the crime of being born, getting an education at great expense and sacrifice to their parents and guardians, then graduating into an economy that has no work for them.

Nowhere is this contradiction sharper than in the collapsing architecture of Kenya’s higher education funding. As of June 2025, more than 730,000 Kenyans owed a running balance of KSh 115.4 billion to the Higher Education Loans Board. Of that, KSh 89.7 billion, close to 78 per cent of the matured loans, sits in default. The Auditor General has warned that the fund can no longer sustain itself.

This is not a delinquency problem. It is a systemic design failure. And a design has designers. The model is transactional and individualistic by construction. It abandons the philosophy of Utu, our recognition of shared humanity and collective responsibility, and replaces it with a predatory credit arrangement that punishes graduates for a jobless economy they did not create. It is time to abolish the student debt trap, and to structuralize Utu Philosophy inside our public finance.

The Neoliberal Origins of the Trap

To call this only a design failure is too generous, because it lets the designers off the hook. The trap was built, deliberately, and we know by whom. For the first three decades of independence, the Kenyan state funded university education in full, tuition and stipend alike. That ended in the early 1990s, not because the country suddenly could not afford its students, but because it was instructed to stop.

The instruction came wrapped in the language of reform. The 1988 Kamunge Report and Sessional Paper No. 8 introduced cost-sharing into Kenyan education, and it did not arrive in a vacuum. It was, as scholars of the period put plainly, informed by neoliberal tenets and delivered in response to the structural adjustment programs mandated for Africa by the World Bank and the IMF. The Bank’s own 1988 blueprint for the continent, Education in Sub-Saharan Africa, forced the emergence of private higher education markets, camouflaged as a reform. HELB, created by an Act of Parliament in 1995, was the machinery built to administer the retreat. As the state withdrew direct funding, the loan stepped in to fill the gap and to bill the student for it.

Underneath sat a specific and now discredited idea. For decades the Bank’s rate-of-return calculus treated higher education in poor countries as something close to a luxury, a lower priority than primary schooling, to be paid for privately if at all. That doctrine hollowed out African universities across the 1980s and 1990s. In Kenya it turned public institutions into revenue-chasing enterprises, and the parallel-degree, self-sponsored student became the cash cow that kept the lights on. Education stopped being a public good held in common and became a product sold to a customer, or a debt advanced against a graduate’s future wage. Extraction was not a side effect of the model. It was the model.

It would be too easy, and too flattering to ourselves, to file all of this under foreign imposition. The local political and administrative class did not merely submit to cost-sharing. It embraced the commercialization, opened and ran the universities as patronage and revenue machines, and defends the arrangement to this day. And here is the final irony. The World Bank itself reversed the doctrine at the turn of the century, conceding in its 2000 Peril and Promise report, and again in 2002, that a knowledge economy cannot be built while higher education is starved. The architects recanted. Kenya kept the architecture. We are still administering, three decades on, an extraction system whose own designers have since disowned it.

The Illusion of the Revolving Fund

The machinery they left us has a foundational flaw: HELB was built as a revolving fund. It relies on extracting repayments from newly graduated, often unemployed young people to finance the next cohort. When the job market stalls, the fund starves. And it is starving in real time.

Consider the mechanics as they stand today. Over three decades, HELB has advanced roughly KSh 195 billion in loans. Last year it collected only KSh 5.2 billion. In the 2025/26 cycle, even as lending surged to a record KSh 62 billion under the Student-Centered Funding Model, Treasury capitation to HELB fell by 12.4 per cent to KSh 27.3 billion, and repayments dropped by 21 per cent to KSh 4.1 billion. The default rate on the loan book, 32.5 per cent, is more than double the 15.6 per cent non-performing loan rate in the commercial banking sector. A revolving fund cannot revolve when the inflows collapse faster than the outflows. This is not mismanagement at the margins. It is a machine doing exactly what its design guarantees it will do.

