There is at least one potentially serious flaw in the Heher commission’s tertiary education funding model. Commercial banks may not make the necessary education loans because satisfactory collateral could only be offered by the rich, who don’t need the loans anyway. What assets could students offer as security for bank loans? These loans certainly finance new assets in the form of valuable higher levels of human capital upon graduation, but this could only be offered as collateral if banks were prepared to negotiate more favourable repayment terms if a graduate defaulted on an education loan. But would banks be prepared, or always able, to do this? With few physical assets owned by this graduate, what other recourse would the bank have? With loans financed by a reformed National Student Financial Aid Scheme, on the other hand, the South African Revenue Service would provide an effective enforcement mechanism. The president’s funding model, moreover, as far as I can understand it, in...
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