Call for relook at free education

FISCAL DEFICITS: BLENDED LOAN-GRANT SYSTEM MOOTED

Plan to stabilise public finances following impact of the virus pandemic.

The government should reconsider its free higher education model and implement a blended loan-grant system to ease the strain on fiscal resources, the Organisation for Economic Cooperation and Development (OECD) recommends in its 2020 economic survey.

The recommendation is one of several measures provided for the government to stabilise public finances, following the impact of the Covid-19 pandemic on its fiscal deficits and debt weighed down by persistent low growth, the public sector wage bill and bailouts to state-owned entities.

The fully subsidised bursaries for students coming from families with a total household income of R350 000 first came into operation in 2018 and have now given more than 90% of students access to institutions of higher learning.

Initially, free higher education, administered through the National Student Financial Aid Scheme (Nsfas), was open to first-year students and existing undergraduate Nsfas loan recipients.

The scheme’s coverage gradually expanded and in 2020 this meant that qualifying students from the first to third year were covered at a cost of R35 billion.

The OECD said that among its 37 member countries, having a tertiary education often resulted in higher earnings.

The assumption is that by investing in higher education, this will lead to higher social returns from income taxes and social contributions from tertiary-educated individuals, who will also need fewer social security benefits.

But in South Africa, the benefit would not be realised soon from a budget perspective, said OECD.

“The impact on tight fiscal resources should be considered and alternative financing mechanism[s] could be mobilised, to partially cover the cost,” it said.

The OECD has recommended that government tweak the bursary grant scheme by determining support for eligible students on a sliding scale based on household income and introduce the participation of banks through income-contingent loans.