New student loan plan queried
Education experts say they have concerns about higher education minister Blade Nzimande’s ambitious plan to provide student loans to just under half the country’s “missing middle” intake this year.
Nzimande announced the new “comprehensive student funding model” to help students who don’t qualify for state funding because their annual household income is above the R350,000 threshold. The plan allows households with an annual income of less than R600,000 to qualify for a loan from the department.
Other than income, criteria for qualification are that students register at a Technical Vocational Education and Training college or public university; 70% will be taken from Stem programmes (science, technology, engineering and mathematics); 30% from humanities; and the student must sign a loan agreement.
Scant on details, Nzimande’s plan is to offer student loans to 31,884 of the missing middle intake (about 47% of the total). This will be funded by a capitalisation fund of R3.8bn. Of this, R1.4bn will be drawn from the National Skills Fund (NSF) and R2.3bn from the Sector Education and Training Authorities (Setas).
This would have to be achieved extremely quickly as university registrations start within days.
Constance Motsitsi, public administration and management lecturer at the University of the Free State, said while the plan could be implemented in theory, the question of how it would be done remained unanswered.
“The department can indeed detour funds and reallocate them to this project. However, they would have to go through parliament for approval to ensure that these funds are authorised,” she said, adding that reprioritising projects raised questions about the projects that would be scrapped.
“Done speedily and in consultation and co-operation with the National Treasury and the involved entities, then yes, the money can be made available by registrations, or at a later stage, by signing agreements with the respective universities,” said Motsitsi.
While the model deals with the capitalisation fund for 2024, it does not explain where future funding will come from.
“South Africa is currently running on a deficit; we do not have money to sustain this long-term project,” Motsitsi said. “We cannot afford this and the government knows this. Funding this project would result in an increase in our taxes. This project simply threatens the development trajectory of our country.
“Last year the department announced cuts including at universities and Nsfas [the National Student Financial Aid Scheme]. It’s mind-boggling that they suddenly have money to fund this project. So it’s time to ask the crucial question: is this another attempt or strategy to buy votes?”
Prof Stephanie Matseleng Allais, skills development research chair at Wits University, said while it was difficult to comment on the scheme without more details, she had concerns and reservations.
These included a failure to indicate where the continued funding would come from and no acknowledgment that Nsfas is already in crisis. It has drawn increasing amounts of money from the direct funding of institutions and this has been detrimental to the system.
“How will they ensure that the money taken is not funds that were supposed to be aimed at unemployed workers and other kinds of training programmes? There has not been communication in this regard ... in principle, this is taking funds away from people who are not in university and need to access other kinds of training,” Allais said.
“There are many problems with how the Setas and NSF operate. But that does not mean the department should keep raiding them to cover university student funding.”
She said employers, already concerned about the use of levy funds, are likely to be annoyed at being treated as a fund to dip into.
Rudie Heyneke, head of investigations at the Organisation to Undo Tax Abuse, who has been spearheading its Nsfas project, described the fund as “a good and noble idea” but foresaw enormous difficulties.
“For a start, they are talking about R3.8bn to fund 47% of the missing middle. But where do those numbers come from? There are about 1-million students that qualify for bursaries, and now they say the entire missing middle is only 68,000. It sounds like a thumbsuck,” he said.
“And then if you look at the system and how Nsfas is managing it, I am 100% convinced that they are not equipped to succeed with this plan. They are still not done with sorting out 2023.”
Nsfas is in crisis amid allegations of corruption involving student payment contracts, which led to CEO Andile Nongogo being axed in October.
Heyneke said the new funding model appeared to be a replica of an old student loan scheme that ended in 2017. The last Nsfas annual report showed that uncollected debt from pre-2017 student loans amounted to R11bn.
“The appointed debt collectors are failing already, so how will these new loans work? Who will sign security, and is that person secure? And if the loans are unsecured, how do you get that money back in three years’ time — especially when you only have three years before the debt subscribes?”
Seán Muller, an economist and research fellow at the Johannesburg Institute for Advanced Study, was also concerned that the new plan is a reintroduction of the previous Nsfas approach of providing loans rather than bursaries.
“If that’s correct, then the allocation of funds to this is actually a net reduction in grant funding: R4bn in loans where students are expected to pay back at least 50% at some point is effectively a reduction from R4bn in grants. However, the group that benefits from the loans will be different to those benefiting from funding through Setas and the NSF, so it’s complicated.”
Department of higher education & training spokesperson Veli Mbele did not respond to questions.