New loan scheme ‘poses risk to NSFAS’

The government’s surprise announcement that it will implement a new loan scheme for students for the 2024 academic year poses risks to higher education institutions and the National Student Financial Aid Scheme (NSFAS), the sector’s key association for universities warned on Monday.

On Sunday, higher education, science & innovation minister Blade Nzimande announced the government will provide loans to students from the “missing middle”. These are students who are not eligible for NSFAS grants because they come from households with an annual income above the R350,000 threshold for qualifying for free higher education, but cannot afford to cover the costs themselves.

Nzimande said loans will be provided to students from households with an income of R350,000-R600,000 annually.

Universities SA (Usaf) chair Francis Petersen said the organisation had previously indicated to the department of higher education & training that the sector needs more time to develop the criteria and systems to implement the loan scheme, and had recommended a 2025 start.

“One of the key risks lies in the execution of the scheme, because NSFAS is already challenged managing the grant system for students from poor and working class families,” he said. “The concern from Usaf is that if you now add an additional component, will NSFAS have the capacity to do that as well?”

Usaf also flagged concerns about the financial risks associated with the scheme, he said. It is vital that loan repayments are linked to the SA Revenue Service to ensure the system is sustainable in the long run.

Nzimande said R3.8bn had been set aside for the first phase of the loan scheme, drawn from the National Skills Fund and the Sector Education Training Authority. This will cover just under half (47%) of the estimated 68,466 “missing middle” students, and assumes the remainder can tap into other sources of funding such as private sector scholarships and bursaries.

Undergraduate and postgraduate students from universities and technical and vocational education training colleges will be eligible for loans, with 70% allocated to students studying science, technology, engineering and mathematicsrelated fields, said Nzimande.

The second phase of the scheme will run from 2025 to 2034, he said.

Petersen said the higher education sector will be under immense pressure in the coming weeks to implement a system to identify and provide loans to eligible students, as the 2024 academic year begins in midFebruary. Usaf is committed to working with the NSFAS and the department of higher education & training to ensure a smooth start to the year, he said.

DA shadow minister for higher education, science & innovation Chantel King said Nzimande’s announcement was a blatant attempt to steer attention away from himself and the NSFAS board chair Ernest Khoza, who are at the centre of corruption allegations levelled by the Organisation Undoing Tax Abuse. Nzimande had neglected to provide key information, such as the loan repayment terms and conditions, she said.

“The fact of the matter is that NSFAS’s financial sustainability will not be solved by limiting income-contingent loans to just the missing middle. Fee-free higher education is unsustainable and with university grants also being cut, higher education institutions are being left in a precarious situation that will continue to exclude the missing middle from accessing higher education,” she said.

Parliament heard last year that the NSFAS faces a budget deficit of R1.1bn in the 2023/24 financial year.