To disguise the structural failure, the state introduced the Student-Centered Funding Model and its Means Testing Instrument. But this was a reorganization of the same inadequate money, not new capital. It did nothing about the KSh 98 billion in pending bills now choking public universities, a figure that ballooned from just KSh 15 billion two years ago. At the University of Nairobi, direct state capitation collapsed from KSh 2.44 billion in 2023/24 to KSh 535 million in 2025/26. The government’s own answer, the Tertiary Education Placement and Funding Bill, proposes to merge HELB, the TVET Fund, the Universities Fund and KUCCPS into a single entity. Even education economists concede that consolidation rearranges the plumbing without adding water. It does not solve the liquidity crisis. It renames it.

Meanwhile, recovery is pursued with a cruelty that should shame us. Private debt collectors, credit reference bureau blacklists, and a KSh 5,000 monthly penalty that a Kenyan court has already described as “imprudence,” noting cases where balances more than doubled within a few years of minimal repayment. The rational response from a young graduate is to disappear. Hundreds of thousands hide in the informal sector, refusing formal registration and payroll employment simply to escape wage garnishment. We have designed a system that pushes our most educated youth out of the formal economy. Then we act surprised when the tax base will not grow.

Political Will, Not Fiscal Capacity

Let us wipe the slate clean, reset the debt! Here, critics will object that we cannot afford to wipe the slate. That objection collapses the moment we look at what we already tolerate losing.

By the EACC’s own 2024 estimate, Kenya loses in the region of KSh 608 billion every year to corruption, close to eight per cent of GDP. Set that against the entire HELB debt of KSh 115.4 billion. The whole debt we are told is unforgivable amounts to less than a fifth of what we surrender to graft in a single year. The question was never whether the money exists. It is whether we have the political will to redirect it from the pockets of cartels to the future of a nation’s generations.

I want to be precise here, because this argument must survive our hostile IMF-minted Treasury officials. Money lost to corruption is not a reserve sitting in an account waiting to be swept into a fund. It is a flow of theft, and stopping it does not instantly produce a matching pile of cash. Asset recovery is slow and partial; the anti-corruption commission recovered only a few billion shillings last year against the hundreds it says vanish. So, the honest claim is not that we will conjure the money in a few months. The honest claim is that a state which can absorb KSh 608 billion in annual leakage without collapsing has no credible fiscal excuse for refusing a one-time KSh 115 billion reset. This is a question of allocation and priorities, which is to say a question of politics, not of arithmetic.

The Blueprint: A Sovereign Endowment

A clean slate, though, is only half the answer. Wipe the debt and keep the revolving fund, and we simply rebuild the trap for the next cohort. The debt reset must be paired with a permanent transition to a Higher Education Sovereign Endowment Fund. Here is how the mechanics of Utu work in practice.

1. Capitalization. An endowment cannot be built on debt; it requires hard capital. The fund must be seeded through structural wealth transfers. As redundant parastatals are restructured or privatized, those proceeds are ring-fenced directly into the endowment rather than swallowed by the annual budget. Recovered anti-corruption assets and a fixed share of natural resource revenues are mandated into the corpus by law.

2. Capital preservation. The core rule of an endowment is that the principal is never spent. Rather than lending seed capital to students in a volatile market, a sovereign trust invests the corpus in high-yield, low-risk vehicles: infrastructure bonds, blue-chip equities, regional development instruments. The principal compounds. Only the yield is ever touched.

3. Capitation via dividends. The returns become the engine of university funding, disbursed as predictable block grants to institutions and as zero-strings scholarships to students. This insulates capitation from the volatility of annual budgets and Treasury shortfalls. Funding stops being a political favor renewed each June and becomes a structural entitlement of the commons.

This Is Not a Utopian Fantasy. It Already Works

Skeptics will call this idealistic. It is not. The mechanism has a long track record, and Kenya would be joining a well-established practice, not inventing one.

The closest working precedent is the Permanent University Fund in Texas. Created in 1876, seeded with about two million acres of land then dismissed as worthless desert, it was constitutionally structured so that the principal could never be spent. When oil was struck on that land in the 1920s, the royalties flowed into the corpus, not the budget. The constitution itself forbids spending the principal and caps annual distributions to preserve the fund’s purchasing power across every rolling ten-year window. Today the fund is worth more than 37 billion US dollars, among the largest university endowments in the United States, and its yields fund two entire university systems. That is the entire blueprint above, operating for a century and a half.

