Broke, unemployed and in debt: Kenyan university students in crisis

The country is staring an effective student debt crisis in the short-run as Kenyan university students bear considerable weight of loan repayments.

Available data paints a grim picture of the impending doom as the majority of college graduates run into major headwinds including unemployment and poor remuneration at work.

The closing walls on students and recent graduates come as the Higher Education Loans Board (HELB) seeks to recover Ksh.10.7 billion from 85,211 individuals with due repayments going as far back as 1975.

According of the national student debt data base shared to Citizen Digital by HELB, an estimated 927,610 students have benefited from the historical disbursement of over Ksh.108 billion with 492,227 loan accounts worth Ksh.58.5 billion having matured so far.

At the same time, 435,383 loan accounts amounting to Ksh.49.5 billion are yet to fall due and represent beneficiaries who are still undertaking their studies or graduates within the one year grace period ahead of the start to repayments.

As such, the student loan book is still performing at a commendable rate of 70 percent but the longevity of its quality remains shrouded in doubt owing to a burgeoning count of unemployment.

No jobs

According to a 2016 World Bank report, one out every five Kenyans aged between 18 and 34 are unemployed to represent an average jobless rate of 17 percent which nearly triples that of neighboring Uganda and Tanzania.

Presently, a projected 800,000 students graduate out of tertiary institutions every year to represent an injection of a 4.5 percent of the country’s entire workforce as per government data at the end of 2018.

An estimated 160,000 graduates are hence unable to acquire job placements year over year to be added onto the millions of other job seeking Kenyans.

At the same time, perennial job losses under the continued stay of a depressive economic environment remain prevalent as the majority of firms turn to automation to lock out thousands of job-seeking youths.

Recent graduates are therefore unable to fend for themselves to elevate the rate of student loan defaults in the country in spite of willingness to make repayments.

“The spirit is willing but the body is very weak. We would want to payback the loans but we don’t have jobs. Getting a job is already an expensive quest,” National Student Caucus President Maxwell Magawi said.

Not a Kenyan problem

The impending student-debt crisis is however not an isolated case for Kenya as many countries around the globe run up to similar headwinds.

Currently, the United States is locked in a student-debt crisis with outstanding repayments standing at all time high Ksh.154 trillion ($1.5 trillion)

According to a recent study, the weighty loans have had the effect of delaying life milestones among millennial including buying a house and having kids as the landmarks become a luxury.

Tuition fees in the US have grown faster than wages since the 70’s to outpace inflation growth three times over in factors attributed to the continued fallout from the 2009 financial crisis.

The student loans have driven graduates into more debt as they borrow from Peter to pay Paul. 70 percent of US graduates with student loans are reported to owe debt upwards of Ksh.3.8 million ($37,000) each.

The high student debt has been manifested in the early 2020 election campaigns with Democratic candidates proposing the adaptation of reform amendments including universal free college, debt forgiveness and the lowering of college costs.

Which way?

In Kenya, the conversation around student debt has only began following an uproar on the planned recoveries from student debt defaulters which include proposals to name and shame bad debtors.

Nevertheless, the government has seemingly taken notice of the impending doom to open up discussions on the containment of debt.

Wajir Senator Abdirahman Ali Hassan is for instance lining up an amendment bill to the HELB Act in a means to insert accommodating changes to repayment rules.

“My amendments would seek to hold down penalties for the unemployed. However, we would want to oblige firms to make mandatory check-off payments off working graduates,” he said.

In the long-term, Economist Ramogi Odhiambo proposes the freeing up of varsity costs.

“We can make university education free by pricing the support after the student-beneficiary acquires employment,” he said.

At the moment, the status quo has HELB cash strapped with the board expected to finance 31.6 percent of its Ksh.15.5 billion allocation in the 2019/20 budget from debt collections.

“If the target of Kshs.4.9 billion  is not achieved 113,953 students may be at risk not being awarded loans in the financial year 2019/2020 and therefore possibly dropping out of learning institutions or deferring their studies,” HELB painted the stakes at play to Citizen Digital in an email note.