Professionals work on student funding

Sizwe Nxasana has 60 professionals working with him on a project to design and build a new student funding scheme to tackle the needs of poor and “missing middle” students – and the project is getting the professional services at no cost. Webber Wentzel has a team of lawyers doing pro bono work on the project, Discovery has seconded actuaries, the banking industry has volunteered people, as has the South African Institute of Chartered Accountants.

Sizwe Nxasana has 60 professionals working with him on a project to design and build a new student funding scheme to tackle the needs of poor and “missing middle” students – and the project is getting the professional services at no cost.

Webber Wentzel has a team of lawyers doing pro bono work on the project, Discovery has seconded a team of young actuaries, the Banking Association of SA and the big banks have volunteered people, as has the South African Institute of Chartered Accountants, while the Association for Savings and Investments SA and its members are doing the actuarial modelling.

“Everybody carries their own costs,” says Nxasana, who is the project leader for the new Ikusasa Student Financial Aid Programme (Isfap) and also chairs the National Student Financial Aid Scheme (NSFAS).

A proper project office will be established soon, with a modest full-time staff.

Meanwhile, the team effort is a measure of the kind of resources the private sector is investing in this public-private initiative to tackle the crisis in higher education, over and above the R200m business has committed to raise to fund the Isfap pilot project, which starts in 2017. The pilot will support 2,000 first-year students at seven universities and one technical college.

Everyone involved with Ikusasa is careful to emphasise it is not about scrapping the ailing NSFAS, nor is it a NSFAS Mark II. But the new architecture Nxasana and his team are building aims to tackle the flaws in the NSFAS model — and it clearly would take over more of the new funding for poor and “missing middle” university and college students, allowing the old, heavily impaired NSFAS book to be run down over time.

That assumes that Ikusasa, which is the product of the ministerial task team set up by Higher Education Minister Blade Nzimande in 2016, can secure the political support and legislative changes it needs in order to scale up.

The Cabinet approved the new scheme in principle in November and a draft was gazetted in December for public comment. The task team is consulting with students and other stakeholders as the universities open and start registering students eligible to participate in the pilot.

One key difference between the pilot and the NSFAS is that it will “front-load” grants. The NSFAS provides students with loans that can be converted into grants in the later years if students pass their courses. This often means those who pass and would be most likely to pay back their loans are least likely to be required to pay them back, while the many first-year students who fail and struggle to get jobs may never be able to repay the NSFAS.

However, the pilot, which will be scaled up over the next couple of years, will give grants first and, in some cases, loans later for students who do well. Students will have to contract with the scheme to take their studies seriously, signing up to academic and psycho-social support that will be tied to the financial support.

Nxasana says the first principle of the new scheme is that it should be possible to offer fully subsidised education to the very poor, at least initially, so students from families that receive social grants will not have to pay back the money. Above that very poor income level, it will be a combination of grants and loans, with grant money reduced on a sliding scale for “missing-middle” students from households earning up to R600,000 (the category the NSFAS does not cover).

Another key principle is that all students funded under the scheme will receive academic and psycho-social support and mentoring to increase success and graduation rates (which the NSFAS does not offer at all).

There will also be a focus on scarce skills to align graduates with the world of work.

Ikusasa will be a partnership between the private sector and the government, via the NSFAS. The team’s finance and actuarial models indicate that R45bn a year would be needed to fund such a programme across SA, only R17bn of which is currently available from the government – so the private sector will have to plug the R25bn gap.

Nxasana says the first significant pot of money will come via the broad-based black economic empowerment revised codes that have raised the skills development requirements for companies from 3% to 6%.

The team has recommended that a quarter of this – 1.5% of payroll – go to funding black students under the new scheme and it is discussing this with the Department of Trade and Industry.

There are plans to raise a further pot of money via social impact bonds and there is also an effort to release additional funding from corporate social investment budgets for higher education by reducing the “leakage” caused by students who get bursaries from as many as four different companies. A consolidated database is being created to prevent this.

The team is also looking at other innovative ways to raise money from the capital markets by way of student funding bonds, which are common in countries such as the US.

That means, though, that the loan book and governance structures of the programme will have to be ship-shape. That is another priority for the private professionals working to design solutions to one of SA’s public problems.

CABINET APPROVED NEW SCHEME IN NOVEMBER AND A DRAFT WAS GAZETTED IN DECEMBER