Africa has already experimented with ring-fenced, dedicated education financing too. Nigeria’s Tertiary Education Trust Fund, TETFund, is capitalized by a mandatory education tax on company profits, administered by a statutory trust and disbursed to public universities, polytechnics and colleges. In its 2026 cycle every Nigerian public university received an identical direct allocation regardless of size or age. I raise TETFund honestly, with its limits visible: it is a levy-and-spend intervention fund, not a preserved-principal endowment, and it did not prevent the eight-month university shutdown of 2022. It proves that an African state can constitutionally dedicate a revenue stream to higher education and defend it from the annual budget scramble. It does not, by itself, prove permanence. Our model must take the dedication and add the preserved corpus.

And for those who still insist that debt is simply how the world funds education, look wider. Germany abolished university tuition fees across the country and funds higher education from general taxation. The Nordic states, Argentina, Mexico and others treat public university as a right funded by the collective for the common good, not a loan advanced against a graduate’s future wages. These systems use a different mechanism from an endowment, general taxation rather than investment yield, but they settle the deeper argument decisively: saddling students with debt is a political choice, not an economic necessity. Much of the world has simply chosen otherwise. That is Utu in practice.

The Question Every Kenyan Will Ask: Won’t It Be Looted?

Let me confront the objection that any honest Kenyan reader is already forming. In a country that loses KSh 608 billion a year to graft, a sovereign fund is not just an endowment. It is a honeypot. We have watched “sovereign” and “strategic” funds become vehicles for capture before, and we should be suspicious of any new pool of ring-fenced billions handed to the same political class.

This objection is correct, and the blueprint must answer it structurally, not with promises of good behaviour. The Texas fund is protected not by the virtue of its custodians but by design: the principal is untouchable by constitutional command, the money is managed at arm’s length by a dedicated professional investment company insulated from the legislature, and its accounts are public. A Kenyan Utu endowment demands the same or stronger safeguards, entrenched in the Constitution and not merely in an Act that a captured Parliament can amend at will. An untouchable principal. Independent, professional management shielded from State House and Bunge. Real-time public reporting. Citizen oversight with teeth. An endowment without these is not Utu. It is simply the next thing to be eaten. The safeguard is the policy. Without it, we should not build the fund at all.

The Macroeconomic Dividend

Done right, this is not only a moral correction. It is a macroeconomic stimulus.

A debt reset immediately unlocks the shadow economy. Freed from the fear of wage garnishment, a large demographic can bring their hustles into the formal, registered economy. That organically broadens the tax base, and over a decade it plausibly generates more revenue than debt collectors could ever claw back from graduates who were hiding precisely because of them. Freeing young people from this debt also injects billions back into local circulation: household consumption, savings, small investment, the seed capital of community life. It lets young adults reach the milestones a debt sentence defers, starting families, building homes, organizing their communities. An educated, unindebted, formally employed generation is not a cost on a balance sheet. It is the single most productive asset a nation can hold. It’s Utu in action.

We The People: A Call to Action

A transition to an endowment fundamentally rewrites the state’s relationship with its citizens. It institutionalizes Utu, affirming that the whole society benefits from an educated people, and that the community, through its collective wealth, is obligated to empower the next generation. Education stops being a credit facility extended to an individual and becomes what it always was: a collective inheritance held in trust. A common good.

This will not arrive as a gift from above. No political class surrenders a honeypot voluntarily. It has to be demanded from below, organized, and written into the settlement by the very people who pay the price of the current system. As we aggregate citizen proposals into a collective, people-led manifesto ahead of 2027, the abolition of the student debt trap and the creation of a Sovereign Education Endowment, entrenched and looting-proof, must stand as a central pillar.

Education is not a credit facility. It is a collective inheritance. It is time we funded it like one.

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