STAN DU PLESSIS: NSFAS has failed our students, universities and country

Education, including higher education, is increasingly expensive in SA. Given our social and economic circumstances, it follows that financial access to post-school education is a major obstacle for SA students.

This is a problem that demands serious attention and a concerted effort by government, universities, the private sector and students. The current National Student Financial Aid Scheme (NSFAS) is no solution to this problem — on the contrary in fact.

During the #Feesmustfall protests of 2015-16 “free higher education” was placed on the national agenda. Former president Jacob Zuma responded with a commission of inquiry into higher education and training under the leadership of judge Arthur Heher to investigate the feasibility of “fee-free” higher education as well as alternative schemes to address the problem.

The outcome was clear and important for the national debate: the SA state does not have the fiscal capacity to provide fee-free university education to all students who need it. What is more, the Heher commission argued that it would not be right to provide fee-free education even if affordable. 

As the main beneficiaries of an already heavily subsidised educational system, SA university graduates also benefit from significantly greater lifetime wages. It is appropriate that these graduates bear some responsibility for the cost of the education that unlocked these personal gains.

The commission proposed a public-private partnership whereby the state, the private sector and students would share the responsibility for funding students’ university education. It specifically recommended an income-contingent loan scheme — with collections handled by the SA Revenue Service — for university students, with repayments beginning once the graduate’s income reached a certain threshold. Such a plan would be sustainable in the long term because the beneficiaries would repay the scheme once employed.   

There are alternatives to the income-contingent loan scheme that are worth considering, such as an income share agreement where, for example, the student has the responsibility to pay a proportion of his or her income over a fixed period. Nevertheless, the fundamental point is the same — cost-sharing between students and the government with the possible inclusion of the private sector and with a focus on long-term sustainability for the funding scheme.

Yet at the watershed 54th ANC national conference, barely two months after the release of the commission’s report, then president Zuma abandoned Heher’s recommendations and announced “free education” for “poor and working-class” South Africans in his last act as ANC president. Regrettably, newly elected ANC president Cyril Ramaphosa acknowledged Zuma’s declaration and committed the government under his leadership to implement fee-free tuition only days later.

This was a significant policy initiative that was launched without any planning, no analysis to establish the best design, no attempt to understand the adverse unintended consequences, and no effort to calculate the scheme’s cost to the fiscus. Instead, this populist proposal was treated as a fait accompli.

Meanwhile, the scheme’s many inherent problems were immediately apparent to those with some knowledge of this country’s higher education system. The first of these is the binary character of the R350,000 means test, which provides for a generous bursary to students with a household income of up to R350,000, and zero support should your family earn just R1 more.

A rational and sensible scheme would instead be based on a gradient, with higher support at lower incomes, declining progressively as family income rises. This problem is worsened by the failure to adjust the cut-off point for inflation since 2017 and, more egregiously, a student may lose his or her NSFAS bursary during their degree programme if his or her family receives an inflation-linked income adjustment that pushes it over the cut-off.

The NSFAS scheme also requires that the government regulate university fees, which is in contravention of the Higher Education Act. Furthermore, the department of higher education & training’s efforts to develop an appropriate regulatory framework have been fruitless. Instead, late every year — after universities have already planned their budgets — the minister announces a  “social compact” for the next year’s fee adjustments, which is an ultra vires attempt to regulate fees.  

The Heher commission said correctly that the government could not afford the “fee-free” NSFAS scheme. Consider that the government allocated R15.4bn for NSFAS and R31.6bn (including R3.5bn for infrastructure) for university subsidies in the 2017/18 fiscal year. By 2023/24 the NSFAS budget had ballooned to R50.1bn, while the allocation for university subsidies rose to R44.5bn (including R673m for infrastructure). Over these six years the subsidy component of the department’s budget increased 56% while the NSFAS allocation grew 328%.  

But it didn’t stop there. By 2023 NSFAS could no longer meet the expectations the government had created and unilaterally announced that the NSFAS accommodation allowance would be capped at R45,000 a year and the food allowance at R13,100 per year.

Students who went to university with the expectation that they would not have any financial obligations now find themselves with substantial debt due to accommodation costs, and are unable to afford food.

Student leaders recently told me how they saw four NSFAS students sharing one meal in the dining hall of their residence. Due to their outstanding debt, final year NSFAS students will not be able to receive their degree certificates at the end of the year, and those who need to continue their studies next year will not be able to register.

According to Universities of SA CEO Phethiwe Matutu, the effect of the accommodation cap at 19 universities is R608m in student debt — the difference between what these universities are charging the students for housing and food and what NSFAS is prepared to pay just for 2023. 

The adverse impact on NSFAS students was compounded by the introduction of an entirely unnecessary and expensive payment platform for the distribution of allowances to students. There is no benefit to NSFAS students when they surrender part of their allowance to high transaction and platform costs. Nor is there any benefit if the students do not receive their funds, as by the end of September this year almost 20% of NSFAS beneficiaries had not received their funds since June 2023.  

As a foreseeable consequence of these problems, thousands of students across the country will experience financial exclusion at graduation in 2023 and at registration in 2024, which will bring the industry back to the specific issue behind #feesmustfall.

Meanwhile, the universities expect their government subsidy to remain constant at best in nominal terms for 2024, as the department’s budget is diverted into the unsustainable NSFAS budget, to which government has allocated R227bn since the 2018 budget.

By implication, universities will have to absorb the impact of inflation on the bottom line since fees cannot be raised aggressively enough to compensate for the real decline in their income. 

After spending a fortune and allocating an ever-increasing amount of the higher education budget to NSFAS, this unwise policy has returned us to the brink of #feesmustfall, having also undermined the sustainability of our public universities.  

NSFAS in its current form cannot be fixed. It is based on the flawed reasoning that SA can or should provide free university education to a substantial part of the population. It has returned the higher education sector to the brink of protest while also undermining its financial sustainability.

We need to return to the logic of the Heher commission, draw a line through the current NSFAS scheme, and design a responsible financial aid scheme that will benefit SA students.

• Du Plessis, a professor in economics and COO at Stellenbosch University, chairs the institution’s special task team on NSFAS. He writes in his personal capacity.